US Income Strategy Recommendation: Lowe’s Companies Inc (LOW)

Posted on February 24th, 2010 admin No Comments

This is an Income Strategy Recommendation for investors looking to invest in the US market via US options. This recommendation is similar to the last two month as the trade last month expire safe/profitable and has returned $3410 USD and still believe LOW is a good investment. The recommendation is buy LOW shares at a discount to market. The recommended trade is to sell put options on LOW with the intent to purchase the shares. This recommendation is designed for investor looking to generate monthly income with capital protection. Instead of buying LOW shares today at market at $23.05 we can place this trade which gives an equivalent entry price at $22.52 a discount of 2.3% and a price I am happy to buy the shares at.

Trade

  • Sell 22 contracts LOW March $23.00 Puts @ 58 cents
  • Buy 22 contracts LOW March $21.00 Puts @ 10 cents

Net Credit 48 cents

Shares per contract = 100

Trade Summary
Maximum Profit $1,056 USD
Maximum Loss $3,344 USD
Breakeven $22.52
Return on Share Value 2.09%
Annualised Return on Share Value 25.04%
Return on Risk (ROR) 31.58%

If exercised we will purchase 2,200 shares at $23.00 which is a trade value of $50,600. When entering this trade you need to be aware and able to purchase the shares if exercised.

Brief Overview

Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States and Canada . The company provides a range of products and services for home decoration, maintenance, repair, remodelling, and property maintenance. It offers home improvement products in various categories, such as appliances, lumber, paint, flooring, building materials, millwork, lawn and landscape products, fashion plumbing, hardware, lighting, tools, seasonal living, rough plumbing, outdoor power equipment, cabinets and countertops, nursery, rough electrical, home environment, home organization, and windows and walls.

Reason for Trade

  • Technical Analysis – LOW is a buy at these levels with strong support at $22.00 and $23.00 and our breakeven is below this level.
  • Return on Risk above 30%
  • Capital Protection at 93.25%

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If you would like to place the LOW recommendation, please email me your account number and quantity of contracts.


To receive US Option Recommendations or to learn more about trading options register for our US Option Trading please contact us on 1300 368 316 or info@totaloptions.com.au

US Option Recommendation – The Mosaic Company (MOS) Protected Long Synthetic

Posted on February 16th, 2010 admin No Comments

I am looking to place the following option trade on The Mosaic Company (MOS:xnys) which trades on the New York Stock Exchange to take advantage of an increase in the share price. The option strategy has limited risk, and will make money as soon as the share price increases so the position can be closed out at any time for a profit once the share price increases. The trade has limited risk and unlimited return. The greater the share price increases, the higher the profit. Once the stock has moved there could be opportunities to sell short dated options against the position to further increase the return. The bought call position expires in June, so there is plenty of time for the stock to increase. The trade involves buying a long dated call for June which expires in 6 months to take advantage of the share price increasing. To pay for this we are selling a bull put spread out until June to pay for the call option. The whole trade is actually done for an approximate 205 cent credit or $1230. The trade details are below as well as some more information on the reasons for entering this trade.

Trade:

Sell 6 contracts June 2010 $60.00 Puts 700 cents

Buy 6 contracts June 2010 $50.00 Puts 300 cents

Buy 3 contracts June 2010 $65.00 Calls 390 cents

Net credit: 205 cents

Net credit: $1230

Summary:

Maximum Profit: Unlimited

Profit if above $60.00 and below $65.00 = $1,230

Maximum Loss is below $2.50 = $4,770

Breakeven = $57.95

Primary Profit Target $80.00 = $13,230

Return on Risk = 277.36%

Secondary Profit Target $100 = $25,230

Return on Risk = 528.93%

Margin requirement:

This trade is done for a credit of $1230; however a margin is required for the bull put spread. The margin requirement will increase if the stock falls, and reduce if the stock increases. After the market increases the bull put spread if cheap enough will be closed out for a profit and then there would be no margin requirement. Allow approximately the maximum risk in dollars to cover the margin requirement or clients with share portfolios can use the shares as collateral. Initially the margin will not be that high, but it’s important to have it available if needed.

Fundamental Analysis:

The Mosaic Company engages in the production and marketing of concentrated phosphate and potash crop nutrients for the agriculture industry worldwide. The company produces phosphate crop nutrients for use in crop nutrients and feed phosphate for animal feed ingredients. It also produces and sells potash for use as fertilizers and animal feed ingredients, as well as in industrial applications. Potash is also used for de-icing and as a water softener regenerant. In addition, The Mosaic Company produces and/or markets phosphate-, potash-, and nitrogen-based crop nutrients and animal feed ingredients, as well as operates sales offices, crop nutrient blending and bagging facilities, port terminals, and warehouses. It sells its products primarily to wholesale distributors, retail chains, cooperatives, independent retailers, and national accounts. The company was founded in 2004 and is headquartered in Plymouth , Minnesota . The Mosaic Company is a subsidiary of Cargill, Incorporated.

The Strategy – Protected Long Synthetic:

The Protected Long Synthetic is a strategy designed to have a leveraged exposure to a stock while only committing a small amount of capital. The strategy is designed to have a bullish view on a stock and to determine the maximum risk when entering and having unlimited potential return. This strategy is implemented when a stock looks set for a breakout or a strong share price increase. The bull put spread is entered for a credit and the funds received on this trade are used to buy call options. Buy selling the put options it reduces the negative time decay on the call options. The strategy also allows a profit to be made straight away and the trade can be closed out early with a profit and does not need to be held until expiry.

