Huff, all: I've been really low on time lately, and that probably won't change for this week... Looking forward to picking up the options talk after that, maybe it might change a couple minds here. I think there are a lot of misconceptions, and the truth is that options can be amazingly simple, very safe, and helpful in reaching your investing goals.
Options are nothing more than an additional set of tools in your arsenal, it is up to you as far as which you use and how you use them. Yes, some of these tools are "power-tools", which is both a good and a bad thing. Wield them poorly and you can lose an arm, but there is no reason you ever have to use any of the "power tool" strategies. Some strategies actually favor the long-term, conservative/low-risk investor.
Huff: Saw your Part1/Part2 post, hope to reply in a few days.
Good luck to all of us this week, hopefully the Fed update on Weds turns out to be positive or neutral for the market, and not a smack-down.
Huff, looks like he's annualizing the rate of return... So since it's only a 1 day trade, he's multiplying by 365! Personally I don't find annualizing a useful metric for short-term trades...
Huff: Regarding discipline on buying back naked puts.. Usually I've felt the same way as you, and typically I let them expire and try to maximize the profit. But as I've transitioned from "only cash-secured naked puts" historically, to leveraging more and more until recently I got to a limit I didn't want to go past... Well, now I have to look at an "in the bag contract" as an opportunity cost. I'm no longer willing to sell any new contracts (or otherwise employ addition capital) which would increase my leverage, so I need to either buy something back, or wait until options expire on the 20th.. And that is painful when there are plays waiting to be made that may not last that long :).
Which is giving back more money: letting a far-out-of--the-money contract expire in say 3 weeks that is currently down to 5c-15c... Or buying it back and then putting on a new trade at a strike that is closer-to-the-money and has more premium to erode? Especially if you think the stock might be going up pre-expiration. But all this is under the premise of limiting leverage. If you have the dry powder, then definitely have your cake and eat it too (let the far-OOTM Puts expire, AND put on the new trades too while you wait!)
LNCO: Ah right, I remember now that you mentioned that. Well, burned or not.. Could be worth looking at again once we hit 2014!.. With merger news and tax selling in the rear-view, the stock could become a little safer but should retain the big volatility premium for a while. Really depends where the stock price is at that point..
What kind of return do you typically target with your AAPL Put Spreads? (absolute %, and annualized %)?
Gotta get some sleep... Time to say my prayers: "Please don't let the Fed announce the start of taper next week, shortly before Dec expirations...." ;)
Huff: Congrats on that SYY spec bet! The morning of Dec 9 must have been a "holy $*%#$*!" moment, but unfortunately short-lived depending on how many hours you waited to sell!
Lately I've been spending a lot of time on portfolio "clean up". Have been buying back various naked contracts where they were down to 5c-15c, no need to wait out these "in the bag" contracts when I could put on new bets that will give me a lot more premium for my time, albeit at higher risk. Also important to me was to chip away at the sheer # of contracts and therefore my margin exposure, which is slowly going from "way too aggressive" to just "very aggressive" ;). I need more dry powder!
Have you looked at LNCO naked puts? I like them as a bread-and-butter play since there is plenty of premium built in and good ability to roll down/out if needed. Hopefully keeps a floor over $30 assuming successful merger results on the Dec16 vote (if not, look out below). If Dec16 results work out but don't pop the stock much, then I'd guess it could still need to make it through all the remaining tax-loss selling for this month before finding its footing. Few people who bought the stock this year won't have good losses to write off for 2013...
Just thought I'd call out that NATDF is in the low $9.5's today (ex-div)... That's an (IMO) sustainable 9.5% yield, and NATDF has a newbuild starting in April 2014 that seems very likely to influence a dividend increase. It "probably won't hurt" that the stock should be IPO'ing on the NYSE in a few months, too.
The macro market could be pretty choppy in the coming months and a receding tide can lower all boats of course. For mid-to-long-term investors though, I suspect it will be hard to go too wrong with this one around these price levels, and you should be well-paid to wait any weakness out.
I am long and would have bought even more today if I didn't already have a large allocation + need the dry powder elsewhere.
Having recently added to my SDRL position when it hit $42.50's, I'll have to say that I don't disagree the price has acted a bit weak since then. I think we could have some time before we get a catalyst and more excitement over the coming newbuilds, so my best guess is that we'll be generally sideways through January, give or take $1.5.
As a tax move, over the weekend I decided that if the stock was down or unchanged today, that I might sell the latest shares I bought, to avoid the div tax, and then buy back in ex-div at hopefully a $1+ discount. Normally I really don't mess with buy/sell decisions over smaller numbers like this, but since I'm not very active right now, I don't mind doing so to keep "the rust off" and see how my instincts would have served me in case it was actually a bigger bet.
