The Money Tree

Safely Generating Income in Retirement

Archive for June 20th, 2010


Posted by mounddweller on June 20, 2010

I ran a VISIONS scan this weekend.  For the first time in quite a while it returned more than just one or two possible trades.  In fact VISIONS identified 14 possible trades, 5 of which have a Gold$ score of greater than 80. 

(1) First Solar (FSLR) – Gold$ = 92

(2) Banco Santander (STD) – Gold$ = 90

(3) Logitech International (LOGI) – Gold$ = 86

(4) ExxonMobil (XOM) – Gold$ = 84

(5) Forest Labs (FRX) – Gold$ = 82

What I found particularly interesting in the results of my scan are the increasing number of ‘blue chip’  stocks that are beginning to appear.  The most notable of these is of course ExxonMobil which showed up in the top 5.  Others, in no particular order, appearing further down the list beyond the top 14 I referenced above include JNJ, MSFT, KO, VISA, and GOOG. 

I believe we are still in a bear market thus I want to limit my trades to those types of large-cap companies.  I say keep an eye on them and pounce when the timing is right. 



Posted in Potential Trades | Tagged: , , , , , , , , | 3 Comments »

MYGN – What to Do?

Posted by mounddweller on June 20, 2010

It would be a big understatement to say that I slightly misjudged the inherent risk in my MYGN trade.  Clearly, MYGN was a mistake.  I over emphasized the positives of the trade and failed to turnover every rock looking for the hidden risk.  In this case the risk wasn’t exactly hidden, I just failed to perform adequate due diligence.  The validity of some of the company’s patents have been revoked (MYGN is appealing the decision). 

Initially it appeared after a sharp decline that the stock would stabilize and then begin a slow recovery.  I was fine with this because the company has an excellent balance sheet and there didn’t appear to be any need for immediate alarm.  However, in the past couple of weeks MYGN has continued to slip and has now fallen below support in the $17.50 range.

What to do?  As I see it I have the following choices:

(1) sell OTM naked puts for JUL or AUG in an effort to generate cash flow and significantly reduce my net cost basis if assigned.  I see my two primary options being the JUL $16 or AUG $15 puts.  The downside to this option is committing additional capital to a trade that might not yet have found a bottom.

(2) sell OTM near month calls below my current cost basis of $23.60.  This would allow me to generate cash flow off of my existing position but if the stock recovers I could find myself stuck in between a rock and a hard place trying to rollout my position to avoid assignment below my net cost basis.

(3) sell long-dated calls at or above my current net cost basis.  This option generates little income and has the potential to severely limit my potential gains should the stock rapidly recover in price well before my long-dated call options are due to expire.

(4) sell my existing MYGN shares at a loss and identify a new trade with which I can work to recover my loss of capital. 

(5) do a combination of the above.

(6) do nothing and wait for MYGN to recover.  It has a rock-solid balance sheet and good growth potential.  Eventually the price will recover.  However, given the current overall market condition that could be a long time coming.

I’m open to hearing your suggestions as to which of these options appeals to you and why.  Perhaps there is another alternative I haven’t considered.  If you think of one, please let me know.



Posted in Portfolio Updates | Tagged: , , , | 3 Comments »