HI all, I have received some questions and stock ideas. I thought I would answer and comment
1. Nolan, you ask about the annual returns. Usually I average2-4% monthly. Every now and again I have a disappointment. I shoot for 3% to open a position and many times the opportunity to roll up and tweak it to maybe 5% happens. As i have said, most of my losses come from rolling up to soon. Often with a week to go i might get within 10% or less of a stock and then ouch. So I constantly remind myself to be patient. But using my guidelines you should be able to average the same results. But discipline is the answer. The 20% cushion is where you start. Don't hesitate to use more % if returns justify it. The answer to success is DON'T BE GREEDY!! The returns are there if you don't crowd the stock price and you use caution. In the previous thread someone is using CSCO with earnings coming out. To me a no no. but it might work out. Several of my personal rules were broke with that play.
1. the stock price to low. (which does not let you use a safe strike)
2. Earnings are coming out immediately... Whew danger
3. A strike price right next to the current stock price.. no no
If you avoid the traps and temptations you will do well. but caution and 'right' thinking will prevail and make you a winner. That is the best advice I can give. The game is easy if you use good sense and are careful.
Newport; i just checked out OPEN. I like it. it is now trading around 85+ and the 75 strike has a good return. This proves that i certainly do not know all. You guys and dolls find a lot of good positions!
Again, my experience and history alerts me to danger signals. I have learned that to avoid them is not easy. Trust me, caution will make you wealthy. I have to laugh when I read this as many would say..Caution.. and you advocate options.. Safety and options are an oxymoron.. Not true! Rules and good sense will beat out aggressiveness all the time.
Ok, enough preaching tonight. You guys seem to "get-it" You younger traders are going to be wealthy. But that isn't happiness. Good friends, family and a smile on you face will make you many friends and a happy person. I have several 'associates' that are multi millionaires.. But when they are around, other can't wait for them to leave. Be the one that people want around. ...but money helps...lol
26 comments:
FYI - just saw on CNBC that Cramer is going to have a segment on OPEN.
I can definitely relate with the discipline part. I have to thank you, Jerry, for giving me a set of concrete rules (along with a couple others I've added) to follow and stay true to. I have used the "crumbs" method only for 6 weeks & I have 3 solid wins and 0 losses. Currently I only have OPEN & FCX open and they both look good to expiration.
Again, thank you. This is the most "professional" as a trader I've felt since starting trading stocks 3 years ago.
Just something interesting to share on a dull red day:
On my trip back to Singapore, the first 3 people I spent time with are self-made millionaires. This first one is a ex VP Intel Asia and current VP cum MD Marvell Tech Asia, his motto in life is to launch a successful IPO soon (that's the drive)...Happens to be my brother.
The second one is a pharmacist who runs a successful pharmacy store. The day I visited, he just bought half a million Aussie dollar house in Perth for his 3 kids studying at Perth University. I commented her house is like a palace, while I am downsizing LOL....(My childhood buddy)
The third one runs her wholesale operation for dry groceries - expanding fast.(My high school and lifelong friend)
They are generous and nice people to be around....while I am poor and happy too LOL
Good day
Jerry,
I see your point. After the sell off in CSCO last november, I actually sold quite a few puts on weakness and make a good 30% ROI. It looks like CSCO dived again this quarter and i would probably be assigned next week, which I don't mind. My thinking is CSCO is a good long term play and it has traded sideways for atleast a decade if you look at the long term chart and the fundamentals are not bad at all!
KJ you said CSCO is a good long term play?? How long? Today I would put them in the same bucket as CSTR. Long term maybe but how about we just play NFLX?
I have a CSCO box with my cable ATT U-Verse locks up all the time F- CSCO there time has come and passed. I fowled my guru into JNPR and sold Feb 41/38 put spread this AM dose not fit the Crumb ideal but works for me.
My point is get away from thinking that just because at one time something was great it will again. Sadly it probably wont.
Gary Just as long as CSCO gets past the $20 share price after i get assigned next week...and then i sell my stock in the open market. And then sell some more 19 and 20 strike puts. Works for me. I hope CSCO continues to trade that way for a long time. I hate to compare CSCO with CSTR. It's like comparing AAPL with NOK.
Hi KJ. I have to agree with Gary regarding the CSCO stock. Down 15% or so today. the problem is that it may not come back to 20. Heck it may not come back to 19. It is how option traders lose money. Been there done that... Well over a million loss by thinking it will come back,it just has to... Wrong.. nothing has to do anything. To live fast and die fast is playing options close to the current stock price. If you are happy with the trade, kool, but tomorrow it might fall another 3 and ouch. It is a dangerous game with options when selling puts. You must protect yourself by allowing lots of cushion to avoid the oh oh's. There are just to many plays out there that offer that protection and at a better ROI. good luck
Jerry
I was reading an article on SHW, how this stock is a buy and keep forever kind of stock as the author claims.
Can you believe that AAPL had a sudden drop of 15 point just because someone reported that an Apple store he observed was empty. Geez!!
the thing with selling puts on csco here is you are doing a bullish play(selling puts/bull put spread) with a bearish stock ? i understand selling puts on stock in an uptrend that pulls back but csco is a falling knife potentially ? at least CSCO though has weeklies so even being put stock here you can sell covered calls every week and generate decent premium on it so it doesnt seem to be that bad a stock to be put if you are intending to be long the stock.......its always tempting to buy stocks after big move down but i'be been nailed buying falling knife stocks.....in fact im very tempted to sell OTM put spreads on AKAM today because its a good play on internet growth but i am questioning my sanity on it as if this market even pulls back those weak stocks will get weaker.
KJ
The point with CSTR/CSCO and NFLX was why play the lagers when the leader is right there smacking it out of the park. Give me a company that have good numbers raised guidance doing a buy back doing a 2 or 3 for one split, ANYTHING other than missing earnings 3 or 4 quarters in a row. If you want a good long term put sale IWM Jan 2012 45's for a .73 is a much better place than hoping CSCO gets over 20 or last earnings 22.50 I think it was, they didn't.
Gary on selling puts that far out, the time/theta decay wont kick in for long time....arent you just tieing up that margin waiting months for it to start to erode and if and when the market ever pulls back by Jan then being short those puts with VIX so low their premiums will jump up quickly so i guess you just expect to hold til expiration on them or think IWM will move higher ?
Snagged a small position in CMG this morning; the FEB 210; 16% cushion with a 1.26% ROI for 8 days vested. Earning yesterday after close; quite the roller coaster ride after & before market. Reported above analyst earnings expectations but a couple of downgrades after earnings :( The volatility is bleeding out of this quickly so I could close if there is still downward pressure.
Have a good weekend!
Brian It's not some thing I would do however I have a friend that does. And yes he holds all the way, If the market crashes he can roll down and out to 2013 or what ever. This allows a nice return for him and his head is not in the market 24/7 so he can run his business.
POT 165 AND OPEN 72.5 strike WORKED OUT GREAT THIS WEEK. HAD EXTRA MAINTENANCE SO I SOLD PUTS ON CMG 220 STRIKE PRICE--19% CUSHION FOR 1 WEEK AND 1 PERCENT TRADE FOR 7 DAYS.. EATING CRUMBS AND DRINKING BEER..
@Fish - love it!!!!
Good job, Newport and Fish !! :)
Sold TTM Feb $25 puts for .20, They reported great earnings stock went up 10%, closed at $26.40, I know everyone here talks about safety first, and would never sell puts so close to the stock price, I thought I'd take a chance, only 5 trading days left to expiration, I would even accept it if I get put on, I'll immediately turn around and write calls, I think this stock is headed up big time, price target out there is $39.
Nicky,
If your going to go out side Jerry's modal make sure the stock has some thing that the crowd loves. I guess not only did the crowd buy a new Jag's they went for the stock also.
I like it.
Nicky
Call me nuts but after reading this I would have sold the 27's It did trade 26.99 high I bet it's over come Friday..
http://seekingalpha.com/article/220879-tata-motors-kicks-into-high-gear?source=qp_investment_views
Gary and Nicky, You guys have nerves of steel with TTM. I know it has been around awhile but no PE, foreign, and Market Edge says AVOID. Also you have to use a close strike to get any kind of return..whew.. Be very careful as these can bite you. The leverage we have works great when we use safety but when some analysts are suggesting to avoid or sell it can be a warnings to listen to. I know all the rational of "well if put-to, I will just sell cc's" Yeah i have told myself that many times and get put to for the 25 strike and the stock drops to 19. You end up selling calls at the 25 strike or? for about .02 cents and in 15 years you are even..lol. I see the stock jumped 10% this week but do use caution. As i said in an earlier post, why use spooky ones when there are safer ones that offer the same return.
Just a heads up.
JDSU MAR 22.5 PUTS 20% CUSHION 5.5% RETURN after COMMISSIONS. A GOODY
JDSU has a P/E of over 500.
Speaking of this, Jerry how do you use PE in your decisions? Some of the most useful stocks (NFLX PE 78, AMZN PE 74, BIDU PE 84) are not what many would characterize as reasonable. Of course there's no one size fits all. But can you clarify a little bit?
Jerry. cheers! I now have a better Idea of what to expect. I also think that risk management in not getting greedy and sticking to methods over high returns is the key to long term success.
yep
Hampton; The PE factor is certainly a 'grey' area. If a company has proved that is is growing fast and with a real product, I am more forgiving of a higher PE. I probably look real close if a PE is over 100. Even if I like the stock. But I don't really have a magic cut-off pint. It is just one more 'factor' to take into account. A few post ago there was a stock someone was using that had NO-PE. That is scary. But I combine PE, analyst opinion, trend, product line, return with good cushion, etc to come to a final judgement about using a stock.
One problem with a higher PE is that when corrections come (and they always do) The high flyer's with a big PE, drop the quickest and the farthest. They can be a real money maker unless you are holding when that happens. So it is a flag to always raise your awareness.
Hi
Thanks!, PCLN mistake there (trading before morning coffee on the west coast is always a risk). I will be cautious now like i was with WLT, and may reverse the trade
Rob
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