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Posts tagged ‘Call option’

Credit Card Stocks on Fire in 2012!! Capitol One Financial(COF) Options?! By: Tim Bolger

Capitol One Financial (COF) stock has been on fire in 2012 and is one of my top stock picks in the credit card/financial services space for this year. Read more on the bio of COF courtesy of Yahoo Finance: Capital One Financial Corporation operates as the bank holding company for the Capital One Bank (USA), National Association (COBNA), and Capital One, National Association (CONA), which provide various financial products and services in the United States, the United Kingdom, and Canada. It offers consumer and small business credit card lending, national closed end installment lending, and the international credit card lending services. The company also provides various non-interest bearing and interest-bearing deposits, including demand deposits, money market deposits, negotiable order of withdrawal accounts, savings accounts, certificates of deposit, and other consumer time deposits. Its loan portfolio comprises credit card loans; consumer loans, such as auto, home, and retail banking loans; and commercial loans, including commercial and multifamily real estate, middle market, specialty lending, and small-ticket commercial real estate loans. In addition, the company provides mortgage banking, treasury management, and depository services. It primarily serves consumers, small businesses, and commercial clients through branches, the Internet, and other distribution channels. The company was founded in 1993 and is headquartered in McLean, Virginia.

Why do I love Capital One Financial (COF)?? This stock has been on a tear over the last couple of years and still looks very attractive from a fundamental valuation perspective. Currently, COF trades at $56.01(2;03p.m. EST), with a trailing Price to Earnings ratio of 8.23 and has a Price to Book value of .87. The book value of COF is $65.17 a share. In comparison to Visa (V), currently trading at $118.06 (2:04 p.m. EST), which has a trailing Price to Earnings ratio of 20.90 and has a Price to Book value of 2.94. The book value of V is $40.61 a share and is trading at a significant premium based on the Price to Book metric.  However, V is still an amazing growth story and it’s extremely important to note that V has zero exposure to losses from consumer defaults on credit card debt. This is in contrast to COF, which has great exposure to consumer defaults, because it lends alot of its own capital. Fortunately, for COF, consumer defaults have been declining as the global economy continues to improve and that has helped propel the stock even higher.

I love Visa (V) stock as well and would be a buyer of this stock under $110 per share. I believe V may run to $150 a share in 2012 and is truly another amazing success story in the San Francisco Bay Area. From a valuation perspective, I am a bigger proponent of owning shares of COF right now. COF could run to $80 in the next twelve months and next stop may be $100 per share…Legendary Hedge Fund Manager and Billonaire investor: John Paulson of Paulson & Company Inc., is one of the largest shareholders of COF, with his managed funds owning 9,420,000 shares of COF.

Capitol One Financial (COF) reports earnings on April 19, 2012. Analysts are anticipating a great quarterly report from COF. Will the company blow past Analyst earnings estimates?? And, what is the Options play on COF ahead of earnings? As you can see from the COF data below, courtesy of Yahoo Finance, COF has beat analyst expectations in three of their last four quarterly earnings reports. Clearly, the weakest financial report was their most recent one in December of 2011, in which they missed Analyst earnings expectations by 43.60%. Ouch! Yes, that was a terrible earnings miss, but I think this upcoming quarterly earnings report is going to be stellar and only time will tell the real story…Visa reported blow out numbers and I think COF earnings will thrill investors as well!!

Earnings History Mar 11 Jun 11 Sep 11 Dec 11
EPS Est 1.55 1.71 1.68 1.56
EPS Actual 2.21 1.97 1.77 0.88
Difference 0.66 0.26 0.09 -0.68
Surprise % 42.60% 15.20% 5.40% -43.60%

 

Trade#1: I would consider buying the Capitol One Financial(COF) $57.50 strike Call Options for $1.00 with an April 20, 2012 expiration. Attached are the COF Options chains with an April 20, 2012 expiration date courtesy of Yahoo Finance:http://finance.yahoo.com/q/op?s=COF+Options. If I buy 10 Call Option contracts, it will cost me $1,000 plus trading fees to get long exposure to 1,000 shares of COF at $57.50. I think that COF stock could trade to $65 per share if the company beats Analyst earnings expectations next month and gives an upbeat earnings guidance for the full year of 2012. Additionally, any positive comments by management on the conference call about a continued decline in consumer credit card defaults, would be another catalyst to propel COF stock much higher. If COF trades to $65 a share by the expiration of these Call Options, this trade will be worth at least $7,500 ($750 per contract x 10 contracts= $7,500 minus trading fees). Good luck COF bulls and remember that Options trading is very risky and to always consult your investment advisor before buying/selling any equity securities and/or Options contracts.

