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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:


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.

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.

Rare Earth Miners Moving Higher Today…Options Play on Avalon Rare Metals(Avl)!! By: Tim Bolger

Rare Earth Miners mine rare earths deposits and mineral resources that are used in the production of everything from magnets to hybrid vehicles, flat panel televisions, digital cameras, disk drives, ipods, Mp3 players, etc. Over the last few years the supply concerns of Rare Earths have been a major catalyst for the exponential price increase in the cost of these rare earths deposits that are so vital to the continued production of many technology products and devices sold around the globe.

A few of the Rare earth miners that I follow closely are Lynas Corp(Lysdy.pk) , Molycorp(Mcp), General Moly(Gmo), and Avalon Rare Metals(Avl).  Avalon Rare Metals will be our rare earth miner in focus for today and is soaring 8% higher on big volume.

A brief bio on Avl courtesy of yahoofinance: http://finance.yahoo.com/q/pr?s=AVL+ProfileAvalon Rare Metals Inc. engages in the exploration and development of rare metals and minerals in Canada. The company primarily explores for the rare earth elements, such as neodymium, terbium, and dysprosium; and other rare metals and minerals, including lithium, tantalum, cesium, indium, neodymium, terbium, dysprosium, niobium, gallium, zirconium, and calcium feldspar, as well as tin. Its principal property includes the Nechalacho Rare Earth Element project located at Thor Lake, Northwest Territories…(yahoofinance)

Check out the Avl mining projects in the works: http://avalonraremetals.com/projects/ This is the Thor Lake project: http://avalonraremetals.com/projects/thor_lake/thor_lake_intro/

Over the past 52 weeks, Avl has traded in a range of 2.29-10.11.  Despite the huge pullback from Avl highs, I think rare earth deposits will continue to be scarce over the long term and this will drive  both rare earth prices and these small cap miners much higher in value…As you can see from the yahoo finance chart below on Avalon Rare Metals and Molycorp, both of these stocks hit all time highs in early 2011 before getting crushed. I think in 2012, we will see a big bounce in these rare earth miners and several other miners.  We also may see some M & A in this space as the bigger players gobble up a few of the smaller competitors.  Another one of my top picks is Australian Miner Lynas Corp. Check out Lynas at http://www.lynascorp.com/.

Options Trade#1: Here is the yahoofinace Avl options chains for April 20, 2012 http://finance.yahoo.com/q/op?s=AVL&m=2012-04.  If I were to try and capitalize on a move higher this spring on Avl, I would look at selling the Avl $3 April 20, 2012 Put Options for .55 cents. If I sell 20 contracts, I will collect a premium of $1,100 minus trading fees. Keep in mind, I need $6,000 in cash in my account in case I get exercised at $3 per share and have to purchase 2000 shares of Avl stock.  Best case scenario, I collect the $1,100 premium and do not get exercised, but I am very comfortable getting long 2,000 shares of this stock at $3 if I do get exercised. I will get exercised only if Avl shares close below $3 at the April 20, 2012 expiration date. The net purchase fee of Avl if I am exercised will be $6,000-$1,100 premium collected for selling the Put Options. That means I will get my 2,000 shares of stock for only $4,900 plus trading fees. That is one of the beautiful things about selling Put Options on a  stock that I already want to go long on.  I think Avl could run back to 7-8 dollars in 2012 if the Rare Earth Miners continue there move higher after get crushed last year. Over the next decade we could see a huge move higher in the value of these Rare Earth Miners and especially a few of my top picks: Avl, Gmo, Lysdy.pk, and Mcp.

Options Play#2: Here is the yahoofinance options chains on Avl for April 20, 2012 http://finance.yahoo.com/q/op?s=AVL&m=2012-04

If I were to buy Call options and take a speculative play on a continued move higher in Avl shares over the next 3 months, I would consider purchasing the Avl $3 April 20, 2012 Call Options for .50 a contract or $50 a contract(.50 x100 shares per contract=$50). If I buy 40 contracts, that will cost me $2,000 plus trading fees and no matter what the stock does, my total capital at risk is the cost of the options contracts plus trading fees. If I just buy to open the Call Options contracts, I do not have to hold $12,000 cash in my account as collateral to purchase the actual shares in case of getting exercised.  So, for 2k plus fees, I would get long exposure on 4,000 shares of Avalon Rare Metals at a strike price of $3 (40 contracts x 100 shares per contract =4,000 shares). If Avl runs to $5 in the next few months, the contracts will be then worth $8,000 plus depending on how much time value is left before the expiration date of the Call options. Remember the “Premium paid for buying Call options is three fold”: the time value premium + the intrinsic value (how much the option is in the money)+ volatility in the stock= Options Premium paid.

