Stock Options Investing Newsletter Sample 1
2012, November 3 - 14:30
Robert Weinstein
Here is an example of some of the content
Each weekly issue of the stock Options Investing Newsletter is filled with actionable ideas that include dividend capturing, managing retirement investment risk, and short term option plays. This includes about 1/3 of a typical newsletter. This is also one of our first.
Are Puts Good Insurance Policies?
Often, when investors think of using put options, they think of using them as insurance policies. In arguing my approach to hedging and diversifying a portfolio, I scoff at this notion. I've touched on the topic in past newsletters as I consider active versus passive tools for hedging and diversifying. I just do not see the utility in a standard long put hedge.
put that expires in about three months. When you're close to losing about $500 on it, you pony up for another $500 and buy another. Do that three or four times a year and you're on the hook for a couple thousand bucks. Given how impossible it is to create a workable hedge doing this, you're better off just throwing that money away each year.
Generally speaking, I do not consider puts broad market hedging vehicles as part of a long-term investment strategy. Of course, there's a time and a place, but you're attempting to time the market if you look to buy a ( SPY) put at a "top" or simply hold them waiting for downside. Unless you're managing millions upon millions of dollars, that, in my opinion, is not a sound use of puts.
Over the next several newsletters, I will illustrate several ways I think investors should utilize puts. As with most of the things we discuss, the methods I introduce might not jibe with your personal situation. Again, one size does not fit all. In this issue, we start with the most basic application of puts. To play a decrease in the price of a stock.
Note: When we refer to options in any of our newsletters or updates, we speak of American-style options (We do not discuss European-style options, which play by different rules, thus are priced differently). Note: Starting this week, the right sidebar includes updates for subscribers as well a
quick model portfolio update and streamlined sections on the covered call and speculative trade ideas. I made this adjustment in the interest of producing a shorter, easier-to-read, more concise, yet still information-packed newsletter.
"Shorting" Stocks Via Puts
I'm not a big fan of dipping too heavily into margin. Like advanced option strategies and errant takes on basic ones, overuse and misuse of margin tends to not end well, particularly for new or mere mortal investors.
That said, you need to have ways to profit from downside, be it in the broad market or in
individual stocks. The ideas accumulated in the hedging and diversifying section of these newsletters provide possible upside exposure to market downturns, while broadening the scope and reach of a portfolio.
Over the months, we will add ideas to that section...... subscribe and read the rest
Over the months, we will add ideas to that section...... subscribe and read the rest
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Hedging And Diversifying
First, an update on our two ongoing alternative investments.
( UCO). Closed at $47.49 Monday, up 17.3% from $40.50 at first mention on February 7, 2012. Last week, I discussed selling OTM calls ($46 to $50) against a position in ( UCO). If you did you're in good shape, particularly if you initiated a position shortly after Issue #2 of the newsletter (Feb 7). I expect oil to continue to be volatile. I would hold current positions in anticipation of March option expiration day and only open new positions in
the ETF on weakness into the low $40s.
At that point, I would buy the ETF and write slightly OTM calls.... subscribe and read the rest
At that point, I would buy the ETF and write slightly OTM calls.... subscribe and read the rest
Robert Weinstein's Weekly Dividend Capture Ideas
Radioshack Corp ( RSH)
Yield: 6.96%
Dividend Amount: $0.13
Ex-Dividend Date: March 14, 2012
Beta: 1.51
I generally hold any given position with a yield of 6.96% and dividend of $0.13 for
about 14 days depending on the timing of the option expiration date and the day of the
week of the ex-dividend.
Here, we go over an upcoming ( RSH) dividend that I may capture with minimal risk.
Criteria For Trade
- Must be able to sell a call option in either the front or first back month that is in-the-money.
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Call sold must have enough premium that we do not mind getting exercisedearly (which happens often and can be a good thing if we have executed thetrade correctly)
Aggressive Strategy
In combination with buying ( RSH) stock, offer to sell the April $7.00 strike call for $0.34 over the intrinsic value. The option may get exercised early for a gain. In almost all cases, I sell the call option first to ensure the stock option leg is complete first. If not, after qualifying for the dividend, I want to close the trade near break even.
It is important
to sell the call option hedge at or near the asking price for at least the minimum amount over intrinsic value. I do not want to try putting on the hedge unless the sale of the option (hedge) will provide at least the full $0.34 over intrinsic value. If my shares get called away the day before they trade ex-dividend as a result of the option buyer wanting the dividend I will make about $0.34 Not all that great, but not bad for about a week of owning the stock. The most I can make is $0.47 if I hold the covered call through option expiration day and the stock gets called away.
Conservative Strategy
In combination with buying ( RSH) stock, offer to sell the April $6.00 strike call for $0.12 over the intrinsic value. The option may get exercised early for a gain. In almost all cases I sell the call option first to ensure the stock option leg is complete first. If not, after qualifying for the dividend, I want to close out the trade near break even. It is important to sell the call option hedge at or near the asking price for at least the minimum amount over intrinsic value. I do not want to try putting on the hedge unless the sale of the option (hedge) will provide at least the full $0.12 over intrinsic value.
All Rights Reserved.
Copyright 2012.Rocco Pendola/Robert Weinstein
Copyright 2012.Rocco Pendola/Robert Weinstein
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