The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘SYK’

Weekly NP Strategy

Posted by mounddweller on December 8, 2011

Fellow Traders,

I want to remind you of the decision I made last month to not publish a list of selections for the Weekly NP Strategy on the final week of the regular monthly expiration calendar.   This is because in reality there are no true weekly options.  The next available option expiration period is that of the normal monthly expiration which occurs on the Saturday following the 3rd Friday of the month.

However, I do have a trade for you to consider.  In scanning the list of options with one week to expiration on stocks with a dividend I came across the SYK DEC $45 with a bid price of $0.25.  Stryker (SYK) closed today at $47.12.  This gives the $45 put down side protection of 5.03%.  The ROIC for this trade with only 8 days to expiration is 0.56%.

The reason I like this trade is because Stryker is a solid, blue-chip company.  It operates as a worldwide medical technology company. The company operates in three segments: Reconstructive, MedSurg, and Neurotechnology and Spine. The Reconstructive segment offers orthopaedic reconstructive (hip and knee) and trauma implant systems, as well as other related products.  Stryker Corporation was founded in 1941 and is headquartered in Kalamazoo, Michigan.

Stryker has large operating margins and a rock solid balance sheet.  It also treats its shareholders very well.  Just yesterday it announced an 18% increase in the quarterly dividend to $0.2125.  You will be eligible to receive this new increased dividend if SYK declines to < $45 by next Friday and you have the stock put to you.   Shareholders of record as of 12/29 are eligible to receive the dividend.

As you can see in the 1 year chart below, technically SYK at $45 is a very good buy.

I encourage you to do your own due diligence and see if you too think this is a good trade.

Regards,

Troy

 

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Potential September Trades

Posted by mounddweller on August 23, 2009

I’m having a real hard time this month finding anything spectacular.  I can talk
myself out of most anything that looks remotely interesting.  Here’s what I’ve
considered thus far (in order of preference):

(1) FLIR – Stock closed Friday at $23.08.  BL is $23.95.  Stock is trading in
the middle of the V and hasn’t ran up a great gob from its 52-wk low of $18.81. 
Looking at doing an ITM buy/write on the SEP $22.5 calls with a net debit of
$21.90.  That would give me an ROIC of around 2.6%.  Not great, but given the
low volatility of late, I’ll take it.

(2) SYK – Stock closed Friday at $41.76, over the BL of $40.36.  Stock is well
off its 52-wk low of $30.82 but is still solidly in the V.  This is a first
class company.  However, for trading purposes I would like it alot more if it
were less than $40.  I’m considering opening a small position by buying at the
market and selling the ATM $42 calls for $1.00.  This would give me an ROIC of
2.97%.  Again, not great, but I’m not willing to trade the riskier stocks in
this market just for higher yield.

(3) BLUD – Stock closed Friday at $18.46 well above the BL of $16.88.  I would
like this one alot more if it had options available in $1 increments.  The SEP
$20 calls are too far OTM to have any premium and the ITM SEP $17.5 calls don’t
yield much either.  If I decide to do a trade in BLUD I suspect I’ll write the
ITM SEP $17.5 calls which at current prices would give me an ROIC of 2.11%.

(4) TK – Stock has run back up to $18.90.  I’m considering selling the SEP $17.5
NPs for $0.40.  That has an ROIC of 2.29%.  More than likely though I’ll hold
off doing this trade and see if I can get a better price on a down day. 
Ideally, I’d rather be selling the SEP $15 NPs.

(5) AA – Sell NPs on the SEP $11 puts for $0.22 or better.  Stock is well
extended above it’s 52-wk low but is still in the V.  However, it is above the
BL.  The PF for the SEP $11 puts is OK at 1.6.  Stock has negative net cash.   (Many thanks to Rich for posting his comments and for pointing out AA to me).

I also looked at re-selling NPs on IPI and O but didn’t like the risk/reward
ratios at any strike price. 

Regards,
Troy

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Update on Potential February Trades

Posted by mounddweller on February 20, 2009

Well, weren’t the last 4 days fun?  Not!  As promised, here’s an update on the potential trades I referenced in my earlier post.

