timwest

YHOO Covered Calls and Covered Puts

YHOO   None
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Here is a review of the trades in YHOO so far. I typed this up yesterday but didn't publish it until today. You can see that YHOO has a 10% range that it is swinging back and forth in and this is certainly an opportunity to make a decent amount of money. However, I prefer to bet that the downside will hold and to get premiums in return for giving away the upside. I will stop doing this if the stock approaches the $17 area as at that point we will be too far away from what I see as valuation support in the $14 area. So far there is a tremendous opportunity in YHOO shares to make a solid return from options strategies. Cheers. By: Technical Tim, Tues, Dec 27, 2011 4:54PM EST
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I am looking at the Feb 16 calls to sell on Monday, but I might look at the Feb 15 calls. I'm a bit concerned about the low level of VIX overall at 18 which signals to me that the market, overall, has a bit too much confidence built into it. The Feb 16 calls are roughly $0.61 cents or another 4% yield for a 1-month holding period, but there is no downside protection. The Feb 15 calls are roughly $1.23, which is only a 1.5% yield for a 1-month time frame, but that is 18% annualized return with a cushion of $0.96 or 6% downside protection for the price of YHOO shares. I think I prefer the Feb 15 calls. If YHOO falls to $15, I will sell the 15 strike puts. Cheers. Tim 7:36PM Saturday Jan 21, 2012
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The Jan 16 calls expired worthless, lowering our cost basis from $15.38 down by another $0.51, or down to $14.87. With YHOO at $15.96, we are up 6%+ on that position. The Additional stock purchased at $14.96 we collected $0.81 and sold the stock at $15.00 for an $0.85 profit on a cost basis of $14.15 ($14.96-$0.81) for a 6% profit from Dec 27 to Jan 20 (less than 4 weeks)! Cheers everyone. Tim Fri, Jan 20, 2012 6:34PM EST
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I heard on Bloomberg radio tonight that Jerry Yang (the founder of Yahoo) resigned from the board. That could pave the way for a sale since he is only a stockholder now.
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Your data points dont match up with your explanation. Except for #4, was this done on purpose?
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timwest tony-zappa
I can see what you mean, but I was referring to "net cost" of buying YHOO on the dates mentioned (as in #1). If you buy YHOO at 15.20 and sell the 15 calls for $1, the net cost of buying YHOO is $14.20. Since I sold the right for someone to buy my YHOO shares at 15 at expiration, I ended up having to sell my YHOO at 15. So even though the price was higher than $15, I had to sell at $15. The return from buying at $14.20 (net) and selling at $15 is an $0.80 profit on a base of $14.20 or approx 6% return. I realize this can be confusing, but I will do a better job of showing how covered calls work in future graphs. Make sense? Shall I try again? Thanks for asking. Tim
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Tim, your options strategies are pretty interesting. Do you use any kind of options analysis software/tools or look just at underlying symbol charts as technical analysis tool?
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timwest charttrader
Chart Trader, I don't use options analysis software. I simply decide what is a reasonable return given my assumptions about risk. I have a long background in options though as I was the registered options principal for a a major Wall Street Brokerage firm for three years.
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Thank you Tim, very interesting. Does this mean that you just look thru the list of options and decide what might be good? Have happy and profitible new year and please keep posting!
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timwest charttrader
Hi - Well, I just base my decisions as best as I can, based on my experience and my fundamental analysis, together with my understanding of how to apply technical analysis. Thanks for asking. Everyone hopefully finds their personal style based on their experience and time available. It's a full time endeavor. Thanks for the good wishes and let's hope this site keeps staying active for us all to share our ideas and help each other find decent risk:reward trades. Cheers! Tim
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