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Posts Tagged ‘NVDA’

Weekly NP Strategy – 05/11/2012 Expiration

Posted by mounddweller on May 3, 2012

Fellow Traders,

It’s that time of the week again.  My plane landed on time and I’m home and able to post my message about what I found in our Weekly NP Strategy query.  This week our query returned 75 possible trades.  Of these I think 3 of worthy of further consideration.  They are IDCC at the $25 strike, NVDA at the $12 strike, and RIG at the $48 strike.

IDCC sold off big earlier this week after missing anlaysts expectations.  NVDA is nearing support at $12, and RIG looks like a bargain at $48.

As always do your own due-diligence.

The remainder of the possible trades can be found here: http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/.

Regards,

Troy

 

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Deep OTM NP Strategy – May Week 2

Posted by mounddweller on May 8, 2011

Fellow Traders,

My apologies for getting this posted so late in the weekend.

This week’s sell-off in energy and silver has presented us with some trades on stocks we’ve not seen before.  On the list below you can see there are potential trades in Coeur DAlene Mines Cp (CDE), Hecla Mines (HL), and Crosstex Energy (XTXI). 

Of these three XTXI is the most interesting.  It seems unlikely that it would fall another 22% in the next two weeks.  However, if it did and you had the stock put to you, you could take comfort in knowing you owned a commodity producing asset that was willing to pay you a 4.8% annual dividend.  The downside to this trade is the meager premium.  At $0.05 per contract you would have to sell a lot of contracts to make it worth your while.

The other trade that appeals to me is NVDA.   With over $4/share in net cash, this stock has a rock-solid balance sheet.  It also is trading at a reasonable, albeit not cheap, 15x forward earnings.  The trade itself has over 13% downside protection with a ROIC of 1.41% with only 2 weeks to expiration.  One important thing to keep in mind is the company is scheduled to report quarterly results on May 12.  Given the strong results recently reported by INTC I wouldn’t expect a bad report from NVDA.  However, I don’t follow NVDA very closely so don’t place your bets based on my opinion; it’s not worth much.

Well, that’s it for this week.  Today is Mother’s Day.  Don’t forget to call your mom!

Regards,

Troy

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VISIONS Screen – 8/21

Posted by mounddweller on August 22, 2010

All,

I ran a VISIONS Scout screen this weekend after AUG expiration Friday.  Below are some highlights from what I found for specific stocks that looked particularly interesting to me.  However, before we jump into those I’ll tell you a little bit about the overall results of the scan.

The scan returned 32 stocks that met all of Ron’s “Level 4” criteria.  Of these 11 are what I’d call ‘investment grade’, i.e., they have a Gold$ greater than or equal to 80.  4 of the 11 have a perfect Gold$ score of 100.  The 11 ‘investment grade’ stocks are (Gold$):  PWRD (100), GHL (100), HAR (100), GAME (100), NVDA (82), SNDA (80), AMTD (80), SF(80), ADBE (80), WAG (80), and GPN (80).

Here are some details of the four stocks that have perfect Gold$ scores as well as one or two others that intrique me.

PWRD – Perfect World is a Chinese online gaming company.  They sell and manage several of the largest and most popular online role-playing games in China.  They have a market cap. of $1.25B.  They have no debt and over $250M in cash on their balance sheet (over $5/share).  Their P/E ratio is 8.5!  As one would expect with a software company they earn incredibly high returns on assets and on equity. 

The stock is currently trading near the lower leg of the VISION V.  Like all VISION selections it has fallen, hit bottom, and is now in recovery mode.  It hit a 52-wk high of $49.08 back in November of 2009.  It then fell hitting its 52-wk low of $20.79 in June.  Since then it has recovered, closing Friday at $24.99.  The SEP CCs at the $24, $25, and $26 strike price all look good.  The best choice of course is dependent on your guess as to the future direction of the market and your risk profile.

GHL – Greenhill & Company is an independent investment bank.  It has a market cap. of $2.13B.  They seem a little pricey having a P/E ratio of 33.  However, they have excellent operating margins.  They have around $33M in cash but over $55M in debt.  The stock hit a 52-wk high of $93.90 back in October before falling to around $61 in June.  It closed Friday at $72.20. 

I would pass on this one for a number of reasons.  First, I like to trade stocks that are less than $50.  Second, it has a very high P/E which in this shaky market means it could fall alot further before folks began to see it as a bargain and starting buying.  Third, while the amounts are modest, it does have more debt than cash on its books.  In this market and economy I’d rather stick with stocks that have zero net debt.

HAR – Harmen International Industries is a manufacturer of stereo equipment under various brand names including the famous Mark Levinson brand stereos found in Lexus automobiles.  It has a market cap. of $2.14B and a reasonable P/E of 13.65.  As one might expect in a highly competitive industry Harmen has thin margins and low rates of return on assets and equity.  However, they do have more cash than debt on their balance sheet and generate good free cashflow.