 

Trade#2: For the longer term bull in COF, I would consider buying the COF $57.50 strike Call Options for $3.50 per contract with a Sept 21, 2012 expiration date. Attached are the COF Options chains with a Sept 21, 2012 expiration date courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=COF&m=2012-09. I can buy 10 Call Option contracts for $3,500, in which I will be paying a premimum for more time value to allow COF shares to potentially climb much higher over the next several months. If the shares of COF trade to $70 a share over the next several months, this trade will be worth at least $12,500.  Good luck to all of the COF Bulls and stay tuned to http://www.Optionshoney.com for more monster Options trades!

Check out the Technical Chart on Capitol One Financial below (COF) courtesy of FinViz:

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Tech Giant Oracle Has Big Quarterly Numbers and Stock Slides!! What are my Options?! By: Tim Bolger

German Sailing Grand Prix Kiel 2006. Team: BMW...

German Sailing Grand Prix Kiel 2006. Team: BMW Oracle Racing. (Photo credit: Wikipedia)

Oracle Corporation (ORCL): the business software and hardware global giant is sliding over 2% to $29.48(3:19 PM EDT) after it beat the streets quarterly earnings expectations after the closing bell on March 20, 2012 (Q3 results ending Feb 29th).

In morning trade, Orcl stock popped to an intraday high of $31.15 a share and then reversed course to the downside breaking the important technical of $30 a share. Nearly 80,000,000 shares have traded hands on this tech giant before 3:26 PM EDT on a day of huge volume, in which investors/analysts have a mixed sentiment on the financial results of the company. Oracle beat analyst expectations by a slight percentage, coming in with $9.04 Billion in revenue for the quarter.  The street had Oracle coming in with an estimated $9.02 Billion, which is only a small beat and may partially explain why the shares are sliding after a quick knee jerk pop to the upside this morning.

On a more positive note, Oracle had a very impressive gross margin of 78.9% and an operating margin of 37.8%. Non-GAAP earnings beat the street by 6 cents, coming in at $0.62 cents a share and the street had predicted Oracle to come in at $0.56 cents a share. Check out the chart below courtesy of Capital IQ to take a closer look at the Non-GAAP earnings results in more detail:

anImage

Source: S&P Capital IQ. Quarterly periods. Non-GAAP figures may vary to maintain comparability with estimates.

Despite the slide in Oracle shares today, I am still a raging bull when it comes to investing in this global technology giant. Larry Ellison is one of the smartest and richest Tech moguls on planet earth and I am very confident in the long term picture of continued profitability and share appreciation of this Bay Area Tech giant. I am maintaining my $37 price target for Orcl shares over the next 11 months and would be a buyer of the shares on this pullback.  I think this is short term storm for and pullback in Orcl shares and presents a great long term buying opportunity for new investors and those looking to accumulate more shares for their core positions. A great entry point in the stock will be at a share price of $27.50 or less. Now, what is the Option play?! I like the longer term Call options and selling the near term Put options on Oracle.

Trade#1: I would consider selling the Oracle(ORCL) $29 strike Put Option for $0.90 cents a contract with an April 20, 2012 expiration date. Attached is Oracle Options Chains with an April 20, 2012 expiration date courtesy of YahooFinance: http://finance.yahoo.com/q/op?s=ORCL&m=2012-04. If I sell 20 Orcl Put Options for $0.90 cents each, I will credit $1,800 into my brokerage account ($0.90 cents x 100 shares per contract=$90 and $90 x 20 contracts =$1,800).

Remember, by selling the Put options, we are taking the big risk of potentially being exercised on the shares of Oracle at $29, if shares of Orcl stock are trading below $29 on the expiration date of these contracts.  Therefore, we need to have $58,000 in cash in our brokerage account as cash collateral in the event that we get exercised on the 20 Put option contracts that we are considering selling. 20 contractsx$2,900($29 x 100 shares per contract)=$58,000. This is definitely not a trade for beginners, especially if you do not have the cash reserves to initiate the trade. However, I am a fan of this trade and a big long term bull on Oracle. In a worst case scenario, I am comfortable going long 2,000 shares of Oracle at $29 a share if I get exercised. By selling the Put options, I am in a sense financing $1,800 towards the potential eventual purchase of 2,000 shares of Oracle at $29 per share. By selling the Put Options, I am actually getting long the stock at $28.10 (net cost of $58,000-$1,800 credit=$56,200)because of the $1,800 that was initially credited to my brokerage account at the opening of this derivatives transaction.

