Category: Stock Option Investment Advice

The financial talking heads and pundits have been saying for some time now that the stock market is destined to take another nosedive in the near future. Time will tell whether their short-term predictions are correct or not, but the stock market is cyclical, so there will always be ups and downs, which causes problems for investors using the covered call investing strategy.

Although the recession began in December 2007, the first very public casualty came in September 2008, with the collapse of Lehman Brothers (LEH). Subsequently, between September 2008 and March 2009 the U.S. economy contracted by 5.5% and consumer prices plummeted by 12.4% in the final quarter of 2008. However, since the 1940s, recessions in the United States have typically existed for approximately a year. Furthermore, there are already symptoms of recovery. For example, consumer prices have increased by a 2.2% annual rate for the first quarter of 2009.

In my experience, the best time to sell a covered call is really based on the performance of the stock. For example, I have a few low priced stocks that are trading around the $6.00 range. I cannot sell the 7.5 strike calls as there is little or no premium, and I do not want to sell the 5 strike call as I do not want to get it called away.

Berkshire Hathaway (BRK.B), the failing textile manufacturing company transformed by Warren Buffet into an extremely successful and diverse conglomerate holding giant, began trading stock options of its Class B shares on June 18th. Its strike prices begin at $2,800, $2,900, $3,000 and $3,100 for the first expiration cycle, ending in March of next year. Its core business being insurance, Berkshire has expanded under Buffet’s leadership to include ownership of a wide range of industry – from vacuum cleaners to regional gas and electric utilities and just about everything in between. Buffet’s notable decision to avoid splitting shares has ultimately contributed to their reputation of high per-share price and low liquidity, alienating the prospect of short-term speculators. A reluctant Buffet eventually created a system of Class B shares with a value of approximately 1/30 of the original Class A shares, allowing Berkshire to function in both short and long-term investment realms….

Many Cyber Security Companies are benefiting in the cyber security market segment. Among them Honeywell (HON), SAIC (Science Applications International Corporation) (SAI), Boeing (BA), and Lockheed Martin (LMT). Some smaller companies also benefiting from security include: McAffee (MFE), Symantec (SYMC), and EMC (EMC), to name a few.

As expected with the coming of the summer months, oil prices have surged over the last couple of weeks from $40 to $60. Fueled by a slew of recent economic data which points to an easing of the recession, investors have been snapping up oil stocks as well as increasing their trade positions in the commodities market. Upward pressure from economic data, which suggest future supply, will be cut at an even more rapid pace than demand is dropping and political turmoil in the Nigeria’s oil rich south will help to lengthen black gold’s recent success.

Wouldn’t it be nice to make money, even if the stock market didn’t go up or down? Well, there’s a way to do it and it’s called the Iron Condor. An iron condor is a stock options strategy and a lot of investors eyes start to glaze over when they hear stock options, because they think stock options are either really really dangerous, or really really complicated.

The global economic downturn has had devastating effects car manufacturers as consumers worldwide have put off buying new vehicles and have chosen to keep and maintain their current ones. While this has severely affected the likes of General Motors (GM), Ford (F), and Toyota (TM), it provides unprecedented opportunities for auto parts stores, parts suppliers, and auto repair specialists.

The Treasury Department recently announced that it has decided to extend federal bailout eligibility to struggling life insurance companies. Treasury officials are reviewing applications from about a dozen large insurance companies seeking a share of what is left of the Trouble Asset Relief Program (TARP) after the financial and auto industry bailouts. The insurance companies play an important part in US finance and their collapse poses a huge risk to the financial system. The life insurance industry is one of the largest investors in the corporate bond market, holding approximately 18 percent of all US corporate bonds. They also have large stakes in commercial real estate and government bonds. Some of the companies expected to benefit from this bailout include Hartford Financial Services Group (HIG), Lincoln National Corporation (LNC), Prudential Financial (PRU) and MetLife (MET).

The details of the toxic assets plan are still unfolding. At this point, all we know is that the U.S. Treasury, the Federal Reserve, the Federal Deposit Insurance Corporation [FDIC] and the private sector will partner to create a market for the toxic assets currently held by a number of banks.