The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – May Week 2

Posted by mounddweller on May 8, 2011

Fellow Traders,

My apologies for getting this posted so late in the weekend.

This week’s sell-off in energy and silver has presented us with some trades on stocks we’ve not seen before.  On the list below you can see there are potential trades in Coeur DAlene Mines Cp (CDE), Hecla Mines (HL), and Crosstex Energy (XTXI). 

Of these three XTXI is the most interesting.  It seems unlikely that it would fall another 22% in the next two weeks.  However, if it did and you had the stock put to you, you could take comfort in knowing you owned a commodity producing asset that was willing to pay you a 4.8% annual dividend.  The downside to this trade is the meager premium.  At $0.05 per contract you would have to sell a lot of contracts to make it worth your while.

The other trade that appeals to me is NVDA.   With over $4/share in net cash, this stock has a rock-solid balance sheet.  It also is trading at a reasonable, albeit not cheap, 15x forward earnings.  The trade itself has over 13% downside protection with a ROIC of 1.41% with only 2 weeks to expiration.  One important thing to keep in mind is the company is scheduled to report quarterly results on May 12.  Given the strong results recently reported by INTC I wouldn’t expect a bad report from NVDA.  However, I don’t follow NVDA very closely so don’t place your bets based on my opinion; it’s not worth much.

Well, that’s it for this week.  Today is Mother’s Day.  Don’t forget to call your mom!

Regards,

Troy

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2 Responses to “Deep OTM NP Strategy – May Week 2”

  1. Jacob said

    Troy,

    Do you know of any good software or online tools for tracking portfolios that include options? Something like google portfolio, but one that allows you to add options holdings? That is free?

    Thanks

    • mounddweller said

      Jacob,

      No, sorry I don’t know of any good free online portfolio tracking tools. I used to use Yahoo but now I just keep track of all of my trades in Excel.

      Regards,
      Troy

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