Here is Part 2 of our Stock, or Portfolio Insurance? Series: Selecting the Right Put In this video we discuss which broad based ETF or Index Put to Select to Insure an overall portfolio. In Part 1 you saw that using an SPY Put option (the 250, ATM strike) was better insurance on a portfolio over buying shares of an Inverse or Leveraged ETF. However, was this the best strike selection? What about lower strike, lower cost, Out of the Money Puts? Wouldn’t puts with a higher delta, deeper In the Money perform better? This video breaks down the costs, outcomes, pros and cons of the different strikes you can use to insure a portfolio. We also give you an outline of how to analyze which put might be best to insure your portfolio. I hope you enjoy Part 2, and I look forward to your thoughts and comments!
Category: Stock Option Investment Advice
Portfolio Insurance (2017) – Part 1: For the Stock Traders
This article is Part 1 of a series on evaluating the ways to add Portfolio Insurance if you are anticipating a market correction or market decline. Most of us are probably in more Bullish positions, based on the last 12 months performance of the market. Every week new highs are being hit, and bullish stock and option traders have been doing well. Over the last 12 months, we have seen SPX (S&P 500 index) and SPY (S&P 500 ETF) gain over 17% (SEP 13th, 2016, SPY closed at $213.23 and is currently around $250.00). During that same time period, NDX (NASDAQ 100 index) and QQQ move up 26% (SEP 14th, 2016, QQQ at $115.85 to about $146.00). Sure, there were small hiccups here and there along the way, but the extended growth has led to many pundits, gurus and other stock prognosticators warning of…
No Free Money with Special Dividend
I am sure that you’ve heard Costco Wholesale (COST) announced a special dividend of $7.00 per share, plus an additional increase of $0.05 to its regular quarterly dividend. The special $7.00 one time cash payment will be paid on May 26th, to those who are on record as owning shares on May 8th, 2017. What do we expect to happen when a special dividend is paid? Well, we expect the COST share price to fall -$7.00 to reflect the $7.00 one time payment. So, is this a Free Money investment if I were to buy an Out of the Money or At-the Money put option? Since the stock is going to fall the put would have to gain in price, correct? Even though I did not receive the dividend, my put would still gain and I would have a nice, juicy, leveraged profit…right? Not quite. In fact, not at all….
Stock vs. Married Put Position Analysis
Married Put Profits Compared to Stock Only Profits: Using married puts to protect and insure a stock position has certain risk / reward trade-offs. Each position is a little different. Your profit results will depend on your stock selection, how much risk you take with the purchase of the put, and what income methods you apply to the position. Two different investors taking positions in the same stock will likely have different outcomes just because of their individual choices for strike price of the put, what income method to apply, and when during the hold cycle to apply the method. Recently an investor wrote to us about some profit concerns with one of his marred put positions: “The stock DB was bought 10-4-16 using the Married Put. The stock is up 57%. I am only showing a 16% profit because of the Put. Granted Hindsight is 20/20. I realize this…
Free Options Resources on PowerOptions
Free Options Resources: What makes options resources valuable? Is it the promise of high returns? Is it the promise of a high success rate? Is it focusing on only the potential success of a strategy, without focusing on the risks or management? Let’s be honest, there are thousands of free options trading resources available. Any trader who has bought one option contract or sold a call against their stock can post a blog, video or white paper about their trade. That doesn’t make them an expert on the subject matter, although they do have an experience to share. Other free resources will give a static definition of a strategy – just enough to illustrate the basics without providing any further details on the risks of the trade or management ideas. In other words, just enough information to be dangerous. And there are still those services that will give you just…
Configure Stock Chart Parameters
Setting Stock Chart Parameters using Big Charts: In Power Options we use Big Charts as our stock charting tool. There are 3 stock chart programs offered by Big Charts: Basic Chart Advanced Chart Interactive Chart We use the Advanced Chart version, with modifications to the default parameter settings. We modify the default settings to make the display more user friendly for the options trader. The modified settings are then saved so they will be applied to future stock chart displays without the need to change from the default setting each time a new stock chart is requested. Big Charts settings are changed in the left hand column of the chart display (in blue): Stock chart parameter changes The first grouping of parameters are for “Time Frame”. A one year time frame is shown by default, but for option trading 3 months is a more convenient choice. And the frequency is left…
Earnings Growth Creates Stock Growth
Earnings are an important indicator of stock price appreciation. In general, if you expect to earn 10% on your stock investments, the stock you choose should have their earning grow at 10% or more. Certainly there are exceptions. Buying a stock because of some short term news event, a new technology that is being developed, or a rumored merger are all exceptions. But over the long run, you should select companies for stock purchase that have a steady earnings growth so they will tend to rise in stock price in line with that earnings expectation. When company selections are made for long stocks or married puts, we generally screen for companies that have good earnings growth. On the PowerOptions site the parameter we like to display and search by for earning growth is %EPSG. %EPSG is and abbreviation for % Earnings Per Share Growth. If %EPSG is not displayed in your search results, add that…
Analyzing Married Puts with PowerOptions’ Position Analysis Tool
I recently spoke to an investor about a position he had in LITE @ $47.90 +1.30. He wanted my advice on what to do with the married put position. Here at PowerOptions and RadioActiveTrading we provide tools to help investors find, analyze, and manage their investments. We do not make recommendations or give advice on how and when to trade individual stocks or options. So a question like, “What should I do next”, is rather awkward. We do not want to give advice, but will work with the self directed investor to find the information they need to make there own decisions. In this case, the conversation proceeded down the following path: The position was in his Power Options portfolio as a marred put, which enabled both of us to look at the Big Charts graph (available under “more/info”, Charts) for LITE, which had a recent large stock price rise. I asked…
Gilead (GILD) War Story: I Learned A Trading Lesson On This One
Several months ago I purchased Gilead Sciences (GILD) in my married put Fusion account. This is an investor war story about this position and some lessons I’ve learned as a result of doing a regular quarterly review of my holdings. But before I get into the lessons learned, I need to share some background information that led up to the purchase in the first place. During the December 2015 to January 2016 time period the entire Biotechnology sector was under pressure and most stocks in the sector declined. But February 2016 brought some stability and consolidation. During the February to March period, volatility declined, Bollinger Bands narrowed, and MACD turned positive. I thought, It was clearly time to consider
The Best Covered Call Strike Price
Writing covered calls (CC) is a commonly used strategy for increasing income in a stock portfolio. Just to review, a covered call (CC) strategy consists of buying a stock and writing (selling) a call against the stock. Your stock, acts as collateral for the obligation to deliver the stock if the stock price is above the option strike price at expiration. You receive option premium income because you give the right to an option buyer to buy your stock at the strike price. A basic rule of thumb in writing covered calls (CC) is to choose underlying stocks that you wouldn’t mind holding in case the stock declines. This basic rule would also apply if you were buying a stock for its’ dividend income. In both cases, the highest risk in the position is the decline of the stock, which could create a loss many times larger than the income…