As it turns out, the stock is up enough today that I'd pay almost as much in short-term taxes if I sold my $42.5 shares versus holding and taking the div, so I will hold. Besides, this is a "bond" for me and not a trading vehicle.
I did however buy 3k more shares of NATDF this morning at $9.67. Roth $$, so no added taxes from the ex-div tomorrow. I suspect the stock price could stay stronger than SDRL's in the short term, especially with the approaching IPO.
Wow, just a suggestion but you really might want to do more homework before giving reasoning like this. In SDRL's case I suggest getting to know EBITDA & cashflow metrics in relationship to the div versus using EPS, understanding the impact/contribution of newbuilds and looking at the coming year's newbuild schedule, and getting to know the history of the stock and management, among other things.
I don't disagree that the stock couldn't go down a little further (obviously it's doing just the opposite today though) but any such weakness should be temporary.
Huff: 3 orders/fills across the day, 500sh ea, in the 42.5's. Would have gone for the final 500 a few mins ago at 42.4 to make an even 2k for the day, but decided to stop here and see how the stock does in coming weeks. No need to rush this, esp as I look at SDRL as a great long-term "bond" with appreciation potential.
With the div imminent (12/3 ex-div), ideally one would purchase post-ex so 95c isn't "immediately returned" as 2013 taxable income.
Listened to the CC as well. Yeah, seems like the date for the IPO is finally tightening up "for real", though depending on the SEC process and maybe if SDRL decides they want to have an NATDF earnings call right before the IPO, I wouldn't rule out "late Jan" becoming late Feb or early March. But I suspect March would truly be "it" this time :). To get a nice pop I think they will really want to be able to raise the div so that with the pop, the stock will still have over an 8% yield (or why buy NATDF over SDRL?). West Linus starting ~April is just what they need for that...
I'm adding ~2k shares to my position today. Have had a couple orders execute so far. Still some more to go. Will post results after the market closes... Back to watching the stock now.
Threw a small amount of spec money at this too, bought 10k shares at 1.01 today. Won't move the needle either way but let's see how it does in the coming year.
SDRL's stock got a little ahead of itself when it ran up to touch $48 (for a day). It's actually held up pretty decently given 1) some natural consolidation, 2) the pullback in oil prices (which does not directly influence SDRL's profitability of course, but can put indirect/sympathetic pressure on the stock). Personally I won't read too much into the next few days, given that SDRL has an earnings release/guidance on Monday which should determine which way SDRL heads.
This should be the "toughest" quarter for them of the coming quarters, as the div may still be straining the cashflow/ebitda metrics. Once we hit 2014 and the newbuilds are hitting in earnest, well... IMO the stock should then continue its rally. Assuming no unexpected polarizing news on Monday of course.
If the stock drops below $44 then I'll likely add more to my position. Otherwise, I will wait to see if the February US government debt debacle that's sure to come offers up some good buying opps, in SDRL and other names.
Keebon: thanks for your thoughts. To me the story sounds good on paper and seems to have potential as a long-term turn-around play. I just wish it wasn't such an off-the-radar & opaque stock. Can't even see a bid/ask? Wow. I may throw a little speculative $$ at it, TBD. Not that my portfolio needs another oil-related stock ;).
Huff: Yeah, I was appreciating NATDF today too. I'd guess some bets are coming in re: the IPO, given the rapidly approaching CC. Personally, I also found the recent SDRL Prospector 3 purchase encouraging, though not directly related. Maybe SDRL can find a HE rig to purchase for NATDF. With 2+ year build times, I fear that if NATDF continues to stay with organic growth, it's going to grow a lot more slowly than originally intended/communicated. Not that sitting on a reliable 9%+ yielder is something to complain about ;)
Could you share your topline thinking regarding SDRNF? On the surface, it seems far more speculative than NATDF, but without the div to pay one to wait and with even worse liquidity & opacity. And unlike NATDF, Seadrill management has made no pitch/feels no obligation to shareholders. Wasn't SDRL's offer a few months ago to buy the remaining shares at only around $.67c?
Now, that said, if one then goes and reads the recent SA article, that paints a nice bull case. Does that article summarize or drive your interest? Timing wise, are you thinking to try to buy now, prior to the upcoming SDRL earnings call?
When I saw 9.35 briefly (from my cell phone, which I rarely trade from) this morning I figured it was a quick came-and-went anomaly. If a $9.35 - ~$9.5 Ask had stuck around, I would have been all over that.