The stock peaked at $52.51 in April.  Its 52-wk low is $27.10 which it hit almost a year ago in August 2009.  It closed Friday at $30.71.   The SEP $30 call looks interesting at $1.75 bid.

GAME – Shanda Games Limited, like Perfect World is another Chinese online gaming company.  It has a market cap. of $2.02B and a P/E of 9.16.  Also like Perfect World, GAME has excellent operating margins and earns high rates of return on both assets and equity.  It has over $420M in cash vs. only around $2M in debt.

I like everything about Shanda except the stock price.  It is less than $10, having closed on Friday at $7.02.  Thus, when trading options you have little room to maneuver.  Worse yet, the Shanda options trade in increments of $2.50.  For these reasons I would pass on trading GAME.

That wraps up my discussion on the four top-rated VISION picks.  However, a couple of others further down the list of 11 caught my eye.  They are ADBE and WAG.

ADBE – Adobe Systems is one of the most recognized names on the planet in computer software.  It makes the ubiquitous Adobe Acrobat and pioneered the PDF document.  It has a market cap. of $14.66B and a relatively high P/E of  39.21.  However, it has a forward P/E of only 13.  It has good but not exceptional margins and about $1.15B in net cash.   It is trading at the lower leg of the VISION V having hit a 52-wk high of $37.86 last December and bottoming out in July at $26.34.  Friday it closed at $27.92.  The SEP $28 call at $0.88 looks interesting to me.  Ron prefers the OCT $28 or $29 strikes.  In this kind of market I prefer to stick with the near month.

WAG – Walgreens is a drugstore retailer.  It has a market cap. of  $27.69B and a reasonable P/E of 13.70.  Like most all retailers it has thin operating margins.  However, it does earn respectable returns on its assets and equity.  Its cash and debt are almost exactly equal and it generates strong cash flow.  The reason I’m interested in Walgreens is because I think it is a blue chip company with a solid dividend.  This is a company I wouldn’t mind owning for a good long time and now is a good time to establish a position.  It pays a small but growing dividend of $0.70/share.

Since hitting a 52-wk high of $39.66 in October it had fallen to a 52-wk low of $26.20 in July.  On Friday it closed at $28.45.  You could enter a position in WAG in several different ways.  You could do a buy/write and sell the JAN $30 or $31 strike.  This would allow you to make some capital gains and collect at least one dividend before facing the possibility of being called away in January.  Or, you could sell near-month put at either $27 or $28 and hope to be assigned on a pull back.

Hope you find all of this information interesting and useful.

Regards,

Troy

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New Naked Put Trades

Posted by mounddweller on May 25, 2010

All,

The recent volatility has gotten me excited again about the possibility of making money selling puts.  Accordingly I spent some time this weekend looking at some possible JUN expiration trades.  I didn’t use a methodical or even
logical approach to identify potential trades.  I simply went back through my list of stocks I’d successfully traded before or stocks I wouldn’t mind owning and looked for what I thought was a fair return for the risk being taken.  For each of the stocks I identified I looked at the chart to look for areas of support.  More importantly though I looked at the risk/reward of various strike prices and their corresponding premiums.  Of course, the best tool with which to evaluate risk/reward (in my opinion) is Ron’s “Put Factor” (PF).  Using the relationship between the current stock price, the strike price, the put premium, and the number of months until expiration the PF allows you to make an ‘apples to apples’ comparison between multiple NP trades.

My initial list contained 14 stocks.  With several of the stocks on this list I looked at multiple strike prices.  Two, NVDA and EWZ really caught my eye.  Both had excellent premiums at strike prices with substantial downside protection.  Accordingly, the PF for these trades was also very high.

I used the sell-off at the opening bell today to sell naked puts on each of them.  Here’s are my trades:

(1) Sold 5 NVDA JUN $10 puts at $0.21

(2) Sold 2 EWZ JUN $45 puts at $0.67

Below is a chart which shows the parameters I was looking at when I pulled the trigger on these trades.

I think it’s pretty obvious why I liked the trades.  With NVDA I have almost 19% downside protection yet I’m earning 2.1% ROIC with only 24 days remaining to expiration.  The PF when I placed the trade was 3.28!  With EWZ I got less return (1.49% ROIC) but more downside protection.  My dowside protection with EWZ is almost 23%!  The PF was 3.10.  Both stocks ended the day significantly higher in price than they were when I sold my puts so my downside protection from here is even greater than that referenced above.

Now, a little about the two stocks on which I sold the puts.  As I’ve mentioned several times before in my blog I never sell puts on a stock that I wouldn’t mind owning.  So why won’t I mind owning NVDA and EWZ if I have them put to me?  Well, with NVDA I would be buying THE industry leader in graphics processors at a great price.  The 52-wk high is 18.96.  The 52-wk low is 9.63.

EWZ is an ETF.  It holds a basket of Brazilian stocks.  Brazil is one of the fastest growing economies in the world.  It is also one of the most resource rich countries.  It does not have the heavy debt problems that now inflict many other countries.

As this market correction continues I plan to remain on the look-out for other similar opportunities.

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