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Posts Tagged ‘RIMM’

Weekly NP Strategy – MAR30 Expiration

Posted by mounddweller on March 22, 2012

Fellow Traders,

The Weekly NP Strategy has 42 possible trades this week.  As usual you can find them here on the Yahoo group board: http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/.

Out of the 42 possibilities I found three that I liked.  First up is Mosaic Company (MOS).  The Mosaic Company engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide.  MOS closed today at $56.27.  The strike price of the put we’re interested in is $52.50.   While this is somewhat higher than its 52-wk low of $44.86 I still like the trade.  Here’s why, looking at the one year chart it appears that MOS has support at $55.  It has bounced off of this level multiple times in both February and March.  The premium on the MAR30 $52.50 put is $0.27 giving a ROIC of 0.51% for the 8-day holding period.

The next two trades that interested me are in the same stock, Research in Motion (RIMM).  Research In Motion Limited (RIM) designs, manufactures, and markets wireless solutions for the worldwide mobile communications market.  I’m sure most of you are aware that RIMM has been taken to the cleaners by Apple and the iPhone.  As a matter of fact I just saw a headline today that iPhone sales had overtaken Blackberry in its home country of Canada.

So, why would I consider a trade in RIMM.  Well, primarily because both of the strike prices I’m interested in ($11 and $12) are below the lows encountered late last year when everyone was trying to get out of RIMM as fast as possible.   Back on December 20th RIMM closed at $12.52.  It retested those lows earlier this month closing at $12.90 on March 7th.

The $12 strike price has a premium of $0.25 indicating a potential ROIC of 2.08%.  The $11 strike price has a premium of $0.11.  Yield is an even 1.00%.

Both RIMM and MOS are debt free and trade at reasonable multiples to current and prospective earnings.  RIMM is especially cheap trading at < 4x current earnings and just over 4x prospective earnings.

That’s it for this week.  Best of luck trading in the coming weeks.  Be safe…it could be a bumpy ride for awhile.

Regards,

Troy

 

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Deep OTM NP Strategy – OCT Week 5

Posted by mounddweller on September 17, 2011

Fellow Traders,

As promised I’m back with the Week 5 selections for our Deep OTM NP Strategy.  Please recall once a quarter we encounter a period with 5 weeks between expiration dates.  This is one of those occasions.  Thus, our selection criteria this week are different from the usual criteria in the first week after expiration.  Our criteria for this week is (1) minimum of 20% down side protection (DSP), and (2) a Put Factor (PF) greater than or equal to 2.0.

So let’s get to it.  This week, as is usual in the first week of a new period, we have a large number of possible trades to choose from.  192 to be exact.  So many in fact that I chose not to list the small caps on the blog.  None of the small caps were of any interest to me.  However, if you would like to see the complete list including the 67 potential small cap trades let me know and I’ll be happy to send you the list.

The first thing I hope you’ll notice is that of the 192 total possible trades I narrowed it down to just 4 that  I would be comfortable trading; 3 large caps and 1 mid cap.  Several others that I’ve selected and/or traded previously appeared on the list again this week but the set-up just didn’t seem right to me.  Part of this is due to the big run-up we had in the market this past week.  The S&P500 gained 6.5% this past week.  That, despite the continuing sovereign debt crisis in Europe, and our own woes here at home.   If I would have had this same list a week earlier I might have selected others as well.

Juniper Networks (JNPR) appears first on our list and coincidentally is my #1 choice this week.  I like this trade primarily because of its 1-year price chart.  You’ll notice it gapped down back in late July after reporting 2nd quarter earnings.  It missed analysts earnings estimates and experienced a slight drop in its operating margin.  Since then it continued to drift downward until finally finding support at $20.  Over the past several weeks it has cycled between $20 and $22 a share.  Friday, it closed at $20.15.  Thus, I think this presents a good entry point to sell the OCT $16 put.  Doing so give us another 22% of DSP.

Next up on the list is Arcelor Mittal (MT).  As most of you know it is one of the world’s largest steel manufacturers.  The shakiness of the global economy and MT’s high debt load have caused it sell off substantially, it is down almost 44% for the year.  What I see in MT is value.  It trades at about 5x forward earnings and less than half of book value.  It is not without risk though.  As I mentioned earlier it carries a substantial amount of debt on its balance sheet.  I chose MT because the $15 strike price is below the 52-wk low of $16.91 it hit this past week.  However, being number two on my list does not make it my second choice.  In fact, MT would be my 4th choice.

Third on the list is one I’m sure most of us are familiar with, Research in Motion (RIMM).  RIMM announced earnings this past week and Mr. Market did not take a liking to them.  RIMM fell sharply from around $30 to close Friday at $23.93.  Intra-day it had gotten as low as $22.74.  What I see in this trade is similar to that of MT.  The strike price of $19 is well below both Friday’s intra-day low as well as the 52-wk low of $21.60.  Also, RIMM despite all of the negative press is still a very profitable business.

Last, but not least, is our lone mid-cap selection, Atlas Air Worldwide Holdings (AAWW).  Atlas shares several characteristics with my other selections.  First, it is cheap, trading at only 7x forward earnings and just over book value.  The $37.50 strike price is below the 52-wk low of $39.66 and the book value of $41.29.  Second, despite hitting turbulence it remains profitable.

OK, that’s it.  Good luck out there this week and be careful.  I’m not thinking this rally is long lived.  At the first sign of renewed problems in Greece or Italy I believe we’ll be in for another rough ride to the downside.