Trade #2: I would consider buying the Oracle(Orcl) $29 strike Call Options with a Sept 21, 2012 expiration date for $1.25 a contract. Attached is the Orcl Options Chains with a Sept 21, 2012 expiration date courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=ORCL&m=2012-09. I can buy 20 contracts for $2,500($125 per contract of 100 shares x20 contracts= $2,500 to open this trade) and that will give me long exposure on 2,000 shares of Orcl stock at $29 a share for the next several months. If the stock trades to $35 by the September expiration date, my initial $2,500 investment will be worth over $12,000. That would be beautiful return on our capital and I think that Tech stocks continue to lead this market rally higher in 2012!!! Lets go Orcl Bulls!! Remember, we need Orcl stock to decline another  5 or 6% in order for us to get an opportunity to buy these September 2012 Call Options for $1.25 a contract. Options take alot of patience and discipline to be successful in making money. Please remember to consult your investment advisor before buying or selling any equity securities/stock options. Good luck and stay tuned for more big action at http://www.Optionshoney.com.

Honey?! Lock in Some Profits on Oracle Call Options?! By: Tim Bolger

Deutsch: Oracle-Zentrale in Redwood Shores.

Image via Wikipedia

I have been a long term bull on the Oracle Corporation(ORCL) and love this company… Earlier this week , I recommended that Options honey readers consider buying the Mar 16, 2012 expiration $30 strike Call Options on Oracle (ORCL) for .20 cents(.20 x 100 shares per contract=$20 a contract plus trading fees). Oracle is trading up 1.23% at 29.61(11:21 AM EST) and the March 16, 2012 $30 strike Call Option contracts have gained almost 100% in value. Attached is the March 16, 2012 expiration $30 strike ORCL Call Option courtesy of Yahoo Financehttp://finance.yahoo.com/q?s=ORCL120317C00030000
 
You might want to consider selling 40% of your position to lock in a big gain at .40 cents a contract(.40 x 100 shares per contract=$40). That would be a quick gain of $800 minus trading fees. That’s nice!! Lovin’ that Honey…I mean Money!! If you bought 100 contracts, you will still have 60 contracts remaining in order to profit huge from the potential move in the stock above $30 in the next few trading days. I reiterate my $37 2012 price target on Oracle shares and strongly believe that if the stock breaks 30, it will run into the low 30s very quickly.

Good luck Oracle Bulls & Stay Tuned to http://www.Optionshoney.com!!

Bernanke Speaks on Capitol Hill and Precious Metals Plummet!! Gold Tanking…Options?! By: Tim Bolger

English: A frame from a screencast from the US...

Image via Wikipedia

Federal Reserve Chairman Ben Bernanke is speaking on Capitol Hill at the moment…During his speech the markets have all turned into the red and Gold is plummeting over $65 an ounce(11:50 am Eastern standard time)…Wow!! It is amazing how the Fed chief can move markets and metals prices in just a few seconds while addressing Congressional leaders and the American people.  I’m a long term bull on Silver and very bullish on Goldilox…Gold was trading down as much as $80 an ounce intraday.

So what is the options play on Gold tanking today?!

Trade#1: I would consider selling the $165 April 20, 2012 Put Options on the GLD for $4.25 a contract. Remember that in order to sell these 3 contracts, we need to have $49,500 in cash reserves in our brokerage account in case we get exercised on the GLD shares at $165 a share.  I am comfortable going long the GLD at $165 and therefore I like this trade alot…By selling 3 Put Option contracts, I will collect a premium of $1,275 minus trading fees. If the GLD bounces after this major sell off today and moves higher I will not get exercised on these shares at expiration. Either way, I like this trade and selling the Put Options will help finance the worst case scenario, in which I get exercised on 3 Put Option contracts (3 x 100= 300 Gld shares at $165 a share). Attached is the April 20, 2012 Options Chains on GLD courtesy of Yahoo Financehttp://finance.yahoo.com/q/op?s=GLD&m=2012-04.

