The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘A’

Deep OTM NP Strategy – DEC Week 3

Posted by mounddweller on November 26, 2011

Fellow Traders,

This week we have 56 new trades which meet our selection criteria.  Of these I found 2 that are worthy of further due-diligence.  They are Agilent (A) and Foster Wheeler (FWLT).

Let’s first look at Agilent.  Agilent Technologies, Inc. provides bio-analytical and electronic measurement solutions to the communications, electronics, life sciences, and chemical analysis industries in the United States and internationally.  It was founded in 1999 and is headquartered in Santa Clara, California.

Agilent has strong fundamentals.  It trades at less than 12x historical earnings and 10x prospective earnings.  It has an net profit margin of 15% and a ROE of 26.8%.  Agilent also has a net cash position of $1.35B.  Now let’s look at the 3-yr price chart.

Our trade is at the $29 strike price.  As you can see this is below recent support at around $30.  The $29 strike has a premium of $0.48 giving us a ROIC of 1.66% with DSP 15.7%.

I see two negatives with this trade.  First, A doesn’t pay a dividend.  With the volatility in this market I would prefer to stick with stocks that pay a dividend.  Second, if A were to fall below it’s recent support at $30 it could fall much further.  As you can see the 3-yr low is down around $12.

Next up let’s look at Foster Wheeler (FWLT).  This is not the first time it has met our screening criteria and been selected for further analysis.  You can read my previous write-up here:

Foster Wheeler AG provides construction and engineering services to oil and gas, oil refining, chemical/petrochemical, pharmaceutical, environmental, power generation, and power plant operation and maintenance industries worldwide.  It was founded in 1894 and is based in Geneva, Switzerland.

FWLT also has strong fundamentals.  It trades at just under 14x historical earnings and 10x prospective earnings.  It also is sitting on a substantial pile of cash to help it through any downturns in the global economy.  It’s net cash position is $6.81/share.

Looking at the chart here’s what I like.  First, $15 strike price is below the recent low of $16.40.  Also, it is close to the 3-yr lows encountered in 2009.  Our $15 put has a premium of $0.25 giving us a ROIC of 1.67%.  It also has DSP of 15.7%.  Like Agilent, Foster Wheeler doesn’t pay a dividend.  As I mentioned earlier, that’s a negative in my mind especially in this volatile market.

For those of you who would like to review the entire list of 56 possible trades you can find it here:



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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:

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.



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Weekly NP Strategy – OCT 22 Exp

Posted by mounddweller on October 13, 2011

Fellow Traders,

Below are my selections for the Weekly NP Strategy this week.  There were over 1300 selections that met our basic criteria.  Obviously I didn’t have time to dig deep into all of them to pick the ones I liked.  Thus, the ones below were selected with minimal due-diligence.  I primarily selected large caps, paying a dividend, where the strike price is less than the recent market lows.

Best of luck trading in the coming week.





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Weekly NP Strategy – SEP17 Exp Results

Posted by mounddweller on September 17, 2011

Fellow Traders,

Well our second week of selecting weekly NP trades has concluded.  Let’s take a look at how my choices faired.   You’ll recall my choices were:

(1) The $30 strike of Agilent (A) closed OTM yesterday at $36.36

(2) The $11 strike of Alcoa (AA) closed OTM yesterday at $11.97

(3) The $23 strike of Adobe (ADBE) closed OTM yesterday at $25.52

(4) The $30 strike of Sotheby’s (BID) closed OTM yesterday at $38.22

(5) The $77.50 strike of Catepillar (CAT) closed OTM yesterday at $85.90

(6) The $80 strike of Cummins Engines (CMI) closed OTM yesterday at $97.84

(7) The $22 strike of Encana (ECA) closed OTM yesterday at $23.85

(8) The $19 strike of Intel (INTC) closed OTM yesterday at $21.97

(9) The $25 strike of Microsoft (MSFT) closed OTM yesterday at $27.12

(10) The $40 strike of Pall (PLL) closed OTM yesterday at $44.03

(11) The $50 strike of Transocean (RIG) closed OTM yesterday at $59.17

(12) The $11 strike of Charles Schwab (SCHW) closed OTM yesterday at $12.34

(13) The $29 strike of Waste Management (WM) closed OTM yesterday at $32.01.

Hey, how about that!  13 for 13.  Two weeks running we haven’t had a single selection finish ITM.  We’re off to a awesome start testing the possibilities of this Weekly NP Strategy. However, two weeks does not make for statistically valid testing.



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