Category: Reading

Marketwatch has a really good article today on charting and the author’s thoughts on whether or not this is a dead cat bounce we’re in now.  He also lists a few stock picks worth checking out.

It appears I might have missed my chance on CAT that I mentioned yesterday as it’s up good again today.  I put a limit order for $2.00 to sell one Sept 75 naked put.  It could dip down and hit at any point, but I could have sold a market order yesterday and gotten more. 

EDIT: My limit order for the September 75 (CATUO) naked put hit not long after I posted this and I received $189.25 after commissions.  CAT was trading at 78.14 on its way down to 77.90 before coming back up from its morning dip in the shallow end of the pool.  Yesterday’s close for this option was 2.42.  I regret leaving that money on the table, but prefer to spread out my orders these days in the likely event of another beating to be issued again without too much warning.  The high for my put that I sold at 2.00 is 2.02 so far.  I’m happy being that close for the day, especially with CAT moving north again.

Technorati Tags: naked puts, investing, stocks, options, covered …

I read a good article on MSN Money today that seemed to echo what I said last week in my post about risk.  Apparently Jim Juback reads my blog and must be getting ideas from me (of course I’m kidding, probably).  Here’s a quote from his article:
“My argument breaks down into two main parts. First, the same macro trends that are almost uniformly negative for bonds have some undeniable upside for stocks. And second, the structural problems in today’s bond market that will drive down bond prices in the next bond panic are largely irrelevant to stocks.”
Instead of repeating all of his points, I suggest taking the time to read his full article.  My point is as we continue to get the random jitters from the fluctuating bond yield, stocks are still a better buy than bonds. 

Technorati Tags: investing, stocks, options, covered calls, trade, bonds 

For those who don’t subscribe to Barron’s (you should), this week included an update from the roundtable they did at the beginnning of the year.  It started like this:
“DOW 14,000, OR BUST.

Suddenly either alternative seems possible for stocks, as the outlook for interest rates turns murky. The Dow industrials and the Standard & Poor’s 500 could race to new highs as corporate profits keep climbing — or fall amid signs that the greatest party ever is ending for bonds.”
It was a somewhat painful read in that I could agree with both sides of the argument which left me wondering what I really thought at the end.  Not only was the group divided on what the market as a whole was going to do for the rest of the year, two panelists even had vast differences on an individual stock, RIMM.  Fred Hickey says to short RIMM since it has no future and Art Samburg says now is the time to buy RIMM and could see it topping 200.

From what I surmised, the final consensus is that we are still due for another longer correction this year at a minimum, but most said 2008 should be good.  That theory makes me wonder if that’s why we continue to have such shallow corrections.  If most of the big money people think next year will be good, why …

Smart Money magazine has an ariticle in the July edition on mutual funds that use covered calls.  Their picks are FFA, BDJ and NFJ.  I’m not going to go into much more depth than just to mention it for any who would like an approach that requires less time invested than doing it yourself.  I still prefer to pick my own stocks and avoid mutual fund fees and paying capital gains taxes from gains earned while I didn’t own the fund. 

Thestreet.com had an article a few months ago with a few picks too.  Here’s the link. 

Technorati Tags: investing, mutual funds, options, covered calls

In the May 28th issue of Barron’s, Tiernan Ray wrote an interesting article entitled “Summer Meltdown Unlikely for Tech”.  I’ll list some of the highlights and quickly move to this picks I thought were worth a closer look. 

All investors know the cliche, sell in May and go away.  Tech stocks don’t typically do well in the summer, but Ray writes “it’s unlikely to experience a dramatic selloff akin to last summer’s rout…  Before any correction happens, bearish investors will likely first bid up shares.”  If this is true, those of us who sell naked puts and covered calls could find a few more months to ride the wave.

He continues, “Negative sentiment is hitting all-time highs, as measured by such things as short interest on the NYSE.  The cynicism looks like a contrarian indicator, suggeting sotcks will rise further in the next few months.  Tech investors, especially, would reap benefits if this occurs, given that the sector has merely traded in line with the broader market this year.”

Ray lists a few interesting stock picks and I’ve narrowed those down to the ones that seem to match my style better, CSC, CY, ELON and ARRS.  I have a fairly busy work day today so I’ve only glanced at these for now and will try to come back later with better focus to trade on one or two.  …

After two big up and down days to end the week I was anxious to read Barron’s views.  I always read the Market Week section first for some reason. Kopin Tan had me turning into a big bull to start my Saturday off right.  He said:
“…corporate profits were up 8.5% in the first quarter, well above the 3.6% pace Wall Street analysts had forecast.  Commodity prices kept climbing.  Consumers sending grew about 4% the past two quarter, and weekly unemployment claims declined for a fourth straight week, to under 300,000 – all signs of a still-healthy economy that emboldened the bulls.”
I was pumped and getting ready to throw caution to the wind until I read the front section kicked off by Alan Abelson.  He reminded us of some key points we shouldn’t forget:
“…the Dow was up 26 of the last 31 sessions, had gained a cool 7% so far this year and set 21 new all-time highs!”  We knew that part, but we bulls try to block it out.  He continued, “…this bullet train has been barreling up the mountain powered by nothing more tangible than pure emotion”.
Who’s right? How can both be right?  I hesitate to say it’s a stock pickers market, because isn’t it always?  I think the sectors are becoming more important than they have in a couple of years.  …

Kopin Tan wrote an interesting article in this weekend’s Barron’s starting on page M2.  A few of the key points he hit are:
- “The Dow has climbed in 19 of the last 21 sessions - one of the most enduring streaks since 1929.”  My first thought was that has to mean that we are due for a hard correction soon.  Then he continued…
- “Institutional market confidence stands a the highest level since 1990.” and…
- “So far, companies’ first quarter profits have generally come in above analysts’ lowball estimates.”

What?  I thought we were doomed, but it was just that the estimates were too low?  What’s a small investor to do?  The same as always - give careful thought to any trade and be ready for a pullback.  One of the takeaways I got from this article was “…institutional willingness -for now- to buy the dips helps limit the downside risk.” 

This market could be the ideal setting to consider SELLING puts.  A lot of institutions are starting to try to cover their tales in case of a fall and are BUYING puts.  Buying options is not for me.  I’d rather sell out-of-the-money puts and pocket the premiums.  Selling puts OTM gives that little cushion that can be all that’s needed in a short pullback to make a fat return.  Don’t get me wrong, risk is still there, …

Barron’s had an article this weekend that highlighted the prospects of TD Ameritrade Holding Corp (NASDAQ: AMTD).  AMTD closed on Friday at 15.79.  I agree that the downside is limited due to potential merger activity, but looking at the chart AMTD is below its 10, 50 and 100 day moving averages.  Only the 20 day could provide support and it doesn’t show a history of caring about the 20 day.  In addition, when charting the trend lines you see the lows getting lower and highs getting lower.  AMTD is almost dead center between the falling upper trend line and lower trend line.  While AMTD could reach back for the upper line again soon, the lower line is where I’m going to be targeting to sell some naked puts.  If AMTD drops below 15, the near term puts should jump due to both added intrinsic value and increased volatility. Going back to the Barron’s article, the dip should only be that, a temporary dip – making it an ideal time to start writing puts.  I always look at both sides of the options trading opportunity just in case I’d prefer to write covered calls in my IRA.  That will be a “game time” decision though depending on the premiums.  If there’s still that bullish tilt, like in AAPL, the at-the-money premiums could favor selling …