An Options Strategy for Believers
Tom Online (TOMO): The April $20.00 puts look good at 40 cents. Right now shares are at $22.25. If the stock remains there, we collect our 40 cents, giving us almost a 2% gain in less than three weeks. If the stock goes down to $19.80, I'm happy adding to my position there.
InfoSpace (INSP): This stock has been in the portfolio for only two weeks, but it has had a nice move -- jumping 8.5% vs. 1.8% for the Nasdaq. However, with the stock now at $27.00, I don't mind selling the $25.00 puts for 40 cents each. That's because $24.60 (lower than our current cost basis) is a cheap price to pay for this stock.
United Online (UNTD): I would definitely sell the April $12.50s where they last traded, at 40 cents. This stock is beyond dirt cheap at this point, and I wouldn't be surprised if we quickly see it top $14.00. Crazy?
I'm "put crazy," you say? Not always. Here's an example where I wouldn't sell them.E*Trade (ET) is at $25.85 right now and the $25.00 puts are trading at 35 cents. So if we were to sell them, and if the stock were to sit right here at $25.85, then we would make about 1.6% when the puts expire. That's not enough of a gain for me, particularly considering that E*Trade started the year at $20.00, significantly lower than where it now trades. It's just not worth the risk. Nor do I consider E*Trade particularly cheap here, although it's not yet at the level where I would want to sell the position, either. I just don't feel like averaging down at these levels. For more information on this newsletter and for a free trial, click here.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV