Category: Stock Option Trading News

Another industry we’ll consider which has a tendency to hold up well during an economic malady is the banking industry. The idea of banks performing well during tough economic times seems counterintuitive, but the reason banks are non-cyclical is due to lower interest rates. Generally, the Federal Reserve lowers interest rates during periods of economic slowness in order to stimulate activity and help prop up the economy. And banks generally do very well in an environment of low interest rates, as their costs for borrowing money are significantly less.

With the economy’s recent anemic performance, we will continue a consideration of industries tending to hold up well during an economic slowdown. Even when the economy is not doing very well consumers continue to go to the doctor, so healthcare is an industry that continues to perform ok in an economic malaise.

In article “U.S. Trade Deficit – Ocean Shipping – Covered Calls” we analyzed the shipping industry in light of world trade and the U.S trade deficit. We decided the shipping industry was looking bullish and a covered calls stock options strategy might be a fruitful investment. Three of the four positions we selected were fully profitable and the average return of the positions was +2.2%. Interestingly, the GMR position paid out a huge $15 dividend during the holding period. The lone loser was TOPT with a loss of -2.1% on the position, but the loss for the covered calls position for TOPT was not nearly as large as a straight long position which would have resulted in a loss of -4.1%.

In article “Fertilizer is Smelling Good – Covered Calls” we looked at covered calls for fertilizer companies. The stocks for fertilizer companies have been doing very well with the emergence of ethanol as a potential competitor to gasoline derived from oil. We selected covered calls positions for fertilizer companies and every position selected was fully profitable experiencing a very nice +5.4% average return.

In the article, “Germany – As Far As East Is From West – Covered Calls”, we checked out investing in covered calls stock options positions for companies located in Germany. The average return for the positions selected was +3.7%. The +3.7% return was generated in only 36 days. All eight positions selected were profitable with seven of the eight positions experiencing the maximum return possible for a covered calls position.

In article, “Subprime Lenders Are In the Bear House”, we outlined a bear call credit spreads stock options strategy for the subprime mortgage lenders. We’ve continued to go bearish on the subprime lenders and for April 2007, both positions we selected were fully profitable returning a very nice average return of 12.4%. The news on the subprime front is still gloomy. The inventory of unsold homes is very high and subprime borrowers are defaulting on loans at a very high rate.

Last Year, Yahoo (YHOO) overhauled it’s online advertising sales to more closely mimic the model set by its competitor Google (GOOF). Yahoo called the project ‘Pamana’ to in some way compare it to the colossal undertaking of trenching a canal to join two bodies of water. The power of the metaphor is somewhat questionable, but the business idea, at least on the surface, was somewhat sound.

So what do China, Smoot-Hawley and Pre-Paid Legal Services have in common? For readers unfamiliar with Smoot-Hawley, we’ll digress for a moment to catch them up. The Smoot-Hawley Tariff Act was signed into law in 1930. Many economic historians consider the Smoot-Hawley Tariff Act to be a large factor in contributing to the worsening the Greet Depression of the 1930’s.

In a Yahoo.com online article entitled, 7 trading ideas for today, the widely visited financial website listed several stocks it was bullish on. PowerOptions weblog wanted to take a closer look at those picks and see if there was a way to use options to give investors a potentially safer investment while still generating solid profits.

A recent Wall Street Journal article noted Halliburton (HAL) was planning on expanding its Middle East operations. The company will also move its headquarters from Houston to Dubai. Company CEO, Dave Lesar has committed to spending nearly half of his time in Dubai and the UAE.