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.
Often writing an in-the-money call against a one of your stocks that has had a swift run-up can be a good way to lock in profits. This week, we used the Value Line Stock Screener to generate a list stocks with above average expectations that have risen 25% or more since the beginning of the year. We then opened our Option Screener with this result and looked for in-the-money covered calls that offered protection of more than 10% and per annum yields of more than 15%. Among our stocks are BJ Restaurants (BJRI) and Sprint Nextel Corp (S).
LEAPS are longer-term options with expirations of between nine months and two and a half years. Put LEAPS can be attractive as portfolio hedges because they lose time premium at a much slower rate than do shorter-term puts. In our screening, we looked for puts that are deemed to be underpriced, according to our model, that are based on stocks expected to do worse than the market over the next six to twelve months, and that offer leverage that is at least 2 to 1 on a downward move in the stock (i.e., if the stock falls 10%, the LEAP gains 20% or more). We also specified a minimum bid/ask spread (15%) and a range of 5% to 35% out-of-the-money. Our results came up with 19 puts on 8 different stocks, among them Carnival Corp (CCL) and NetApp Inc (NTAP).
A “married put” is a stock hedged with a put. With many implied volatilities having imploded over the past few weeks, there appear to be ample opportunities for investors to hedge good stocks with reasonably priced puts. In this week’s screen, we have specified that we want stocks with above average fundamental and technical outlooks and a high married put ranking in our service. We have also specified that we want expirations later than May, that we want a bid/ask spread no wider than 10%, that the options be underpriced (according to our model), and finally, that they be struck 10% to 20% below the stock price.
This week, we take advantage of low implied volatilities and premium to search for underpriced, out-of-the-call LEAPS on stocks with better than average fundamental and technical outlooks. We also specified that we want the premium to be no greater than $7.00 per share and that we want the bid/ask spread to be no wider than 20%. Our search came up with calls on 24 companies, including calls on Ford Motor (F) and Macys Inc. (M)
Put LEAPS can be attractive as portfolio hedges because they lose time premium at a much slower rate than do shorter-term puts. In our screening, we looked for puts, which expire in January 2013, that are deemed to be underpriced (according to our model), that are based on stocks expected to do worse than the market over the next six to twelve months, and that offer leverage of at least 2 to 1 on a downward move in the stock (i.e., if the stock falls 10%, the LEAP gains 20% or more).
Often a stock upgrade from “below average” to “average” can pinpoint an investment opportunity that might otherwise be missed. This week, we search for new stock upgrades to find underpriced calls that are attractively priced. Our screening came up with calls on eight different companies, including Advanced Battery Tech. (ABAT) and Capstead Mortgage Corp (CMO).
One investor’s risk insurance can be another’s bread and butter. This week, we take advantage of the heavy demand for put insurance on good stocks, by taking the other side and writing high yielding out-of-the-money puts.
Here we screen for highly ranked calls with premiums of $0.10 or less on highly ranked stocks. While these calls are usually far out-of-the-money, and thus have relatively little chance ending up in-the-money, they still offer the significant gains should the stock rise sharply near-term. In our table below, we have adjusted the “current leverage” to reflect the percentage difference in the bid/ask spreads.
In this screen, we look for calls that are attractively priced for call buying. By attractively priced, we mean that, according to our Value Line Options Model, the premiums are a bargain in view of the profits you can make if the stock rises.