MJ DeMarco
I followed the science; all I found was money.
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Is it possible in this market?
I think it is ...
In the current market we have:
High volatility (this means ... options are loaded with premium which favors sellers of options.)
Here are some short-term investment plays I've been uncovering ...
1) Buy high dividend yielding stocks
2) Sell short term, covered calls on the position.
Here is an example based on current prices (Oct 23rd)
Penn West Energy (PWE)
Price: $16
Dividend Yield: 26%
Nov 17.5 Call Option .75
Here are the numbers:
Buy 2,000 shares of PWE at $16 .... $32,000 total investment.
Dividend (pays monthly) ... $290.00 per 1000 shares
Dividend: $580.00
Sell 20 contracts @ 75 apiece: $1,500
Total income for your $32,000 investment: $2,080
ROI Analysis based on stock price:
PWE Price || ROI || ROI Annualized
If the stock stays at the same price, you earn 6.5% on your money in 1 month or 77% annualized.
There are deals like this out there ... I'm not saying PWE is the best to do it with, but there are short term opportunities like this that I'd consider low risk. Many of these stocks are so beaten down they can't get lower. Just be careful and consider the ability to pay the dividend for the company bought ... if a dividend is cut on the stock you buy, the stock price will plummet making this analysis all but moot.
I think it is ...
In the current market we have:
High volatility (this means ... options are loaded with premium which favors sellers of options.)
Here are some short-term investment plays I've been uncovering ...
1) Buy high dividend yielding stocks
2) Sell short term, covered calls on the position.
Here is an example based on current prices (Oct 23rd)
Penn West Energy (PWE)
Price: $16
Dividend Yield: 26%
Nov 17.5 Call Option .75
Here are the numbers:
Buy 2,000 shares of PWE at $16 .... $32,000 total investment.
Dividend (pays monthly) ... $290.00 per 1000 shares
Dividend: $580.00
Sell 20 contracts @ 75 apiece: $1,500
Total income for your $32,000 investment: $2,080
ROI Analysis based on stock price:
PWE Price || ROI || ROI Annualized
- 16.00 - 6.5% -- 77%
- 17.00 - 12.75% -- 153%
- 17.50 - 15.9% -- 190% (Call is exercised)
- 19.00 - 15.9% -- 190% (Call is exercised)
- 15.50 - 3.3% -- 40% Gain
- 15.00 - 1/2% - 6% Gain
- 14.50 - (3.1%) - (12%) Loss Annualized
- 14.00 - (6.2%) - (72%) Loss Annualized
If the stock stays at the same price, you earn 6.5% on your money in 1 month or 77% annualized.
There are deals like this out there ... I'm not saying PWE is the best to do it with, but there are short term opportunities like this that I'd consider low risk. Many of these stocks are so beaten down they can't get lower. Just be careful and consider the ability to pay the dividend for the company bought ... if a dividend is cut on the stock you buy, the stock price will plummet making this analysis all but moot.
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