Comments on: Protective Puts: Selecting the Best Strike Price https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/ Learn how to invest by selling stock options. Thu, 09 Jun 2016 10:35:01 +0000 hourly 1 By: Alan Ellman https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48819 Thu, 09 Jun 2016 10:35:01 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48819 In reply to Mike.

Mike,

First check with your broker to see if they provide such a news service. If not, a good free service of news releases for your stocks is:

http://www.seekingalpha.com

Another excellent free resource for stock news”:

http://www.finviz.com

I know of no way to predict when earnings pre-announcements will come out. They are usually made when companies hope to lesson the impact on share price when a negative report is expected to come out in the near future.

Alan

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By: Alan Ellman https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48816 Thu, 09 Jun 2016 10:03:02 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48816 In reply to Jay.

Jay,

Thanks for sharing this article. As I was reading the article I was thinking of the declining VIX and then this appeared:

“He adds that the calm implied by the low levels of the Chicago Board Options Exchange Volatility Index belies the fragility of markets, which have become more susceptible to abrupt declines. ”

Most of us on this site will agree that covered call writing can be crafted for most market environments whether we believe in near-term bullish or bearish changes.

Alan

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By: Mike https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48803 Thu, 09 Jun 2016 05:22:11 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48803 Alan, Is it possible for me to get all the news for all stocks I am trading during the month sent to my email?(then I can be more prepared for any bad news)

Something else I want to ask. Even though we may be able to avoid ER’s, then what about companies that can give ‘pre-announcements’. This could have happened in the contract, being the same one we may be selling CC’s in.
Isn’t there anyway we can know if this were to happen?

Really enjoy reading through your reports.
Thanks

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By: Jay https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48729 Wed, 08 Jun 2016 15:04:14 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48729 There is an interesting article on Yahoo Finance from a GS guy discussing elevated market risk in coming months:

http://finance.yahoo.com/news/goldman-says-theres-elevated-risk-124929214.html

This excerpt is relevant to our discussion:

Mueller-Glissman believes systematic call overwriting, in which an investor receives a premium for selling upside exposure on one of their holdings, is a better way to hedge equity risk than buying VIX futures or puts.

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By: Alan Ellman https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48577 Tue, 07 Jun 2016 19:57:59 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48577 In reply to Jennie.

Jennie,

There is an interest rate advantage to buying calls. The cash not spent on buying the stock can be used to generate interest. The greater the interest rate, the more valuable are the calls compared to buying the shares.

There is an interest rate disadvantage to buying puts. Buying a put has an inherent interest rate cost-to-carry. Put value goes up if share value goes down. Instead of buying puts, investors can short stock. This puts cash into the brokerage account which can then earn interest. The higher the interest rate the more attractive is shorting compared to buying puts.

That said, when interest rates change it is usually by only 25 basis points (1/4 of 1%) and this will impact our premiums minimally (see the chapter on Rho in my Greek E-Book) so I would concentrate more on changes in share price (Delta) and implied volatility (Vega) when evaluating changes in premium.

Alan

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By: Jennie https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48560 Tue, 07 Jun 2016 15:45:25 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48560 Alan,

With all this talk about rising interest rates i was wondering if you could comment on how it may effect our option premiums. Thanks for your help.

Jennie

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By: Alan Ellman https://www.thebluecollarinvestor.com/protective-puts-selecting-the-best-strike-price/#comment-48550 Tue, 07 Jun 2016 14:16:45 +0000 http://www.thebluecollarinvestor.com/?p=13999#comment-48550 Running list stocks in the news: DY:

Dycom Industries boasted a stellar 3rd quarter earnings report on May 24th with a 44% “beat” on earnings and a revenue increase of 28.7%. As a result, analysts have raised estimates to earnings growth of 79.3% in 2016 and 18.6% in 2017.

Our Premium Watch List shows DY in the telecom industry segment currently ranked “B”, a Scouter rating of “10”, a beta of 1.75, adequate open interest for near-the-money strikes and a projected next earnings report of 8/23/2016.

The chart below shows an impressive recovery since the January/February selloff.

Check to see if this security deserves a spot in your portfolio.

CLICK ON IMAGE TO ENLARGE & USE THE BACK ARROW TO RETURN TO BLOG.

Alan

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