Options for Week #9

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, Netflix, ASML, 3M and Royal Dutch Shell. 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 has barely dropped last week, where tech stocks got hammered. For this reason it remains my favorite short.

Current price: $369,03
P/E: 95.83 (Forward 43.82)
52 week range: $252,28 – $392,95

Company #2: Apple

Apple has finally gotten punched back into reality, however we are still above historical values, with a company that is barely innovating and getting hit hard on supply chain and demand because of the virus. I think there is definitely more to be gained for shorts in the short term.

Current price: $273,36
P/E: 21.59 (Forward 17.43)
52 week range: $169,50 – $327,85

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: Altria Group

Well here we are again, Altria has dipped to the low $40 levels again. A dividend king with a huge dividend and some nice dividend growth has been moving away from it’s recent troubles but has been punished for global virus fears. This seems like a nice opportunity to pick up shares with a put option, or to profit with a put option for the medium to long term when this value play gets picked up.

Current price: $40,37
P/E: – (Forward 8.62)
52 week range: $39,30 – $57,88

Company #2: Royal Dutch Shell

I’ve been a big buyer of Shell shares and I think that even though oil might hit more rough waters in the short term. You’ll be thanking yourself years from now for picking up these great names, that yield a lot! Below my reasoning for Shell from last week:

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: $44,03
P/E: 11.30 (Forward 8.50)
52 week range: $43,94 – $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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4 Comments

  1. Nice picks. I totally agree with Altria and Royal Dutch Shell. I have bought quite a lot of shares of those companies recently. I got in a little bit too early, but oh well..

    • DutchIndependence

      Hi SD, thanks for your comment! I just read your post about your trades and income as well, that’s a nice piece of income you got there! I got into RDSA too early as well, but looking in the long term we might hit ourselves for not buying more. For Altria I have one sold put at $37,50 for now, and I’ll be hoping they drop further today to sell another one!

      Good luck!

      DI

  2. Talking about Shell… I got assigned 100 RDSA (I buy in Amsterdam) and I expect to get 100 more with the March Expiry.
    I do not mind as I like the dividend, even after taxes. And with the Belgian fiscal rule, I can get up the Belgian tax refunded. And then it is a matter of time before I can sell covered calls on the stock

    • DutchIndependence

      Hi Amber Tree, good to hear that you share my exact thoughts! I have 400 shares of the Amsterdam listed stock for the same reasons as you. I’ve sold some short term puts for the stock in the hope to get assigned for some more shares. I’ll be looking to sell some calls on it too, once the stock price appreciates slightly!

      Thanks for sharing!

      DI

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