Fyi, A “Call Option is in the Money if the actual stock or asset we are purchasing the contracts on is trading higher than the strike price of our Call Options contracts that we may own. For example, if we own $3 strike Call Options on Avl and the stock is trading at $3.15. The stock is .15 cents in the money or $15 per Call Options contract we own on the Avl stock. Therefore, in this example the intrinsic value of the Avl $3 strike Call Options contract would be .15 cents or $15 per contract. It is also important to remember that if our Option at expiration is even 1 cent in the money our broker has on obligation to exercise the shares on us. Therefore, if you do not want to purchase the shares, you need to call your broker and tell them to let the options expire worthless.


Chart forAvalon Rare Metals Inc. (AVL)

Larry Ellison and The Global Enterprise Software Giant: Oracle Corporation!! What is the Options Play Honey? By: Tim Bolger

Oracle (Orcl) is one of the most powerful software companies on the planet and we all know the man behind the helm who has been most influential in taking this business software powerhouse to where it is today…Yes, that remarkable man is billionaire Larry Ellison (Co-Founder and Ceo of Oracle) and a business legend (In 2011, Forbes ranked Ellison as the 5th richest man in the world) that I admire for his brilliance, innovation, and competitive nature.  Ellison has built one of the most successful Technology companies in the world and he has a continual hunger to get larger, more powerful, and more profitable all the time.  Oracle’s Ellison has spent over $40 billion in the last decade acquiring and gobbling up both competitors and smaller companies to add to the stellar suite of Oracle companies and software products.  Currently, Ellison is attempting a hostile takeover of Peoplesoft and is always mining for additional acquisition targets that he sees fit for Oracle’s continued growth and gaining a competitive advantage in the marketplace.

Ellison is not only extremely competitive in the business world, but in “all other walks of life,” such as his love for racing sail boats. Ellison and his team were the recent winners of the America’s cup and brought the cup back to his hometown yahting club in lovely San Francisco.   Competitive sailing, just like running one of most successful technology companies in the world, is a way of life for this Tech mogul.  Ellison is determined to win the next America’s Cup being raced in San Francisco…To attempt achieving this goal, he built a custom $100 Million sailboat.  Yes, he built a pretty nice boat by all standards.  And, he likes to win and win alot…winning makes him and other powerful players alike feel good and he loves the adrenaline rush. After all, when you have over $30 Billion, you can buy whatever you want on earth(he owns fighter planes, helicopters, the second largest yacht in the world(The Rising Sun and is 452 ft 8 inches), sports cars, several gorgeous estates/mansions around the world, a beautiful place on San Francisco’s Billionaire’s row, etc.) and it is more the game of continual winning than needing any more cash…But, who can blame the guy if he wants to surpass Mexico billonaire Carlos Slim‘s wealth someday and be worth $80 billion someday.  I definitely know that if he more than doubles his current wealth in his lifetime, that will be very good for both long term Oracle shareholders and Ellison’s personal Oracle fortune (Ellison is by far the largest Oracle shareholder, with a majority of his wealth held in the company’s shares).  As of Jan 5, 2011 Ellison owned over 1.1 billion Oracle Shares. Wow!! It is always important to know how large the stakes of insiders are and the institutions that own the shares of the companies that we might invest in.  I especially like to see when a founder, such as Ellison has a majority of his wealth on the shares. It is usually a bullish signal for longer term investors and means that Ellison feels the best investment is investing in himself(the quarterback) and the future of his company Oracle…

Say Hello to Larry Ellison’s Private Mega Yacht the “Rising Sun”:

Rising Sun

Courtesy of:  http://www.wirecyber.com/2009/04/18/world-class-luxury-cruise/

One of Ellison’s favorite quotes was by Genghis Khan: “It is not sufficient that I suceed – all others must fail.” That is clearly a quote that Ellison has lived his life by and this business mogul continues to divide and conquer to achieve his personal goals and business goals for Oracle shareholders.  Personally, I have been monitoring Oracle’s stock for over 3 years and think there is definitely great upside potential in the stock and equity options for Oracle investors.

