Nothing frightens me more than the extremes the market is putting in right now. Directional bets are a coin toss, especially with options spreads, since they need time in order to give us returns.
But I believe there are some companies out there that no matter what (well, sort of), you can count on their stocks outperforming the market. Two that come to mind are Amazon and Apple. I call these High Fliers.
Yesterday I opened Bull Put Credit spreads (see In Play) on both using this weeks option expiration, and I pushed hard to get a decent return by putting my short strike very close to the current price at the time of the trade – at a high delta in the 30s and a 5:1 risk/reward ratio. I didn’t go big on my position size either – not wanting to risk too much on these even though they are looking strong. My hope is that they hold on until Thursday when I can exit with some profit. I think as long as Europe is quiet for a few days and the politicians stay away from Washington and keep their mouths shut, this might just work out.
Another Naked Put
No, this is not a self portrait.
I mentioned in a previous post that right now I was favoring Naked Puts on (what many consider) recession-proof stocks – or stocks that I would like to own. I added another one to my stable for my conservative account yesterday. It’s Intel, which has been in a pullback recently. If I get Put the stock, the cost basis is 18.26 which is a pretty good purchase price. In addition, with a annual dividend of 0.84/year, that figures to an annual dividend yield of 4.6%.
I’m just not comfortable opening any Profit Tent Portfolio™ trades at this time. The moves in the market (daily ranges) are just too big to take that type of risk. Right now testing the waters with Naked Puts is the strategy I prefer.
