Friday, August 22, 2014

Puts are very underrated

Puts are very underrated.  The rap on them:  "they're so expensive."

They are.  But like a lot of things in life (not all), the dictum applies:  "you get what you pay for."

If you're persuaded, like some, that the Fed will pave the way to SP 2500, no sweat, you won't feel the need for any costly insurance.  But if the chorus of cautious voices has soaked through your hair, scalp and skull, and is now resident inside your gray matter, and you're like to be able to sleep soundly at night:  consider puts.

Let's take mighty Apple for example.  This past month, with the stock at 95 and change, the Jan. ATM (at-the-money) puts were going for something like 6.50.  (I am doing this, more or less, from memory.)  So, worst case, if Apple went to 0 (how could that happen?), or 50, or 80, max loss is capped at 6.50 (and change).

Let's head north.  Say the stock goes to 200 (how could that happen?).  You're out the insurance tab, and pocket 105.  Not bad.

For your 6.50 put tab, you get a 50something delta, quantified loss level.

What happened next?  Apple went to 100.  The strategist made 5 or so on the stock, lost 2.70 or so on the put, net gain, 2.30 on 6.50 risk, or 35%.   (And if AAPL reaches that magical 125 some pundits talk up, there's still another 25 points to go.....)

Without the put, the risk was 95 on the stock, made 5 on the stock, so 5/95, or 5.2%.

Additionally, will some profit under the belt, there are some adjustment options available, but that's beyond the scope of today's musing.

Leverage.  ROI.  Peace of mind.

Not to mention dividend capture, ability to sell calls (or puts) against, and countless other options machinations.

There's a bit more to this, our method, e.g. fundamentals, timing. options analysis.  For more, give a look to our book, Option Wizard® Trading Method.

In today's world of Putin, Ukraine, ISIS, Ebola --- and the unknown unknown that's coming down the pike next to hit us all on the blind side, puts are very underrated.

I'm just sayin'.........

Wednesday, July 9, 2014

Zacks' Bull Of The Day: Goldcorp - Goldcorp Inc. (NYSE:GG) | Seeking Alpha

Zacks' Bull Of The Day: Goldcorp May Have 10%+ Upside. (NYSE:GG) | Seeking Alpha

................In 2013 production was 2.7 million
ounces. This year GG is looking for 2.95 to 3.1 million ounces and next
year 3.6 to 3.8 million. This outlook has Goldcorp becoming free cash
flow positive in Q4 2014 assuming gold prices at $1200 an ounce.

We have it as a Zacks Rank #1 (Strong Buy) due to recent earnings estimate
revisions over the last 60 days. Four analysts have increased their
estimates for the current year and next year. The revisions have pushed
consensus up from 70 cents per share to 80 for this year.

Last quarter’s earnings surprise came in at 26 cents versus expectations for
14 cents. This firm beat along with the agreement and magnitude of the
revisions by analysts are what give this stock such a strong Zacks Rank.

The Zacks Rank isn’t the only reason why I like the stock at these levels.
The technical chart is very bullish for GG as well. Over the last two
weeks GG has been consolidating just below $28. During the consolidation
the stock has remained firmly above its 40 day exponential moving
average which currently sits down at $25.86.

The stochastics are showing an overbought position currently but that shouldn’t stop anyone
from buying the stock. This indicator can stay overbought for extended
periods of time during rallies. The last big run for the stock took it
from support ant $23 up to the level it trades at today. The next push
upwards will likely approach the 52 week high just above $29. If the
stock can push through that level than the August 2013 high near $32
comes into focus.