The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – NOV Week 4

Posted by mounddweller on October 23, 2011

Fellow Traders,

There are a lot of selections for our Deep OTM NP Strategy this week. 378 of them in fact.  That’s way too many for me to easily post in my blog so as I’ve done before I have posted the entire list of selections out on the Yahoo CoveredCalls-NakedPuts_OptionStrategies group board.  You can find it here: http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/.

I have 7 trades for you to consider.  They are presented below.  I have to say it is hard to be excited about any of the trades I selected.  Here’s why…the market has rallied significantly over the past several trading days.  This has occurred despite the tremendous overhang of the European debt crisis and being in the middle of earnings season.  Thus, I feel a correction could be right around the corner.  On the other hand you have a lot of analysts saying we’re going to have a year-end rally.  So bottom line, nobody knows what is going to happen.  Thus, given all this uncertainty I remain skeptical and very cautious.

There are two stocks in this list that I’d like to highlight.  They are Dow Chemical (DOW) and Freeport McMoran Copper & Gold (FCX).  I’m highlighting these two because they are highly sensitive to the economic cycle.  If the worldwide economy continues to slow these stocks will continue to fall.  If the economy stabilizes I believe both these stocks are worth a look.  Let’s look at the 5-yr charts for DOW and FCX.

As you can see both of these stocks have remarkably similar charts.  Both fell into the single digits during the financial crisis in late 2008 and early 2009 only to soar 400-500% as the market recovered.  Both are bouncing after recently hitting 52-wk lows.  The strike prices for each of the trades on these stocks are at or below those recent lows.  In the case of DOW, the $22 strike price is near the recent low of $21.51.  For FCX the $29.50 strike price is below the recent low of $29.87.

Well, that’s it for this week.  Best of luck as we start this next trading cycle.

Regards,

Troy

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

 
%d bloggers like this: