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Posts Tagged ‘CREE’

Weekly NP Strategy – DEC 9 Exp. Results

Posted by mounddweller on December 11, 2011

Fellow Traders,

This will be short.  Please recall last week I recommended AA at the $9 strike.  Friday, AA closed at $9.64.  I also recommended CREE at both the $22 and $23 strike prices.  Friday, CREE closed at $23.79.

Thus, all three puts expired OTM and worthless.

Regards,

Troy

 

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Weekly NP Strategy – DEC 9 Exp

Posted by mounddweller on December 1, 2011

Fellow Traders,

This week our Weekly NP Strategy returned 87 possible trades.  Of these I found 3 worthy of your further consideration.  They are AA at the $9 strike and CREE at the $22 or $23 strike.  Those of you who would like to look through the entire list can find it here: http://finance.groups.yahoo.com/group/weeklyoptions/files/.

I don’t need to say much about the AA trade.  AA has consistently shown up in our selection results from day one of starting this strategy.  AA closed today at $9.81.  The $9 put has a bid price of $0.06 giving us a ROIC of 0.67% (before commissions).  In the past three months AA has bounced back twice when it got just below $9.  On October 3 it closed at $8.90 and on November 23 it closed at $8.88.  AA was one of my recommended trades that week and if you followed that recommendation you more than likely would have had AA put to you.  However, you could have easily sold it for a profit the following week.

Next up is CREE.  I like CREE at both the $22 and $23 strike prices.  CREE hit its 52-wk low of $23.03 back on October 3.  Since then it has rebounded, closing today at $24.83.  The ROIC (before commissions) is 0.55% and 1.13% at the $22 and $23 strikes respectively.  CREE has a rock-solid balance sheet.  It has $5.48/share in cash in the bank and ZERO debt.

Best of luck to everyone in their trades and happy holidays.

Regards,

Troy

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Deep OTM NP Strategy – AUG Week 3

Posted by mounddweller on July 31, 2011

Fellow Traders,

The recent uptick in volatility has generated an increase in the number of trades meeting our selection criteria this week.  The complete list of possible trades is presented below.

As you can see I highlighted two that caught my eye.  First up, let’s look at CREE.  Cree, Inc. develops and manufactures light emitting diode (LED) products, silicon carbide (SiC) and gallium nitride (GaN) material products, and power and radio frequency (RF) products. Its LED products include LED chips used in various applications, including video screens, gaming displays, function indicator lights, and automotive backlighting; LED components; and LED lighting products.

It is a competitor to RBCN which has appeared on our selection list on several other occasions.  CREE has an excellent balance sheet.  It has $9.85/share in cash and no debt.  Unfortunately, it has a very ugly 1-year price chart (see below).  It has fallen from a 52-wk high of $74.87 to a recent low of $30.17.  In the past couple of weeks it has attempted to turn the corner and head back up.  Friday it closed at $32.85.  The reason this trade caught my eye is because the strike price of $27.50 is well below the recent low of $30.17.  Barring a complete melt-down in the market from the debt-ceiling crisis I think this trade has potential.

The second trade that caught my eye is in MYGN.  Myriad Genetics is a stock I unsuccessfully traded last year.  I had done a buy/write and had successfully sold two rounds of CCs before the bottom dropped out and left me high and dry.  This time the set-up is a little bit different.  The stock has already fallen substantially.  The strike price ($18) of our NP trade is at an area of strong support.  The stock closed Friday at $21.27.

If I had to choose between the two trades I’d pick CREE over MYGN.  It has already bounced and is trying to recover while MYGN still appears to be falling.

Best of luck trading this week.

Regards,

Troy

 

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Deep OTM NP Strategy – January Results

Posted by mounddweller on January 22, 2011

Fellow Traders,

It was a ‘so-so’ month for our Deep OTM NP Strategy.  Certainly it was not an auspicious start for 2011 nor for the beginning of posting this trading strategy on my blog.  Enough of the lamenting let’s get on with reviewing the results.

This month we had 27 trades in our strategy to choose from.  After the market close on Friday (1/21), 23 of them closed OTM.  That’s a success rate of 85%.  Certainly not bad given the types of stocks that meet our trading criteria.  In the current market environment most of our trades involve small and mid-cap stocks with less than stellar fundamentals.  However, it is not nearly as good as the 96% success rate I was experiencing last year before I began publishing my results.

