From 2012 to 2014, Revenue and Net Income was both up. That means a company is generating more revenue, and share prices should increase as a result. A good upward trend is a good sign.
I’m debating between a 15% margin of safety and a 10% margin of safety.
Options: IHS – Puts
Expiration: January 15, 2016
Current Price: $109.07
Selling puts @ $100
Safety: 10%
Net: 0.75/100
Selling puts @ $95 (32 volume of contract on the bid)
Safety: (109.07-95)/95= 14.81%
Net: 0.30/95
I can do it at $95, and I can double down.
I’ll do the other end too.
OptionSlam.com
Analysis Surprise: It surprised analysts 5 times in a row.
I don’t mind doing it at the $100 because I don’t mind owning this stock. Hasn’t touched $100 since May 3, 2015. The stock has been on a down trend (which means the weak hands and nonbelievers are selling off, right prior to the earnings announcement). It has a greater chance to go up after a positive earning announcements than a continued sell off.
I’m currently analyzing live Level 2 Quotes to see how the options are doing. I’m watching the ask at $100 get destroyed, and it’s almost at $100 already. The ask at $95 is thin and can jump very fast to $0.70’s. There is 3 ask at $0.45 right now. The bids don’t seem interested in moving up through.
In this new economy, we might be in a situation where when the stock goes down it may not guarantee to rise up because the whole economy is bad and not giving a high P/E to stocks anymore.
Potential Trade Profits: $200 to $666.
I will only do the puts side and don’t want to do any covered calls in case the stock does a big surprise.
I can do at $100 and then at $95 too. $246 and $702 for $1,000. But then you do 8% cushion for the first one. I want to wait for the ask to get surpassed but I guess it won’t happen and I don’t want to miss the guaranteed bids.
Not sure what to do with that $444 safe profits. You can do a lot I guess.
Results – 1/12/2016
I waited for a long time, and finally I gained $240.
I can’t even close it out at $95, so I will bid $0.05 at $100. This requires some creativity. If stock drops below $95, I can use the $100 put I bought and exercise it I guess, to offset that loss that will happen. I think it should work that way.