The opportunity for our Options play just got even better for us in Dec 2o11.  Oracle’s stock plunged 10% on high volume(over 180 million shares traded hands) after missing Wall St. analysts top line revenue forecasts in its latest quarterly earnings report in Dec 2011.  I believe the revenue miss and share pullback was just a temporary bump in the road for Oracle shareholders and presents longer term investors with a great opportunity to add to their core position in the shares.  So let’s look at the Options alternatives here:

Options Trade#1:  I like selling the Orcl Mar 16 2012 25 Put Options for .75 cents.  Keep in mind that the ask right now on these contracts is .51(the ask is what a seller is willing to sell them for currently) and a bid of .49, so we need the stock to decline 4-5% in order to get the Put options to a level at which I am looking to sell them to collect the options premium. As I will continue to educate on Optionshoney.com, selling or buying Options at the current Market price is often not a good idea and we need to be patient for the best time to make our trade.  If the Put Options increase to .75 cents and I were to hypothetically sell 20 contracts, I would receive a credit of $1,500 to my brokerage account.  I love Oracle shares for the long term and I am comfortable getting long the stock at 25, if I get exercised on the shares. I will get exercised only if Oracle shares are trading below $25 at Mar 16, 2012 expiration.  If I wanted to place this trade, I would first need $50,000 in cash in my account as collateral in case I get exercised($25 share price x100 shares per options contract=$2,500, so if I get exercised on 20 contracts, that equals 20 x $2,500=$50,000). I like this trade, because I think the recent big sell off in Oracle shares was overdone to the downside as a result of a weaker Dec 2011 quarterly report than Analysts had forecasted. I believe Orcl shares will trend higher or sideways over the next few months and anticipate a stock price close higher than $25 by the March expiration of the contracts. If I get exercised on the shares, selling the 20 Put contracts will reduce my gross purchase cost of 2,000 Orcl shares at $25 per share from $50,000 to $48,500($50,000-$1,500 premium collected for selling the 25 strike Put Options).  If Orcl shares trade to 40 in the next 18 months and I get exercised on the Orcl puts I might sell, this trade hypothetically costing me $48,500 will be worth $80,000 at 40 a share.  I would be very happy with those potential returns and believe Oracle is well positioned in the global Technology arena to continue its growth and profitability.  Of course, Options are very risky and I do not have a crystal ball as to the future of the markets or any outcome of my hypothetical Options trades, so please make sure to consult your financial advisor before buying/selling any options or making any stock investments. The Optionshoney.com  disclaimer.

Options Trade#2:  If I were to make a more bullish longer term bet on Oracle shares, I would think about purchasing the Orcl Jan 18, 2013 30 Call Options for $1.65 on a pullback in the current levels of Oracle stock. Oracle closed Friday at $27.34 and the ask on these Jan 13 contracts was $2.44.  Remember timing and patience is key to setting up the perfect options trade.  We need Orcl stock to decline from current levels to around $25 to be able to purchase the Call options for my desired price…The beauty of this trade is that I do not need any money as collateral to purchase the shares and just need the money to purchase the Call Options. As I demonstrated in Options Trade#1, we needed tens of thousands of dollars in collateral to execute the trade.  In options trade#2, my total financial risk is that the contracts could expire worthless at expiration and I would lose $1,650 plus trading fees. So, If I were to purchase 10 contracts at $1.65, it would cost me 1.65 x 100 shares per contract=$165. $165 x10 contracts=$1,650 plus trading fees.  For $1,650 plus fees an Orcl bull can get long exposure to 1,000 shares of stock at an exercise price of 30 and we have almost a year for the shares to rise. If Orcl runs to 40 in the next 12 months, our $1,650 trade will be worth over $10,000. Well, that would be excellent in a perfect world and be over a 600% return on our initial $1,650 invested in the Call Options…The beauty here is that we only risked $1,650 to potentially make $10,000.  Now let’s put the actual cost of purchasing 1,000 shares of Oracle stock, which have no expiration date in perspective. For us to purchase 1,000 shares today, it would cost us $27,340 plus trading fees.  This is an example of how Call Options can give you great leverage for only a small fraction of the cost of purchasing the actual stock to get in the game!!! Optionshoney disclaimer.  Check out the five year chart on Oracle Corp below, courtesy of YahooFinance. Notice the huge volume at the bottom of the chart on Oracle’s recent quarterly earnings report. Till next time.    —Timmy B

Chart forOracle Corporation (ORCL)

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