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Posts Tagged ‘AGO’

Deep OTM NP Strategy – APR Week 4

Posted by mounddweller on March 20, 2011

Fellow Traders,

We have a total of 38 selections meeting our Week 4 criteria.  However, I don’t think all 38 are worthy of our risk capital.  As I mentioned in my MAR results post I think it is imperative, given the current market volatility, that we become more selective in what we choose to trade.  So, while I am posting the entire list of 38, I would like to highlight a few that caught my eye as having a good risk/reward profile.

Running down the list the first stock that caught my attention was Interdigital Communications (IDCC).  It closed Friday at $42.01.  The put I’m interested in is the $35 strike.  It has a bid price of $0.60 giving us a ROIC of 1.71% with 18.11% DSP.  Some will take one look at the chart and immediately wonder if I am out of my mind.  The stock had a strong run up from $25 to 57.50 and has since fallen sharply back to the low $40s.   But if you look closely you can see the stock is trying to find a bottom and that the money flow has bottomed out and is beginning to recover.  That technical indicator coupled with the stocks excellent fundamentals makes it a worthy candidate for an NP trade.  IDCC has a net margin of almost 40%!  Yes, you read that correctly, 40%.  It also boasts almost $12/share of cash sitting on its balance sheet.    It currently trades at about 12x trailing earnings.

The second stock that caught my eye was LDK Solar (LDK).  This is a stock I successfully traded under similar circumstances back in late November.  Friday, the stock closed at $11.47.  The APR put at the $9 strike closed at $0.15.  This gives us a 1.67% ROIC with 22.84% DSP. 

The third stock I noticed is one that was on our list last month as well, Rambus (RMBS).  We all know the technology stocks have been taking a beating of late.  Rambus is no exception.  In the past few weeks it has fallen from just over $22 to almost $18.  Friday it closed at $19.06.  The $16 put is at $0.36 bid.  This yields an ROIC of 2.25% and 17.94% DSP.  The $16 stike is below the 52-wk low of $16.94.

I also found three other stocks on the list which I feel are worthy of your consideration.  They are AGO, TSL, and WFR.  AGO insures bonds, while TSL and WFR are solar related stocks.

Best of luck to everyone this month.  I think we are in for quite a ride. 

Regards,

Troy

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Deep OTM NP Strategy – FEB Week 3

Posted by mounddweller on January 30, 2011

Fellow Traders,

My apologies for the delay in getting this posted.

The pick-up in volatility this past week resulted in a corresponding pick-up in the number of selections from our strategy.  This week we have 12 new selections (5 mid-caps and 7 small-caps).  In addition many of the selections from last week reappeared this week.  I’m hopeful continued volatility will result in some large-caps making our list in the coming weeks.  Despite the great record of the overall strategy it is very hard to blindly sell puts on some of these smaller companies.

Here is the list for this week:

Have a great week trading.  I’ll be back again next weekend with another round of picks.  I’ll also keep you in the loop with regard to other CC and NP trades that I make outside of this particular strategy.

Regards,

Troy

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