Trade#2: I would consider taking advantage of this huge sell off in Gold today and think about buying the $165 June 15, 2012 expiration GLD Call Options for $4.80 a contract. I can buy 10 Call Option contracts for $4,800 plus trading fees and that will give me long exposure to 1,000 shares of GLD at $165 a share. My $4,800 investment will be worth over $10,000 if GLD trades to $175 by the June 15, 2012 expiration.  Attached is the June 15, 2012 Options Chains on GLD courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=GLD&m=2012-06. Good luck to all of the Goldilox bulls and stay tuned to Optionshoney.com for more Options action!! Show me the honey!!

For more conservative investors, I would stay away from the Options on GLD and just buy the GLD at $165 or less. The GLD is a great hedge on higher inflation and a weak U.S. Dollar…The other way to get Gold exposure is by purchasing 10 ounce gold bars or the beautiful 1 ounce Gold American Eagle coins. It is really nice to own the physical and fun to hold these shiny yellow bars/coins…and yes they are worth alot of money too!! I am also a big fan of owning shares of Canadian gold miner: Barrick Gold Corporation (ABX) at $45 or less a share.

Greece Inks a Huge 2nd Bailout!! Metals Jumping! Options honey?! By: Tim Bolger

Photo courtesy of: http://www.iho-ohi.org/index.php/category/greece/

Athens Greece

Riots continue to escalate all over Athens throughout the long weekend and Greece inks a 2nd bailout deal with European finance officials to save the country from bankruptcy in the short term…such a beautiful country that has been crushed by sovereign debt issues and a very weak economy. The Dow Jones is flirting with 13000 and metals are jumping today on this breaking news on Greece…Gold is up over $26 an ounce today and I posted an article on Jan 17, 2012 about my long term bull case for Goldilox moving higher…here is my previous post on Gold: http://optionshoney.com/2012/01/17/can-you-say-goldilox-is-soaring-this-shiny-metal-is-hott-in-january-gold-options-honey/.  I suggested traders/investors think about buying the June 15, 2012 $165 strike Call Options on the GLD for $6.00 a contract. Those GLD Options contracts are spiking higher today and may still move much higher in the near term. The ishares Silver Trust(SLV) is trading 2% higher as well today.   I would recommend more conservative investors to buy shares of stock on the GLD and SLV for the long term…I like the GLD at $165 and the SLV at $29.

I am very positive on the miners going forward and I think there is still huge upside in that space…Many of the miners have underperformed the big rise in metals prices over the past few years and that is where I am seeing the most opportunity for investors seeking value plays.  I am increasing my position today on Hecla Mining (HL) by buying the Call Options and I would be a buyer of the Call options on General Molycorp(GMO) as well. Hecla Mining reported earnings today and the stock is soaring over 7 %…Business wire reports: Hecla Reports Record 2011 Revenue & Gross ProfitsBusiness Wire(Tue 8:00AM EST). Hecla Declares Silver-Linked Dividend and Adds New Minimum DividendBusiness Wire(Tue 8:15AM EST)

A quick profile bio on Hecla Mining courtesy of Yahoo Finance: Hecla Mining Company, together with its subsidiaries, engages in the discovery, acquisition, development, production, and marketing of silver, gold, lead, and zinc. The company produces lead, zinc, and bulk concentrates and sells them to custom smelters; and unrefined gold and silver bullion bars, which it sells to precious metals traders. It holds 100% interest in the Greens Creek operating unit located near Admiralty Island in Alaska; and 100% interest in the Lucky Friday operating unit located in Idaho. Hecla Mining Company founded in 1891 and is based in Coeur d’Alene, Idaho.

http://www.hecla-mining.com/exploration/ Chart below is on Hecla Mining Silver Growth:

Silver Growth

What is the Options Play on Hecla Mining?!  

Hecla Mining(HL)  is jumping over 6.5% today and I would think about buying the March 16, 2012 $5 strike Call Options on HL for .45 cents a contract.  Attached is the March 16, 2012 Options Chains for HL courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=HL&m=2012-03.

I would also consider buying longer term options contracts on HL further out to give us a little more time for a continued rise in the shares of HL.  I like the HL June 15, 2012 $6 strike Call Options for .25-.30 cents a contract. Attached is the Options Chains on HL for June 15, 2012 expiration courtesy of Yahoo Finance: http://finance.yahoo.com/q/op?s=HL&m=2012-06. Stay tuned for more big trades at http://www.Optionshoney.com!!

