This year has been incredibly volatile, but options markets are pricing in lower and lower expected movement. Are the options markets right or is there a unique opportunity here? What does this mean for investors and traders and how can we take advantage of these potential mispricings?
Join Keith Harwood, President and Chief Options Strategist of Option Hotline as he discusses how he, as a former market-maker and hedge fund trader, looks at these markets and where he believes the mispricings exist.
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Tomorrow, you could begin doubling your account every single month starting with one letter.
The letter will come from a 20-year trading professional named Ian Cooper. He says, “In 2022, following my trades you would be doubling even tripling your account some months. Let me show you how.”
He will show you exactly what to do... and he’ll give you the blueprint for just $1.
There was the coronavirus, inflation, aggravated consumers, fears of recession, a more aggressive Federal Reserve, issues with Russia, China, and North Korea. And while we can’t tell you what could possibly happen next, we can point you in the direction of hot stocks that are not only oversold, but setting up for potentially big moves.
Apple (AAPL)
The company just beat expectations on revenue and profits, and it showed that global demand for its products is still high. In its fourth quarter, the company’s revenue was up 8% to $90 billion. That would have been higher, if the U.S. dollar didn’t spike as sharply as it did. In fact, even the company said growth would have been in the double-digits without that.
Mac sales were up 25% to $11.5 billion in the quarter. iPhone sales were up 10% to $42.6 billion. Operating income was up by 5% to $25 billion. And EPS was up 4% to $1.29, putting it above expectations for $1.27. Also, analysts, such as Deutsche Bank’s Sidney Ho, Apple is trading at a reasonable valuation, and has a buy rating, with a price target of $175. Apple also carries a dividend yield of 0.66%, and it’s been aggressive with stock buybacks.
After you have done your research homework, and you have found a company that looks like a good candidate for writing a covered call, it’s time for one final consideration. How much money can you make on the play? We have to look at the option premiums and determine the percent return on our money to see if it’s worth playing. A good covered call play is considered to have a high enough premium that will give a 10% or better return in one or two months when the stock is not on margin, and the strike price is slightly out-of-the-money.
What is a good return on your money? The percent return on money is sometimes called the yield. Consider how much interest your money could be making if it were somewhere else. Something nice and safe like passbook savings accounts and certificates of deposits may be paying 3% to 6% annually. Mutual funds may give 10% or better annual returns. So, if you are going to put your hard earned money at risk, you want to get a rate of return that beats these other investments.
Let’s use a real-life covered call play we did to clarify the steps of determining return on investment.
At the beginning of May, we began looking at a company that matched a lot of our criteria. We found a company that had just announced a record 4th quarter; it had a history of five consecutive quarters reporting increased revenue.
I’m looking forward to things going back to normal. And by normal, I mean make-believe realities and gambling. More specifically, by normal I mean focusing on Trading such as these two stocks releasing their Earnings this week:
Tuesday, November 8 After the Close: Disney (DIS)
Wednesday, November 9 After the Close: Wynn Resorts (WYNN)
And just in case you didn’t get the joke, these two companies are based on make-believe and gambling.
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