Sell 1 Apple Jan 12 265 put for $11.10 (1,110 per contract)
Use the proceeds to buy 10 BAC Jan 13 12.5/15 vertical call spreads for 1.24.
Total Cost: $130 (will need to set aside around 2,500 in margin on the short Apple put)
Max Profit: $1,110 if Apple is above 265 on Jan 12 and $1,260 if BAC is above $15 in Jan 2013 for a total of $2,360.
Friday, March 4, 2011
Akamai Technologies (AKAM)
Akamai Technologies (AKAM) is a technology company that provides services for accelerating and delivering applications over the internet. The company's network currently handles more than 15% of all web traffic. It is also a frequent takeover target. Here is a good article explaining a little of what Akamai does.
After the most recent quarter's earnings, the stock got absolutely hammered due to lower guidance. It went from $54 down to its current price $37. I think this makes it an appealing opportunity for a buy-write that can be very profitable even if the stock doesn't move at all in the next 19 mos.
Buy 100 AKAM @ 37.78: ($3,778)
Sell 1 Jan 13 35 call @ 10.8: 1,080
Sell 1 Jan 13 35 put @ 6 600
---------------------------------------------------------
Total cash outlay: (2,098)
Potential Return: $1,124 or 54% on cash invested. Max profit can be obtained whether the stock goes up, stays the same, or drops less than 7%
Break-even: $27.99 giving a margin of safety of 26%.
I think a few things make this a good, safe trade. One is that the stock is severely depressed currently. Another is as more and more people begin using tablets and smart phones, this will only increase the demand for the services Akamai sells. The worst case scenario is that you have to own the industry leader in one of the most rapidly growing markets at a 25% discount from current prices.
After the most recent quarter's earnings, the stock got absolutely hammered due to lower guidance. It went from $54 down to its current price $37. I think this makes it an appealing opportunity for a buy-write that can be very profitable even if the stock doesn't move at all in the next 19 mos.
Buy 100 AKAM @ 37.78: ($3,778)
Sell 1 Jan 13 35 call @ 10.8: 1,080
Sell 1 Jan 13 35 put @ 6 600
---------------------------------------------------------
Total cash outlay: (2,098)
Potential Return: $1,124 or 54% on cash invested. Max profit can be obtained whether the stock goes up, stays the same, or drops less than 7%
Break-even: $27.99 giving a margin of safety of 26%.
I think a few things make this a good, safe trade. One is that the stock is severely depressed currently. Another is as more and more people begin using tablets and smart phones, this will only increase the demand for the services Akamai sells. The worst case scenario is that you have to own the industry leader in one of the most rapidly growing markets at a 25% discount from current prices.
Thursday, March 3, 2011
Wal Mart (WMT) raises dividend 21%
I've previously written about WMT here. Today they announced a raise in dividend of 21% to $1.46/share.
http://finance.yahoo.com/news/Walmart-Increases-Annual-bw-1581713540.html?x=0&.v=1
http://finance.yahoo.com/news/Walmart-Increases-Annual-bw-1581713540.html?x=0&.v=1
Wednesday, March 2, 2011
iPad 2 has claimed its first victim
iPad 2 just did the same thing to ZAGG that Charlie Sheen plans to do to anyone who gets in his way: destroy them violently. Zagg makes protective coverings for phones and tablets. Today, Apple announced it has its own covering for its newest version of the iPad. The news sent ZAGG's price down 25%. Zagg needs to get some of that Tiger's Blood that is coursing through Charlie Sheen's veins.
Sunday, February 27, 2011
What is the real inflation rate?
Don't believe the official inflation rates published by governments around the world? Check out this project by MIT that tracks the prices of millions of goods around the world. It's pretty amazing.
Billion Prices Project
Billion Prices Project
Inflation Hedges
I stopped to fill up my tank today and the price of gas had jumped from $3.00 to $3.25+ in just a month. It made me wish i had done some of these inflation hedges that Phil at Phil's Stock World had mentioned around Christmas, specifically the gas inflation hedge:
http://seekingalpha.com/article/243574-4-inflation-hedges-for-2011
Some of these can be tweaked into very profitable trades still. However, I think the biggest thing to take away from this is that you can use this same thought process to help hedge yourself against any number of scenarios that are out of your control. Some of the trades mentioned in his article are up almost 1,000%. It's a good read and I suggest you go on and read some more of his articles as they are very informative and can deliver big results.
http://seekingalpha.com/article/243574-4-inflation-hedges-for-2011
Some of these can be tweaked into very profitable trades still. However, I think the biggest thing to take away from this is that you can use this same thought process to help hedge yourself against any number of scenarios that are out of your control. Some of the trades mentioned in his article are up almost 1,000%. It's a good read and I suggest you go on and read some more of his articles as they are very informative and can deliver big results.