Monthly Archives: August 2007

Is Putin Itching for a Cold War? Defense Industry Covered Calls

Recently a shirtless and Siberian-vacationing Putin has been making headlines; partly because he has been running around shirtless in a land known more for its mosquitoes than for its sunshine and partly for resuscitating the cold war. Read more »

Using Common Value Investing Techniques to Find Option Trades

A stock picked using a value investing technique is a way a lot of investors find stocks they like for the long term. There are other favored techniques such as technical signals and trends, but investors often favor the valuation method as a way to get a dime stock for a nickel. Read more »

Americans Getting Fatter & Covered Calls

A report by the Trust for America’s Health (TFAH) organization entitled, “F as in Fat: How Obesity Policies are Failing in America, 2007”, recently observed Americans in 31 states continue to exhibit higher rates of obesity as reported from the previous year. Mississippi clocked in with the highest obesity rate for the third year in a row at 30.6%. Statistically about every third Mississipian you see will be obese. Another way to look at it is if a person is in Mississippi and they look to the person on the left and they look to the person on the right and don’t see an obese person, then the person doing all the head turning is probably the person eating too many hamburgers and french-fries. Read more »

CME Bull Put Spreads Strategy Returns +8.7% August 07

In the article, “CME Buying CBOT”, we analyzed Chicago Mercantile Exchange’s (CME) purchase of CBOT with an eye for a bullish strategy for CME. We continued the CME bull put credit spreads saga and for the month of August the strategy experienced a very nice +8.7% return. This strategy has returned over 82% in only nine months.

Last month’s CME bull put credit spreads position came the closest to backfiring, as the price of CME stock fell to 505.89 on Thursday August 16 the day before options expiration. If the price of CME’s stock had remained below 530 at the market close on options expiration on Friday August 17, then the position would have experienced a loss of -91.3. And instead of enjoying a nine-month return of 82% we would have instead the ugly experience of an -18% loss over nine months. But fortunately the price of CME’s stock recovered and closed at 543.85 on Friday August 17, which was above the 540-strike price of the short put option, and the bull-put credit spread was fully profitable. Read more »

Covered Calls Based on Jim Cramer’s Buy Recommendations

There has recently been a spate of media reports detailing the danger of chasing Jim Cramer recommendations. Ignoring this potentially sage advice to stay away, we dive headlong into the sometimes-erroneous hyperkinetic world of Jim Cramer to look at potential covered call trades on stocks he has recently plugged. (Note: Jim Cramer does not endorse any of the option strategies based on his stock selections illustrated in this article or on Read more »

Using PowerOptions’ Strategy Search Summary Tool to Find the Best Trades on a Stock

In the course of writing the PowerOptions blog we often find ourselves discussing news events and signals indicating a stock will move up or down. Rarely have we focused on the best way to exploit a position once we have a strong hunch on which way the underlying equity will go. Read more »

Biotech Stocks Uncharacteristically Calm in Volatile Market – Covered Call Opportunities

Shares of large biotechnology companies posted only slight gains Friday, despite large gains in the market overall. Biotechs have been calm all week, experiencing on average only half the losses seen in the wider market, according to the American Stock Exchange’s Biotechnology Index. Read more »

Whole Foods and Wild Oats Merger Likely To Go Through – Organic Covered Call Opportunities

In our June 6th article entitled, “What do Health Food Supermarkets and Satellite Radio Have in Common? The FTC, Mergers, and Option Investing Opportunities”, we reported on the potential deal between Whole Foods Market and Wild Oats. Now the stock of both companies has risen around 5% since then and the merger looks likely to go through. Today, we will look again to both of these companies and explore potential Covered Call trading ideas. Read more »

Trouble for Housing Market and Mortgage Lenders – Bear Call Credit Spreads

News reports on Thursday stated mortgage lender Countrywide Financial (CFC) has siphoned off an $11.5 billion credit facility to fund its operations as they are having an increasingly hard time raising money. This news prompted Fitch (a stock rating agency) to lower Countrywide’s long-term default rating from A to BBB+. Read more »

Buick outshines Toyota in U. of Michigan Survey – Covered Calls on Major Auto Manuf.

Car buyers are more satisfied with American made cars than their traditionally technically superior Asian rivals. Many thought America’s rusted auto manufacturing sector was unlikely to ever catch Toyota and the other Japanese car-makers in customer satisfaction, but apparently it has happened according to a survey released Tuesday by the University of Michigan. Read more »

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