Best Regards,

Troy

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Weekly NP Strategy – First Results

Posted by mounddweller on September 3, 2011

Fellow Traders,

Well our first 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 $36 strike of BP Exploration (BP) which had closed the previous day at $38.19 closed OTM yesterday at $36.53

(2) The $26 strike of Research in Motion (RIMM) which had closed at $28.19 the previous day closed OTM yesterday at $30.12

(3) The $35 strike of Silver Wheaton (SLW) which had closed at $39.41 the previous day closed OTM yesterday at $40.71

(4) The $28 strike of Suncor Energy (SU) which had closed at $30.31 the previous day closed OTM yesterday at $30.41.

Hey, how about that!  4 for 4.  We’re off to a great start testing the possibilities of this Weekly NP Strategy.  Given the market’s performance Friday I suspect this next week may be a little more challenging.

Hope everyone is enjoying their Labor Day weekend.

Regards,

Troy

 

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Deep OTM NP Strategy – JUNE Week 1

Posted by mounddweller on June 12, 2011

Fellow Traders,

It’s been a busy week at my house.  My oldest son graduated from high school yesterday.  Thus, the week was filled with preparations for the obligatory ‘open house’ and arrival of out-of-town relatives, some of which are still here.  Thus, my investment analysis and subsequent write-up in this post will be short and to the point.

Here are the trades that met our  selection criteria for this last week before JUNE expiration.

None of these selections peaked my interest.  None are ones I’d be willing to hold should they fall and expire ITM.  Given the current market conditions that is a critical consideration.

Several selections from earlier this month also passed our Week 1 screener.  RIMM is one.  It closed Friday at $36.56.  For the week it was down $2.42 (6.21%).  Both the JUN $32.50 and $30 strikes meet our JUN Week 1 criteria.  The puts closed Friday $0.46 and $0.16 respectively.  With the $32.50 strike you get 12.36% DSP.  This trade yields 1.4% ROIC with one week to expiration and has a PF of 5.3.  The $30 strike has 18.38% DSP, a 0.53% ROIC, and a PF of 3.5.

Another selection from earlier this month which reappeared this week is IDCC.  It closed Friday at $35.91, down $1.97 (5.2%) for the week.  The $32 strike at $0.30 has 11.72% DSP with a ROIC of 0.94%.

Well, that’s it for this week for our Deep OTM NP Strategy.  If time allows I’ll be back later in the day with another post updating my CSCO NP trade.

Regards,

Troy

 

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Deep OTM NP Strategy – June Week 2

Posted by mounddweller on June 4, 2011

Fellow Traders,

Wow, this week went by fast.  Just seems like yesterday I was writing about JUN Week 3 selections.  Anyway, let’s dig into the selections for this week.  I found one or two that are pretty interesting.

My two favorites this week are appropriately at the top of the list displayed above.  Let’s first take a look at BVN.  If this is a symbol that’s not familiar to you there’s a reason.  It is a foreign stock.  The name of the company is Compania Mina Buenaventura, S.A.  It is a mining company headquartered in Lima, Peru.  It was founded in 1953.  It has a market-cap of $10.6B.

Here is a price chart for BVN.

I believe this stock appeared on our list this week because of the upcoming presidential election in Peru on Sunday, June 5.  The election pitts a pro-business candidate against a socialist (hmmm…sounds familiar).  Anyway, it is a very close race.  I’m speculating that because stock markets hate uncertainty the options on this stock are elevated.  If the pro-business candidate  wins the stock will likely recover some lost ground.  If the socialist candidate wins the stock could continue to fall.

Traders who are willing to bet the pro-business candidate will win or that the stock won’t fall sharply if the socialist wins will be well compensated for the risk they are taking on.  The bid on the JUN $37 put closed Friday at $0.75 which generates a ROIC of just over 2% with just 14 days to expiration.  There is also over 13% of DSP.    However, I have to point out that since the election is tomorrow before the market opens on Monday it is certainly possible the premium may disappear before the opening bell if the pro-business candidate is announced as the winner.

Next up on our selection list this week is RIMM.  Research in Motion is the manufacturer of mobile computing and telecommunications devices.  Until the Apple iPhone came on the scene RIMM had a virtual lock on the corprate mobile telecom market.  RIMM is another foreign stock.  It is headquartered in Waterloo, Ontario Canada.

Generally I like to analyze and show the one-year chart for a stock I’m considering.  However, with RIMM this time I want to show you the 5-year chart.

The reason I selected the 5-year chart is because I want to show you just how cheap this stock is relative to price over the past 5 years.   You have to go back to the financial crisis in 2009 to find RIMM trading at this level.  To find RIMM trading at the the $32.50 strike price of the selected put you would have to go all the way back to September of 2006.

Ordinarily I would not try to catch a ‘falling knife’ stock like RIMM.  However, in this case I may be willing to make an exception.  Why? Because I believe it is oversold and due for a bounce.  It closed Friday at $38.96.  This is over 17% above the $32.50 strike price.  Also, I wouldn’t mind owning RIMM at $32.50.  At $32.50 RIMM would be trading at around 5x earnings.  That’s cheap!  Talk about hated.  RIMM also has over $2B in cash on its balance sheet and zero debt.  Thus, it is not going to go out of business anytime soon.

Everyone seems to think RIMM is going to end up like NOK; ultimately losing the battle for business customer dominance in the mobile phone space to Apple with its iPhone or Google with the Android operating system.  I don’t think so.  Thus, I’m willing to place this bet and ultimately own RIMM at $32.50 if I have it put to me.

Well, that’s it for this week.  Best of luck in your trades.  It’s getting more volatile out there so be careful.  Be very careful in minding your stop loss positions or better yet only trading options on those stocks you truly wouldn’t mind owning.

Regards,

Troy

 

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