Volume started out a little stronger than usual, but at this point in the day (147k, 30 mins before close) isn't out-of-the-ordinary, I would have expected over 200k by now if not hours ago. Maybe buyers are waiting until additional news confirming that the IPO date is imminent, or maybe anyone who was planning to make a bet pretty much already has.
FYI the F1/F4 SEC submission news came out a little after close-of-market Friday. No one had anything to say about it anywhere over the weekend, until SDRL made a news item of it at ~market open today.
Ha, I'm waiting to see a date on the calendar for the actual IPO, until then it won't be real for me given all the delays we've had :).
I sure hope it gets a nice little pop once the IPO finally happens, but can't complain too much for the wait thanks to the great yield and some nice buying opps along the way to average down. I wish SDRL could have figured out how to get an additional rig over to NATDF in the IPO timeframe, but at least there will be a newbuild coming online early next year.
Msg threads like this remind me of how much I miss Yahoo's old format.
Hey, naked puts aren't any more risky than holding the underlying stock, and at least you can start off w/ an out-of-the-money strike!
AAPL Bull Put Spreads, I haven't looked lately but in the past I didn't usually find the reward attractive enough, in part because of how much premium the protective Long Put commanded. Now, if one was willing to take on the risk of legging into the trade over days/weeks, that's a different story (pulled that off nicely once last year, but the success was easily outweighed by other AAPL naked puts I sold during the year that I had to cover at a higher price).
Schwab StreetSmart Edge: I use it and think it's great (other than the notable performance issues). I haven't really paid much attention to Greeks & probability calculators for my trades though. Side note: By comparison, TDA's ThinkOrSwim is horribly outdated and archaic. Sorta like taking a 1970 Pinto and slapping on so many modifications that it can keep pace with today's sports cars.
Though I'd long since given up thinking I'd ever get an allocation via Schwab on any IPO that interested me, from time to time I still give it a shot for the heck of it. Surprisingly, I got 100 shares @$26 for TWTR (my order was for 3k shares, ha). I guess once every blue moon or two...
The rest of my portfolio is being hit hard today though, so the paper gain on TWTR is "barely a rounding error" unfortunately.
Wow -- that's a ton (Jan 2014 $600C's). And there's more to it than that. There is heavy interest in all strike increments of $50. Ie, $550, $600, $650, $700... After $750 it skips to $100 increments up to $1000. I wonder if some long-term fund/institutional bets were placed back in the days when Apple was high $600's and there was talk of the race to $1000.
I like that you sold and/or recommended naked calls. While a simple strategy, it's rare to see anyone mention it as it conjures up (overly) fearful images of "unlimited losses". I haven't used it a lot yet, but played around a little with it this year on BRCM and mostly enjoyed the experience (got a little dicey when BRCM ran up to $37's). I look forward to utilizing it more, but need to find some good candidates. Preferably with a February expiration, with the guess that maybe government shenanigans will aid in keeping a ceiling on the market at that time.
Thought I'd say "hi" to everyone since I've finally started posting msg's on this forum after lurking for a few months... Bobdbeck "sent me", it was nice to find this board. Seems to be one of the very few Yahoo forums with a good group of folks, looking at stocks that generally interest me, and which hasn't been overcome by spammers/shorties. I used to think of the AGNC forum as a "home", a great place for exchanging ideas & trades. But that changed a little over a year ago as mREITs started to worsen, and then spammers moved in & completely destroyed the forum with dozens of unrelenting trash posts a day. All the quality folks packed up & left.
As for me -- investing is my full time focus. I follow a lot of stocks, including most of the names that also tend to come up here, but I typically invest, deeply, in a very small number of names that I get to know really well. Most of my trades tend to be via options and usually have timeframes of 3 to 6 months. For some positions, options aren't supported or just aren't the best choice IMO, so for stocks like say SDRL and NATDF I hold pure stock and enjoy the divs (and sometimes the cap appreciation). For now, it's working out well (until it doesn't) :).
I probably won't be a prolific poster but will weigh in where it makes sense. Right now my hope is actually to take a lot of trades off by end of this year and to de-leverage a bit, doing my best to avoid starting new trades that wouldn't wrap up by December expiration. While I'll still be in the market and won't be trimming any of my core stock holdings, with big gains for this year I am thinking to reduce some risk for the Jan - March timeframe given the disaster that is the U.S. government. I hope to make use of some weakness to put on new positions. Those are my thoughts right now, subject to change :).
I am no expert, but if there is anyone who wants to learn more about options I am also happy to help, feel free to ask anytime.