Had you chosen to sell puts (using the capital allocation plan I outlined in an earlier post) on all 27 selected trades this month it would have required a capital balance of $175,925.  Remember, this assumes you are trading in a tax-advantaged retirement account which does not allow the use of margin.   Doing so would have generated total premiums of $2,756.60 (net of commissions).  This equates to a 1.57% ROIC, which is 16.82% annualized.

But wait, you say, what about the losers?  Yes, my friends we have to account for our capital losses.  We had 4 trades that finished ITM.  On Monday we will have to purchase these 4 stocks.  They are PSDV, LPHI, SVU, and CREE.  Assuming we did nothing to mitigate our losses by either (1) buying to close the puts at the first sign of trouble, or (2) holding the stock after assignment and possibly selling CCs against it, our total capital losses (based on Friday’s closing prices) would equal $2,764.80.  The net result (premiums plus capital losses) would be a very small loss of $8.20.

However, as I mentioned above we have several options (pun intended) available to us to mitigate that loss and perhaps we could have ended the month with a significant gain had we proactively managed the trades.  Let’s look at each of the four losers and see what our best course of action might have been.

First up, let’s look at PSDV.  We sold 10 JAN $5 puts back on 12/19/2010 when the stock was trading at $5.70.  It closed Friday at $4.53.  This left us with a capital loss of $0.47/share or $470.00 on 10 contracts.  However, we had plently of time to recognize the trade was in trouble and could have avoided the loss by not holding the contract to expiration.  The stock gapped down on 12/27.  Over the ensuing 3 1/2 weeks we would have had many opportunities to close the trade with a small loss or possibly even a profit.  Alternatively, we could have chosen to take assignment and hold the shares until they get back above $5.  It’s not unreasonable to assume this could occur over the course of the next week.

Next is LPHI.  Unfortunately, there wasn’t much opportunity to avoid this sizeable loss.  The stock dropped almost $2.50 on 1/20, just one day before expiration.  Given the significant gap between the closing price on Friday ($11.82) and our strike price of $14.75 there also appears to be little sense in waiting for an uptick in price before selling the stock.  In this situation in my opinion the best course of action is to just suck it up and take the loss by selling the shares on Monday.  This trade represented the bulk of our capital losses ($1,473.95 of $2,764.80).

Our third loser was SVU.  Recall on 1/7/2011 we sold 10 JAN $7.50 puts on SVU.  SVU was trading at $8.66.  Friday it closed at $7.33.  SVU gapped down on 1/11/2011 closing at $7.59.  Again, like PSDV, we had a couple of weeks to get out of this trade if we wanted to.  Even if we hadn’t we still aren’t in a bad position.  Having closed only $0.17 below our strike price it is very likely we will have been able to sell it above $7.50 at somepoint on Monday.

Our last loser was CREE.  On 1/14/2011, with the stock at $63.77, we sold 1 JAN $57.50 put.  On Friday the stock closed at $51.26.  It had gapped down earlier in the week, falling from $62.71 to $53.63.  Their really wasn’t a good way to avoid this loss.  However, we could have lessened the size of the loss by buying to close our puts when the stock gapped down on 1/19. 

Well, there you have it my friends.  I’ll be back later this weekend with another post to announce the first round of February selections in our Deep OTM NP Strategy.  I’d be interested in hearing if anyone selected any of the picks from my strategy in January.  If you’d like please post your results as a comment to this message.

Regards,

Troy

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Deep OTM NP Strategy – JAN Week 1

Posted by mounddweller on January 14, 2011

Fellow Traders,

I have 3 selections for you this week from our Deep OTM NP Strategy. 

As you can see from the chart above two of our three selections are mid-caps with stock prices suggesting they may be viable choices for a NP trade.  In doing some basic DD I found that both CREE and PLCM will be announcing quarterly earnings next week.  That accounts for the relatively high premiums for only 8 days to expiration.  Both CREE and PLCM are relatively expensive from a fundamental perspective, trading at over 21x estimated 2011 earnings.  However, on the plus side both have zero debt and large cash balances.

From a technical perspective I like CREE better than PLCM.  PLCM has had a strong run-up in price in the past 4 months, increasing from just under $29 to almost $42.  CREE has backed off from recent highs, falling from $72 to just under $64.  The other thing I like about the CREE trade is the $57.50 strike price.  It is under CREE’s 200-DMA of around $60.50.

Best of luck to all this week and especially at expiration on Friday.  As always, remember to do your own DD and that nothing written in my blog should be construed as personal investment advice.

Regards,

Troy

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