Tomorrow is Thanksgiving and it is time to step back from all the markets and give thanks for the simple things we have in front of us – especially something many of you may be unfamiliar with, weekly options. But first thanks for what the Street has been giving us all year.
• Thanks to Apple (AAPL) and Wall Street for giving us the greatest trading opportunity via the most undervalued stock we may ever see in our lifetime.
• Thanks to Dell (DELL) and Microsoft (MSFT) and Hewlett-Packard (HPQ) and Nokia (NOK) and Research in Motion (RIMM) for letting themselves be run over by Apple and giving us ongoing short side opportunities not seen since the crash.
• Thanks to fracking and Wall Street for giving us a set of the greatest opportunities in energy the Street has ignored – the companies refining that oil, such as Calumet Specialty Products (CLMT) and the companies cleaning up all that gas, Martin Midstream Partners (MMLP).
• And above all, thanks to the CBOE – the folks that list and run the exchanges for weekly options.
Ode to options
The real story here is weekly options – so, above all, let’s give thanks for weekly options, the best vehicle for anyone looking to generate monthly income. Weeklies are better than bonds, better than dividend yielding stocks, better than the corner bookie. Weekly options are options that are listed and expire weekly – and there are now more than 175 names you can sell puts against or write calls against. You sell them and trade them as if they were regular monthly puts and calls, but your market exposure is far shorter and in my service, Options Income Blueprint, I typically write calls mid-week, limiting that exposure to two and a half days.
But not my income – if I can get half a percent a week, I get 25% a year. With two and a half days exposure to the market – sometimes more, sometimes less. And thanks to some much needed thoughtfulness on Wall Street, pick the right names and the stock and the weeklies will trade against the market. A couple of weeks back I wrote two puts – one on a company called Questcor (QCOR), another on Transocean (RIG), the stocks went up when the market went down and QCOR returned 1.4%, RIG 1% — in a few days.
So, what looks good right now?
Apple – the big move this week means premiums are sky-high. You can sell a weekly put a couple of strike prices out of the money and you can pocket a great deal of cash. Sell theM at 11 this Friday morning, with the markets closing at one, and you still pick up what I call “free money.”
U.S. Steel (X) – I mentioned fracking – well, U.S. Steel supplies enormous amounts of steel for fracking and for pipelines. Pipeline construction will be 82% this year and more than 35% next year. I rest my case. Yes, companies matter in case you are put the stock – you should only sell a put against a stock you like, just in case. The stock has rebuilt a base around $20, the puts are good to go.
General Motors (GM) – I am biased, I have been driving Chevys – Tahoe, Suburban, Blazer, Blazer, Tahoe and now a Traverse – seemingly forever. The stock is good to $30, it is only around $24.50 and it has very fat premiums on the weekly options.