The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘VRGY’

Deep OTM NP Strategy – FEB Week 3

Posted by mounddweller on January 30, 2011

Fellow Traders,

My apologies for the delay in getting this posted.

The pick-up in volatility this past week resulted in a corresponding pick-up in the number of selections from our strategy.  This week we have 12 new selections (5 mid-caps and 7 small-caps).  In addition many of the selections from last week reappeared this week.  I’m hopeful continued volatility will result in some large-caps making our list in the coming weeks.  Despite the great record of the overall strategy it is very hard to blindly sell puts on some of these smaller companies.

Here is the list for this week:

Have a great week trading.  I’ll be back again next weekend with another round of picks.  I’ll also keep you in the loop with regard to other CC and NP trades that I make outside of this particular strategy.



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Deep OTM NP Strategy – JAN Week 2

Posted by mounddweller on January 7, 2011

Hello everyone.  I’m back with the selections for January – Week 2 of the Deep OTM NP Strategy.  This week we have 3 selections, 2 mid-caps and one small-cap.  Information on each is provided below.


In addition to these 3 new selections, as was also the case last week, there are several other trades that reappeared on our screen after having been selected earlier this month.  Stock which reappeared on our screen this week are: MBI, VHC, VRGY, and ZLC.

Please keep in mind, generally speaking, NONE of these trades are suitable as long-term investments.  We are simply looking to pick a little money off the money tree by placing a calculated bet that the stock will not decline sufficiently in the time remaining to expiration to close below our strike price.

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UPDATE – NP Strategy – JAN Week 4

Posted by mounddweller on December 27, 2010


Just a quick couple of notes on my NP Strategy selections, VRGY and LPHI. VRGY also has a $10 strike price that looks very attractive. This morning it is trading at a bid/ask of $0.10/$0.15 and has traded as high as $0.18. Anything above $0.15 would work for me. At $0.15 you would have a 1.5% ROIC with 23.5% downside protection.

Now, an update on LPHI. Earlier this morning I read the WSJ article about LPHI. It does not cast LPHI in a very favorable light. I also read the LPHI CEO’s rebuttal. My advice would be to proceed with caution. The $14.75 strike price that appeared in our selection results has a very wide bid/ask spread of $0.20/$0.75. I see that as a ‘red flag’. I am going to hold off selling any puts on LPHI until I see how this shakes out. I recommend you do the same.


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First Post – New NP Strategy – JAN Week 4 Selections

Posted by mounddweller on December 24, 2010


Below are this week’s selections for the Deep OTM NP Strategy.  Please recall the selection criteria for this week are (1) downside protection of at least 17.5%, and (2) a Put Factor (PF) >= 2.0. 

Of the three selections meeting our criteria, LPHI and VRGY peaked my interest.  LPHI closed yesterday (12/23) at $18.71.  It is almost midway between it’s 52-wk high of $24.50 and the 52-wk low of $14.69.  Note the proximity of the strike price to the 52-wk low.  I like that!  Other items that appeal to me are that it pays a 5% dividend and has a P/E of 9.26.    So, why the high premium on a deep OTM put for a stock that sports a high dividend and a low P/E?  Well, the best I can figure is it is tied to a recent story in the WSJ.  The WSJ questioned some of LPHI’s business practices.  Earlier this week LPHI’s CEO issued a rebuttal to the story.  Bottom line, despite the negative press I like this trade. 

Now let’s look at VRGY.  The fundamentals, while not bad, are not near as good as LPHI.  It doesn’t pay a dividend and has a much higher P/E.  It also is trading much closer to it’s 52-wk high of $13.79 than the 52-wk low of $7.48.   What’s appealing about VRGY is that it is a takeover target.  Advantest has said they would like to buy VRGY for $15/share.  This is a sweetened bid from an earlier price that was rejected as too low.  In my mind this limits the potential for the stock to decrease substantially betwen now and expiration on January 21st.

Before closing, just wanted to mention why THC doesn’t appeal to me.  With a premium of only $0.05 you would need to sell a substantial number of contracts to make it worth your while.  That, coupled with the relatively low 1% ROIC, makes it a less attractive trade.

Well, that’s it for this week.  Best of luck in the last week of 2010.



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