Covered Calls

(1) Stryker (SYK) – Well, this one fell much like everything else in the market.  It now has fallen to the bottom of the Groenke V and has a TAI status of GR (get ready), and a Gold $ score of 70.  On the plus side it has a good BR (buy rank) of 5.05 and is well under the BL (buy limit) of $44.03 .   I’m going to keep it on my watch list.  A rally in the market would quickly rekindle my interest in establishing a position in SYK. 

(2) ABB (ABB) – The situation with ABB is similar to Stryker.  The market sell-off has pushed it down and it is now just below the bottom of the Groenke V.  It now has a TAI status of GR and a Gold $ score of 40.  I’ll keep it on my radar screen for a potential CC play in the future.  A more immediate opportunity (albeit with more risk) might be to sell the Mar 10 puts for around $0.25-0.30.  Note: this NP trade wouldn’t meet Ron’s criteria.

(3) Analog Devices (ADI) – This one still remains a viable candidate.  Even with the market setting new lows ADI still remains inside the Groenke V, has a TAI status of TA (take action), and a Gold $ score of 70.  Further, it has a reasonable BR of 3.00 and at $19.30 is under the BL of $20.76.  A couple up days would make this an almost perfect set-up for a successful CC trade.

(4) Activision Blizzard (ATVI) – Activision is much like the first two, SYK and ABB.  It has fallen to the bottom of the Groenke V and is rated GR.

ETF CCs

(1) XLK – It seems I have to  keep repeating myself.  XLK has now fallen below the Groenke V and has a TAI status of GR.  Hopefully the market will turn around soon.

(2) EWZ – I still like EWZ.  It is just inside the bottom leg of the Groenke V, has a TAI status of TA, and a Gold $ score of 70.  It very much is like ADI.  A couple day rally could present a very nice entry point for a CC trade.  Impatient and more aggressive traders might consider selling March NPs as there are several at various strike prices with enticing premiums.

(3) XME – This one has an interesting chart.  Like the others we’ve discussed, it is now outside the bottom leg of the Groenke V and has a TAI status of GR.  What makes XME different and interesting is that it isn’t a sharp price drop that has caused it to drop out of the V.  Rather, it moved outside the bottom leg because it has been moving sideways for so long.   Looking at the available option chains reveals many potential CC and/or NP trades.   This one intriques me, despite not meeting Ron’s criteria.

Well, that’s it.  As you know from my earlier post, I pulled the trigger on my XLE put trade.  So far so good.  Even with the steep sell-off I’m still well north of my $39 strike price.  I’ll be back later this weekend with an update on my January trades and other open positions.

Regards,

Troy

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Potential February Trades

Posted by mounddweller on February 16, 2009

Well, here we are just 4 trading days left before expiration on Friday.  I’ve started looking at potential trades for February.  Who knows what will happen between now and the market close on Friday but here’s what looks interesting to me right now.  These trades are listed in my order of preference based on various fundamental and technical indicators as well as perceived risk.

Covered Calls

(1) Stryker (SYK) – Great Balance Sheet, Recession resistant business, and a very nice looking chart.

(2) ABB Ltd (ABB) – Solid Balance Sheet, and a timely infrastructure play (think “stimulus” package).

(3) Analog Devices (ADI) – Great Balance Sheet, bad news appears to already be priced in.  We’ll find out after market close on Wednesday.

(4) Activision Blizzard (ATVI) – Great Balance Sheet, most aggressive idea.

ETF Covered Calls 

(1) Technology Sector SPDR (XLK) – CSCO, INTC, GOOG, MSFT, T, VZ all in one trade; what’s not to like!

(2) iShares MSCI Brazil Index (EWZ) – in my opinion the least risky of the emerging markets. 

(3) SPDR S&P Metals & Mining (XME) – chock full of beaten down commoditiy and mining companies.

Naked Puts

(1) Energy Select Sector SPDR (XLE) – like it again this month.

As I mentioned above, these are my POTENTIAL trades for February.  Who knows what any of these will look like by Friday.  

I’ll be back with another post after the market close on Friday.  I’ll update you on the potential February trades outlined above and give you some ideas on what I will be looking at going into the weekend.  In addition, I’ll let you know how my January picks turned out.

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