US Option Recommendations:

Clients who wish to trade the US market can now set up online accounts to take advantage of Full Service Recommendation or to trade yourself on the US Options Platform. If you are interested in opening an account to trade US options please contact me for more information.

For more information on this strategy or to implement a Protected Long Synthetic Portfolio on a number of stocks please contact me to discuss in more detail. If you would like to place this trade please email me your account number and quantity of contracts to trade otherwise I can be contacted by email or on 1300 736 622 for more information.

Technical Analysis:

  • Mosaic is in a long-term uptrend which has recently held on the last pull back in the market.
  • The weekly stochastic is indicating a strong buy at these levels.
  • Mosaic has very little resistance and has potential to reach its primary target of $80 and secondary target of $100


To receive ASX Option Recommendations or to learn more about trading options please request the complete Introduction to Options Trading eBook by contacting us on 1300 368 316 or info@totaloptions.com.au

US Income Strategy Recommendation: Lowe’s Companies Inc (LOW)

Posted on January 18th, 2010 admin No Comments

The Income Strategy is an extremely powerful portfolio strategy that incorporates a combination of Stock and Options. It is designed to produce a consistent monthly income while providing capital protection for the portfolio.

The Income Strategy is very popular with Self Managed Super Fund (SMSF) and longer term wealth building individuals.

This is an Income Strategy Recommendation for investors looking to invest in the US market. The recommendation is buy LOW shares at a discount to market. The recommended trade is to sell put options on LOW with the intent to purchase the shares. This recommendation is designed for investor looking to generate monthly income with capital protection. Instead of buying LOW shares today at market at $22.91 we can place this trade which gives an equivalent entry price at $21.95 a discount of 4.2% and a price I am happy to buy the shares at.

Trade

  • Sell 44 contracts LOW January $22.50 Puts   @ 80 cents  
  • Buy 44 contracts LOW January $20.00 Puts   @ 25 cents

Net Credit 55 cents

Shares per contract = 100

Trade Summary

Maximum Profit – $2420 USD

Maximum Loss – $8580 USD

 Breakeven – $21.95

 Return on Share Value – 2.44%

 Annualised Return on Share Value – 29.28%

 Return on Risk (ROR) – 28.21%

If exercised we will purchase 4,400 shares at $22.50 which is a trade value of $99,000. When entering this trade you need to be aware and able to purchase the shares if exercised.

Brief Overview

Lowe’s Companies, Inc., together with its subsidiaries, operates as a home improvement retailer in the United States and Canada. The company provides a range of products and services for home decoration, maintenance, repair, remodelling, and property maintenance. It offers home improvement products in various categories, such as appliances, lumber, paint, flooring, building materials, millwork, lawn and landscape products, fashion plumbing, hardware, lighting, tools, seasonal living, rough plumbing, outdoor power equipment, cabinets and countertops, nursery, rough electrical, home environment, home organization, and windows and walls.

Reason for Trade

  • Technical Analysis – LOW is a buy at these levels with strong support at $22.00 and our breakeven is below this level.
  • Return on Risk above 25%
  • Capital Protection at 91.12%

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To speak with a Total Options Advisor please call 1300 368 316

US Income Strategy Recommendation: Weyerhaeuser Co (WY)

Posted on January 18th, 2010 admin No Comments

The Income Strategy is an extremely powerful portfolio strategy that incorporates a combination of Stock and Options. It is designed to produce a consistent monthly income while providing capital protection for the portfolio.

The Income Strategy is very popular with Self Managed Super Fund (SMSF) and longer term wealth building individuals.

This is an Income Strategy Recommendation for investors looking to invest in the US Stock Market. The recommendation is buy WY shares at a discount to market. The recommended trade is to sell put options on WY with the intent to purchase the shares. This recommendation is designed for investor looking to generate monthly income with capital protection. Instead of buying WY shares today at market at $41.87 we can place this trade which gives an equivalent entry price at $39.00 a discount of 6.85% and a price we are happy to buy the shares at.

Trade

  • Sell 25 contracts WY January $40.00 Puts   @ 140 cents  
  • Buy 25 contracts WY January $36.00 Puts   @ 40 cents

Net Credit 100 cents

Shares per contract = 100

Trade Summary

 Maximum Profit – $2500 USD

 Maximum Loss – $7500 USD

 Breakeven – $39.00

 Return on Share Value – 2.5%

 Annualised Return on Share Value – 30%

 Return on Risk (ROR) – 33.33%

If exercised we will purchase 2,500 shares at $40.00 which is a trade value of $100,000. When entering this trade you need to be aware and able to purchase the shares if exercised. 

Brief Overview

Weyerhaeuser Company grows and harvests trees, builds homes, and manufactures forest products worldwide. The company manages approximately 6 million of private commercial forestland and leases the other 700,000 acres; and has renewable long-term licenses on 15.2 million acres of forestland. It grows and harvests trees for use as lumber, pulp and paper, and other wood and building products; and offers logs, timber, minerals, oil, gas, seed and seedlings, and poles, as well as plywood and hardwood lumber. 

Reason for Trade 

  • Technical Analysis – WY is a buy at these levels with strong support at $40.00 which is where the stock has broken above resistance and which is now very strong support level.  
  • Return on Risk above 25%  
  • Capital Protection at 92.31%

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