Monday, February 28, 2011

Using Options to acquiring a second lot of Xerox

Sold one lots worth of Mar $11 puts today for 44 cents net of commission.

Scenario 1 - The stock will stay below $11 over the next three weeks and the second lot will be acquired at a net price of $10.56. A price that seems attractive based on prior post, 1% below the current price and around what looks like a potential support level on the charts.

Scenario 2 - The stock moves back near or over $11 in the next three weeks. Best case the option will expire for about a 4% gain over 3 weeks, or we will keep an look-out for opportunities to cover in the even shorter term.

Friday, February 25, 2011

Postions Boeing - Bought second lot on tanker news

Good news for Boeing today as it was announced that they won the tanker bid. I suspect most of this news was priced into the stock as it seemed hard to believe the US govt could really shift the jobs and key elements of control of the program out of the country. However, this does eliminate one bit of uncertainty for the stock, provides significant long term support for the company, and reinforces my long-term bullish view of the stock.

In the short-term - The stock jumped over $74 (nearly 5%) on the news which seemed to be a break out on the chart. Also, hopefully this news will help trigger some positive analyst moves over the coming weeks. Hence, seem like it is time to add the second lot of the stock. When the stock it filled some of the gap back to near its support level I added the second lot to the position at a price (including commissions) of $72.71.

That makes the portfolio long two lots at an average price just under $71.

Friday, February 18, 2011

Intel - Covered Call Intiatied

Intel had a nice week and broke through $22.

Took the opportunity on this pop to sell one lots worth of May $23 calls for $.49 net of commissions.

Scenario 1 - stock runs over $23 in the next quarter and one lot of stock will be called away and result in a lighten up of the portfolios position in Intel. Over the next three months this lot will return $.49 in options, $.18 in q2 dividend, and about $.80 in capital appreciation.
A total return of $1.47 or 6.6% in a quarter.

Scenario 2 - the stock will stay flat and the 2% option premium will be pocketed.

Scenario 3 - Intel stock (and perhaps the overall market) will hit a correction period this spring and this option will be able to be covered for a small hedge on the position.

Monday, February 14, 2011

Bunge Jumped - Covered Option

Bunge jumped very nicely in the two days after earnings.
(or should that be Bungy

Seems to be stalling at its technical resistance around $72.50. Covered the Feb $70 put which was sold on Thursday for $.20. The small remaining yield did not seem worth the risk of holding for a few more days. This option trade yielded 2.2% of risk capital in 2 days!

Still bullish on Bunge and will be looking for ways to add a second lot to this trade on any pullback.

Friday, February 11, 2011

Favorable Winds of Change at Xerox

Xerox stock appears to be attractively valued. The company has set earnings expectations for next year at $1.05 to $1.10. At a p/e of 12 yields a price of $13, or 20% up from here. These fundamentals indicate an opportunity might exist in this stock. However, numbers never tell the whole story. It is always important to look beyond the numbers to see what changes are going on at a company. In the case of Xerox it appears it appears there several changes underway that support the fundamental case for the stock.

Read more about the winds of change at Xerox that could blow some profits into your portfolio at

Thursday, February 10, 2011

Bunge - Earnings update

Bunge announced earnings today. As you will recall, there was a wide range of estimates on the street. Earnings beat not only the average estimate but the highest estimate. Revenue was near the top end of the analysts range. The company declined to give 2011 guidance. This always seems to make wall street uncomfortable. I suspect this is part of the reason the stock did not react that positively today. ( the cynic in me says this is just because now they just can't parrot back company guidance to their clients.... but I digress). When taking longer term positions for investments, I prefer the stability of a more steady prediction of earnings from a company but from the mid term trading perspective of this holding this uncertainty can actually be beneficial. Hopefully it will keep volatility high and increase the chance for short-term profits and covered call strategies.

Given the earnings seemed to contain no major negative surprises, it is time to add the second lot of the trade. Prior to adding a lot, I cleaned up the prior options "insurance" by selling off the protective put for a whopping $.10 net of commission. That means the "insurance" for buying before earnings cost a net $.90. In hind sight, not a good policy to write, but better safe than sorry. To try to establish the second trading lot, I sold one lots worth of Feb $70 puts for $1.85. Either one of two things will happen next week
a). the stock will stay under $70 and the portfolio will be long a second lot of stock at a net price of $68.15 . That is over a 1% discount from just buying the stock today, and obviously I am comfortable owing these shares
b). the stock will bounce over $70 and the put can be covered for a 2% one week gain and we will need to look for another way to get a second lot of the stock.

Wednesday, February 9, 2011

Positions - Boeing Covered Option

Boeing hit $72.50 and looks to be pausing at this resistance level on the chart. I bought back the March $70 puts sold about 2 weeks ago for a little more than $1. Tactically, this option trade made just less than $2 or 2.7% of risk capital in 2 weeks.

Still bullish on Boeing. However, the air force tanker decision might be getting close to announcement. This will likely move the stock in one direction or the other

Own 1 lot of shares, and looking for a cost effective way to accumulate more lots. Will consider re-establishing an options position on a short term pull back towards $70. Either a similar trade (put sale) or perhaps a strangle to try to capitalize on any move from the tanker decision.

Friday, February 4, 2011

Positions - A lower risk position in gold via options

There are many opinions on the direction of the price of gold. Some believe gold is in a bubble and will be below $1000 soon. Others think gold is the only true store of value and will be surging past $1500 in the not too distant future. There is of course no sure way to know which of these scenarios will come to pass. There is however, a lot of solid analysis that indicates having a long gold position in a portfolio is a good diversification strategy. (i.e. hopefully if equities and bonds pull back, gold will not)

If you believe in the positive diversification aspects of having gold in a portfolio, there are a few basic alternatives to gain gold exposure in your portfolio such as buying the Gold ETF (GLD) Gold Miners ETF (GDX). However, options on these equities provide another approach to gaining exposure which might minimize the risk in the event of a fall in the price of gold.

Learn more about a low risk option based approach to getting gold exposure in your portfolio at:

Wednesday, February 2, 2011

Trade - Hershey Vday Trade closed

The speculative trade in Hershey for v-day went wrong from the beginning. I guess the "cocco crisis" was more powerful than v-day. The stock bounced positively on earnings today.
So maybe I was not "wrong" just "early" on the

Anyway, I used the earning bounce as an opportunity to cut loses and close out the trade at $48.49. This speculative trade lost just under 1%. Fortunately this was only a one lot position .

Still... it makes me depressed enough to eat some chocolate!

Tuesday, February 1, 2011

Trade - Bunge Establishing a hedged position prior to earnings

In general there is reason to be long term bullish on Bunge. This is mostly from a strategic perspective as it provides exposure to two positive macro level trends via its core agribusiness and exposure to Emerging Markets. However, in the recent past not all of the Bunge story has been positive. This situation has created a lot of short-term uncertainty which could translate into a great long term opportunity.

Read more about establishing a hedged initial position in BG prior to its earnings at: