Option Spreads I: Basic Bull and Bear Spreads
Knowing a few basics can save you a lot of time in figuring out spreads. This report gives you the tools to trade spreads with confidence.
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A Refresher Course on Our Old Screener
Understanding Our Volatility Forecasts
We are proud to say that we are the only options service available to retail investors that provides state-of-the art volatility forecasts on virtually the entire equity options market (2,500 + common stocks). These volatility forecasts are important, because they tell you whether an option is favorably priced for a particular strategy.
Screening for Stocks and Options
Many of our option subscribers also have access to the Value Line Investment Survey online and to its Stock Screener. What these subscribers may not know is that they can use this Stock Screener to select a list of stocks and then automatically transfer their selections to our Option Screener.
An Option Strategy on International Business Machines
This week’s spotlight for option opportunities looks at International Business Machines (IBM), whose earnings for 2011 are now estimated by Value Line analyst Theresa Brophy at $12.95 a share, which would be an increase of somewhat over 12%.
September Quarter Option Rank Performance - November 14, 2011
This week, we review the performance of our option and covered call ranks for our September quarter evaluation period, which ended 9/27/2011. This definitely was a good time to be “long volatility” (and, hopefully, to be a subscriber to our service).
Options on Xerox Corp (XRX)
This week, we kick off a new series of spotlights on option opportunities on individual stocks, starting with Xerox Corp (XRX). With the stock down 33% from end-June levels, and with a P/E ratio this is less than half the market’s, Xerox is steeply undervalued, according to our analysis. In looking at Xerox options, we see opportunities for covered call writes, cash-covered put writes, and outright longer-term call purchases.
10 Covered Call Myths (or “Myth Conceptions”)
Much of what you are told about covered call writing, even by many so-called “experts,” is wrong – or, at least, less than 100% accurate. This week, we explore ten myths about covered call writing that you may have heard. Perhaps the key word here is “always,” as in always explore your alternatives - rather than always pursue exactly the same strategy.
Adding Options to Your Portfolio
The mere mention of options can send shivers down the spine of investors who have only heard about them through the news. To be sure, when used imprudently, options can do a great deal of damage to a portfolio. But, when used prudently, options can be a valuable addition to an investor’s toolbox. Covered calls are probably the best starting point for adding options to your portfolio.
Buying Protective Puts
This is definitely a market in which you need to be hedged. The S&P 500 and the Dow are down about 11% over the past month and only about 2% above earlier January lows. On the other hand, some stocks are doing better than others. Value Line’s rank 1 common stocks are down only about 3.5% as investors are tentatively looking for growth potential. In what may be a “stock picker’s” market, holding good stocks and protecting them with puts may be the way to go. In this week’s report, we cover in some detail how to hedge stocks you own with puts. Even when markets are volatile (as they are now), you can tailor your put insurance to suit your expectations and your tolerance for risk.
Defining Options Terms
If you are already familiar with options (what they are, what gives them value, the terms that describe them and how they are traded), you can probably skip this chapter. However, if you are uncertain about some of the terms or concepts, this chapter will probably answer your questions. We start with some basic definitions.
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