Options for Week #7

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, Boeing, Altria and International Business Machines. 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.

Company #1: Have your pick of any of the following overvalued names:

Applied Materials, Lam Research, Apple, Microsoft, Micron, Nvidia, Netflix or Intel.

I can’t be bothered to pick one of the names in specific, they are all full of crap at the moment. These stocks are reporting normal earning reports, because of stock buybacks (financed with debt), as revenues and incomes are dropping. Not to mention the supply chain and end-market problems with China right now. Even though the situation seems more dire every day, the markets have priced in exactly 0,0% of this, because of the endless free liquidity of the central banks.

Be sensible about what you’re doing, I’ve gone in too early and it’s costing me dearly. Logic will prevail and valuations will come down sooner rather than later. Just be careful with leveraging and taking on obligations.

Company #2: Boeing

Boeing has a nice back-to-back feature:

Boeing keeps delivering (excuse my French) shit news. Software problems, bad internal memo’s, financial distress due to distorted priorities (stock buybacks). However the stock price is not willing to budge a lot, I believe this could be due for a correction within a few months.

Current price: $340,49
P/E: – (Forward 20.62)
52 week range: $302,72 – $446,01

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: ExxonMobil

ExxonMobil (and runner-up Royal Dutch Shell) offer an amazing opportunity right now. While Tesla stock went through the roof on bizarre expectations (or a simple short-squeeze), the opposite side, big (old) oil, is on a downward spiral. Huge and reliable dividends are up for grabs. There are two ways of looking at these companies: A) Exxon is doubling down on old and trusted methods, oil drilling. B) Shell is diversifying into multiple fossil fuels and is starting to buy energy companies and networks, while also investing more and more in green energy solutions.

Make sure to at least look at these opportunities for your long term portfolio, they might not be around for all too long.

Current price: $60,65
P/E: 18.06 (Forward 16.22)
52 week range: $59,62 – $83,49

Company #2: Cisco Systems

Either Cisco is in way less trouble than the market thinks, or Cisco is the only honest company on Wall Street, which would back up the case to short any of the above mentioned technology stocks.

Cisco dropped on quarterly numbers and their (Chinese market) outlook. Overdone or not, Cisco offers good and stable value for the future. Might as well make some money with it.

Current price: $46,97
P/E: 17.28 (Forward 13.81)
52 week range: $43,40 – $58,26

What I usually do

I usually play these kinds 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. Not sure if I agree with Intel. Their earnings per share are something like $4.60. So that gives them a P/E of like 14.5. That’s not all that high. And considering that Intel is still growing and is a hugely profitable blue chip stock with a good economic moat, I’d say they’re not that overvalued just yet.

    But I do agree with some of the other picks. Especially CSCO and XOM are stocks that I also believe to be good value right now.

  2. Thanks, I sold a put option $XOM the other day @ 55. I wouldn’t mind to purchase an additional 100 shares at such price and get the option price on top of it 😉

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