Options for Week #51

In these posts we will be looking at four assets that we could sell call or put options on to create some extra income. These suggestions are just some ideas to consider. Do your own research and make your own decisions!

In the previous post we looked at Applied Materials, Netflix, IBM and Kraft Heinz. CLICK HERE to read about last weeks options.

The way I select the candidates is based on multiple factors:

-Price/earnings valuation;
-Trading range and/or 52 week high/low;
-Market sentiment;
-A contrarian view.

Short calls

Whenever you sell a call option it counts as a short position, you take on the obligation to deliver shares at a certain price and preferably the stock won’t go higher than the strike so that you can keep the premium without having to deliver any shares.

For now I decided to not put in any short calls. I feel like I’m sharing the same names every week, based on fundamentals. However fundamentals don’t count in the current market, until they do. So I’ll leave you with the names that I think are greatly overvalued, without anymore explaning:

Apple, Applied Materials, Netflix, Caterpillar, Nvidia, Intel, Texas Instruments, Nike, and Union Pacific are some of the names that come to mind.

Short puts

Whenever you sell a put option it counts as a long position, you take on the obligation to buy shares at a certain price and preferably the stock won’t go lower than the strike. This way you are able to keep the option premium without having to buy any shares.

Company #1: ABN AMRO

An European bank, that’s quite something different to advise. I recently went long with a small stock position. ABN has been punished for a potential fine for not ignoring some information about some of their customers. The fear in the stock is overdone, it still is a cash rich business, of which the Dutch state owns roughly 50%, this gives some shareholder stability. Earnings have been trending slightly lower due to increased investing for all the rules that European banks have to comply with, but I feel as if we’re on the way to having this A) priced in, and B) businesses starting to become more efficient with all of the new laws.

It might be the right time to scoop up some long term puts, to benefit from some price appreciation.

Current price: €16,33
P/E: 7.89 (Forward ?)
52 week range: €14,92 – €22,98

Company #2: Flow Traders

Flow Traders is an Amsterdam based market maker. Almost every publically traded product in Europe, and a lot of bonds in America and Asia are traded through Flow Traders systems. They make money with the spreads, those profits have been tiny as volatility seems unexistent in current markets. They have been diversifying their business for years to create more stable income opposed to only earning a great profit in volatile times. This play is a hedge for bad market times and one has to have a long term vision for this to work.

Current price: €20,58
P/E: 14,27 (Forward ?)
52 week range: €20,22 – €30,82

What I usually do

I usually play these kind of situations with a margin of safety of at least 10% and a medium to long term option.

Note that I’m merely pointing out some interesting names to look at. You should ALWAYS do your own research!

To find more information about options CLICK HERE.

To see my own option trades CLICK HERE.

To see the option trades I do for other people CLICK HERE.

For any questions regarding options, leave them down below in the comment section or simply hit me up on any of my social media channels!

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2 Comments

  1. Got a FLOW short put last week. Looks like you are doubling down on short puts FLOW?

    ABN short put looks also interesting..

    • DutchIndependence

      Hi DividendMill, Nice on the short put! Yeah I expanded my position as I’d be seriously interested in owning more shares at around an €19,50 cost basis. Currently I already have some shares at a price point that might be very interesting for the long term.

      ABN is simply at such a compelling price point that it’d makes sense to go long with options or shares (I did both last weeks) in my view.

      Thanks for commenting!

      DI

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