The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘STP’

VISIONS Scan – Potential Trades

Posted by mounddweller on March 26, 2011

Fellow Traders,

Earlier this afternoon I ran SCOUT in VISIONS to see if I could unearth any interesting NP trades for the 3 weeks remaining before APR expiration.  17 stocks met Ron’s Level 4 selection criteria.  The “Top 10” were BBBB, AKAM, STP, STRA, LPL, ARO, CELG, ICLR, UMPQ, and CEPH.  Out of the “Top 10” I felt AKAM, STP, LPL, ARO, and CEPH were worth digging into deeper.

My objective in running the scan was to find stocks trading in Ron’s VISION V with APR puts that met the following criteria:

(1) Strike price at or less than recent lows, and

(2)  Premium that provided an annualized ROIC > 15%.

In the first chart below you can see that LPL was the only stock that met both of my criteria.  However, you’ll also notice it has < 4% DSP.  I didn’t like that so I decided to explore a little further and see how much I had to increase the strike price to attain my desired minimum ROIC.  The results of that analysis can be found in the second chart.  By relaxing my first criteria I was able to identify three trades that I felt might be a reasonable trade.  These are highlighted in green. 

Of these three ‘finalists’ I think CEPH is the best bet.  Looking at its price chart over a 1, 2, and 5 year period reveals that it has strong support around the $55 level.  STP and AKAM do not have strong support at my chosen strike prices.  STP has some support at $7 but as we saw earlier there is no premium at that strike.  Looking at the 1, 2, and 5 charts for AKAM reveals a very scary situation in that it hit lows of around $10 back in 2009. 

Here is the VISIONS 1-year price chart for CEPH.  I would also encourage you to go to Yahoo or another site where you can see the 5-year chart to see the strong support at the $55 price point.

Check these stocks out and let me know what you think about my selection criteria and my process of elimination.

Regards,

Troy

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Deep OTM NP Strategy – March Week 2

Posted by mounddweller on March 5, 2011

Fellow Traders,

I don’t have a lot of commentary this week to accompany our weekly picks for the Deep OTM NP Strategy.  Nothing really jumps out at me as a compelling trade.  I will make a few comments about Getty Oil (GTY).  GTY is a Real Estate Investment Trust (REIT) that leases gas stations to operators.  They have over 1,000 locations primarily in the Northeast.  This past week their largest tenant, a subsidiary of the Russion oil company, Lukoil sold their interests to another company which then announced there would be a delay in the March lease payment.  Given the market doesn’t like uncertainty the stock understandably declined precipitously.  The new tenant said it would be making the lease payment on or around March 7th.  That’s Monday.  If the new tenant makes the payment on Monday and the put premium remains high it might be a good trade.  However, I’m not sold on it as a longer term investment.  This new tenant may attempt to reduce the lease rates and thus impact GTY’s ability to maintain its current dividend.

Best of luck to everyone in their trading this week.  Be careful out there.

Regards,

Troy

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