Options in the macro markets like gold, bonds, and currencies are priced for a disaster heading into "Brexit" Here's a way to play the pumped up volatility in the options market using Fibonacci and Elliott Wave Analysis.
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Plan Your Trade, and Trade Your Plan,
Todd Gordon
Netflix Inc. (NASDAQ:NFLX) is a very controversial high-flying growth stock with a nosebleed valuation as measured by traditional metrics such as the price-to-earnings multiple (P/E ratio) and the PEG ratio. Due to its rapid growth, expanding original programming, wrestling market share away from big cable companies, expansion into international markets and its overall ubiquity, it's easy to see why investors are willing to pay a premium. It's difficult to arrive at an accurate valuation based on traditional metrics for this media disruptor. Due to these factors and the difficulty of placing an accurate valuation on Netflix, options in the form of covered call writing may be an effective way to leverage this high-flier while mitigating downside risk. Netflix offers a confluence of volatility, liquidity and a high level of interest which gives rise to high yielding premiums on a bi-weekly or monthly basis. This confluence bodes well for those who are long Netflix and desire to leverage options trading to augment returns and mitigate risk throughout the volatile nature of Netflix’s stock. Netflix’s recent earnings disappointment underscores the value of covered call writing to mitigate losses and smooth out drastic moves in the underlying security.
Note: This article is backing my long position while opportunistically and quantitatively writing covered calls to mitigate downside risk and generate income. I provide my real life examples embedded into my long position as Netflix is intrinsically volatile.
Netflix is a highly volatile stock and swings of $10 per share (or ~8%) throughout the course of a day are all too often observed. These swings to the upside or downside can be difficult to stomach. However, one can leverage his position via writing covered call contracts to mitigate these swings while remaining long this volatile stock. Utilizing biweekly or monthly contacts one can expect to obtain a cash premium of roughly 3%-6% with a strike price that's within 3%-5% of the strike price (tables 1 and 2). Continue reading "Can A Covered Call Strategy On Netflix Bode Well For You Too?"
With the Fed firmly on hold, stocks are in quarter-ending ramp job helped by a falling dollar. We take a spin around the markets and key sectors leading us and then finish with Fibonacci analysis of our new option position in the US dollar ETF.
Learn more about TradingAnalysis.com here.
Plan Your Trade, and Trade Your Plan,
Todd Gordon
Leveraging covered call options in opportunistic or conservative scenarios may augment overall portfolio returns while mitigating risk in a meaningful manner. In brief, options are a form of derivative trading that traders can utilize in order to initiate a short or long position via the sale or purchase of contacts. A call option is a contract which gives the buyer of the contract the right, but not the obligation, to buy the underlying security at a specified price on or before a specified date. The seller has the obligation to sell the underlying security if the buyer exercises the call option. A call option gives the owner (buyer) the right to buy the security at a specific price is referred to as a call (bullish); an option that gives the right of the owner to sell the security at a specific price is referred to as a put (bearish). In the event of a covered call, this is accomplished by leveraging the shares one currently owns by selling a call contact against those shares and collecting a premium. I will provide an overview of the theory vs. empirical practice based on my covered call activity during Q1 2016. Here, I’ll provide details focusing on optimizing stock leverage via covered calls. Emphasizing the ability to sell these types of options in an opportunistic, aggressive and disciplined manner to generate liquidity while accentuating returns and mitigating risk via empirical data.
The Fed announced we MIGHT get 2 rate hikes in 2016 starting in July. Sure, as long as the S&P 500 is pushing all-time highs on a daily basis!
We came into the announcement with commodity-related positions highlighted in the last video we posted, and also, we put a new options position to work in emerging markets. Let's dive in and I'll show you how we're trading this.
Learn more about TradingAnalysis.com here.
Plan Your Trade, and Trade Your Plan,
Todd Gordon
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