Options for Week #8

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 technology stocks, Boeing, ExxonMobil and Cisco Systems. 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: Netflix

Netflix is my favorite short candidate right now. I’ll be initiating a short position this week myself. At $380 the stock got way ahead of itself while everything but subscriber numbers are not meeting expectations. I firmly believe that once the fear of a potential world wide pandemic set in, Netflix might be hit very hard.

Current price: $380,07
P/E: 98.69 (Forward 45.01)
52 week range: $252,28 – $392,95

Company #2: ASML

ASML has ran up more than 100% in the last few months, the company is solid but is in the middle between the USA and China and their semiconductor war. Also the corona virus that hits the Chinese market and the other Asian markets can cause a big stir to ASML’s earnings. Samsung in South Korea has just shut one of it’s factories due to the virus, Samsung is one of ASML’s biggest clients. The other factor is that ASML’s peers Applied Materials and Lam Research have been hit quite hard in late night Friday trading, ASML has some catching up to do.

Current price: $306,00
P/E: 45.90 (Forward 26.81)
52 week range: $175,57 – $319,22

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: 3M

3M, a dividend king, a highly diversified business and a great management. They have been in some rough waters due to market conditions and slacking growth, however they’re poised for a big turn around. Compared to it’s peers 3M is too cheap to ignore and gives investors a great risk/reward potential at it’s current price point.

Current price: $156,93
P/E: 20.08 (Forward 15.53)
52 week range: $150,58 – $219,75

Company #2: Royal Dutch Shell

The oil/energy sector has been hit hard recently. Low oil and gas prices have been tough on the sector. Shell’s management is actively diversifying and rewarding shareholders in the meantime. Right now Shell shares are buyable with a 7,5% dividend that hasn’t been cut since the second world war. With Shell’s investment in green energy, energy companies and energy storage I’m sure Shell is set for a beautiful rebound in the medium term.

Current price: $49,17
P/E: 12.62 (Forward 9.50)
52 week range: $49,52 – $66,48

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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