See below the 5 day technical chart on Hecla Mining (HL) courtesy of Fidelity Investments:

Chart

Diamond Foods Spiking 6% After Big Sell Off Yesterday!! Call Options?! By: Tim Bolger

Just a quick note on Diamond Foods(DMND). I posted an article yesterday: http://optionshoney.com/2012/02/09/big-shake-up-at-diamond-foods-this-is-totally-nutz-ceo-and-cfo-are-out-options-honey/recommending that investors buy shares of the San Francisco snack food maker on a huge 42% decline in the shares. DMND is up close to 6% today, on a day in the red across all the major U.S. stock indexes.  Additionally, I suggested buying the Call Options on DMND to take advantage of yesterday’s tremendous share weakness.  I bought the Feb 17, 2012 $23 strike Call Options for $1.45 yesterday and hope that a few other traders jumped on that train. Well, I know alot of Wall St. Pros are all over this big trade and yesterday was a record volume day for Options traded on DMND foods, but I hope a few Optionshoney lovers are making money on this trade as well. Forbes reports: Plunge In Diamond Foods Yields Feast Of Options Trades at Forbes(Fri 10:07AM EST). Consider locking in profits today as these DMND Options contracts are trading 61% higher over night:http://finance.yahoo.com/q?s=DMND120218C00023000. Always remember that pigs get slaughtered…no need to be greedy and it’s a very smart move to take 60% of our profits off the table on this rally in DMND shares and the Call Options…But, this stock may run to 28 by the Feb 17th expiration next week and we could still see huge upside in the value of these Call Options contracts. Options are risky financial instruments and please consult your investment advisor before buying any Options contracts or stocks that I research/trade on this site.  Stay tuned for more action at Optionshoney.com.

Check out the 2 day chart on DMND courtesy of Fidelity Investments:

Chart

Big Shake-up at Diamond Foods…This is Totally Nutz!!! CEO and CFO are Out?!. Options Honey?! By: Tim Bolger

Shares of San Francisco based snack food maker Diamond Foods(DMND) tanked over 42% on huge volume this morning after the company announced yesterday evening that they would have to restate there 2010-2011 financial statements following the negative results of a 3 month Audit investigation that was not favorable for DMND shareholders in the short term… The audit was conducted because of an alleged accounting scandal over the momentum payment from DMND to its Walnut growers.. To put the icing on the cake, the CEO and CFO are being removed from the company.  Definitely not a fun day for those long the stock…However, I still love Diamond Foods Wasabi Almonds and the rest of their yummy products. So, I bought shares of the stock on all of this bad news today.  Consumers will continue to gobble up there tasty nuts around the globe for sure and this is a short term thunderstorm for the company that provides a great opportunity to buy the shares at a deep discount….

So what is the Options play?!  Diamond Foods: http://www.diamondfoods.com. Check out this article written by the Wall St. Journal today on Diamond Foods. The WSJ reports a record trading volume day in Put and Call Options on Diamond Foods Inc.: http://blogs.wsj.com/marketbeat/2012/02/09/taking-a-bullish-flyer-on-diamond-foods/?mod=yahoo_hs.

WSJ Reports: Diamond Food CFO’s To-Dos: Restate, Then Rebuild…

 http://blogs.wsj.com/cfo/2012/02/09/diamond-food-cfos-to-dos-restate-then-rebuild/?mod=yahoo_hs

I purchased the Feb 17, 2012 $23 strike Call Options on DMND today for $1.45 a contract and would be a buyer of the longer term Call Options as well. Attached is the Options Chains for the DMND June 15, 2012 Put/Call Options courtesy of Yahoo Finance:  http://finance.yahoo.com/q/op?s=DMND&m=2012-06. I would be a buyer of the DMND $22.50 strike Call Options for $3.40.  I am also a buyer of the stock under $23  a share and believe it is a great long term investment.  I love San Francisco and love this SF Nut Company!!! The Pringles acquisition may not happen now because of this terrible news today…however, I would personally prefer the company not to purchase Pringles from Procter and Gamble and feel that DMND is paying way too large a premium for this brand name chip franchise. Reuters reports:Procter & Gamble likely to terminate Pringles deal with Diamond Foods, NYT saystheflyonthewall.com (Thu 11:47AM EST).  Stay tuned to Optionshoney.com for more Options plays… 🙂

Check out the ten day chart of DMND courtesy of Fidelity Investments:

Chart

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