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Archive for December 8th, 2011

Weekly NP Strategy

Posted by mounddweller on December 8, 2011

Fellow Traders,

I want to remind you of the decision I made last month to not publish a list of selections for the Weekly NP Strategy on the final week of the regular monthly expiration calendar.   This is because in reality there are no true weekly options.  The next available option expiration period is that of the normal monthly expiration which occurs on the Saturday following the 3rd Friday of the month.

However, I do have a trade for you to consider.  In scanning the list of options with one week to expiration on stocks with a dividend I came across the SYK DEC $45 with a bid price of $0.25.  Stryker (SYK) closed today at $47.12.  This gives the $45 put down side protection of 5.03%.  The ROIC for this trade with only 8 days to expiration is 0.56%.

The reason I like this trade is because Stryker is a solid, blue-chip company.  It operates as a worldwide medical technology company. The company operates in three segments: Reconstructive, MedSurg, and Neurotechnology and Spine. The Reconstructive segment offers orthopaedic reconstructive (hip and knee) and trauma implant systems, as well as other related products.  Stryker Corporation was founded in 1941 and is headquartered in Kalamazoo, Michigan.

Stryker has large operating margins and a rock solid balance sheet.  It also treats its shareholders very well.  Just yesterday it announced an 18% increase in the quarterly dividend to $0.2125.  You will be eligible to receive this new increased dividend if SYK declines to < $45 by next Friday and you have the stock put to you.   Shareholders of record as of 12/29 are eligible to receive the dividend.

As you can see in the 1 year chart below, technically SYK at $45 is a very good buy.

I encourage you to do your own due diligence and see if you too think this is a good trade.

Regards,

Troy

 

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