The two latest picks in my deep-in-the-money options-picking system have made it onto my scoreboard - both of them big tech stocks. On Friday, we put our money down on Microsoft (MSFT), while an opportune price drop in Hewlett-Packard (HPQ) on Monday let us place our bets that this stock will rebound soon for a quick cash-out.
Volatility has pushed options prices up this year, keeping us out of a few of my favorite picks, like Caterpillar (CAT) (Jan. 7 and March 4) and United Technologies (UTX) (Feb. 18 and March 6). But the recent four-day rally gave us an entry point with my latest picks.
My system - which bets that shares of value-priced stocks will rise - has a win record of 96-1. With even more picks on the board, we will soon push the number of wins higher.Unless you're a derivatives trader at AIG (AIG - Get Report), you need to pay yourself a bonus by getting in on the picks action through a subscription to my Nails on the Numbers newsletter. My most recent win was March 10 on Cameron International (CAM - Get Report), bringing the year-to-date win total to $8,800. Corning (GLW - Get Report) has had the biggest payout so far, adding $5,800 on Jan. 6 after 62 days in play. When I consider a stock for my system, I want to know whether the company uses its capital wisely. The best way to judge is to look at its return on capital vs. its cost of capital. I won't get into all of that now, but today we can review how to determine a company's cost of its debt - one of two components in the cost of capital. We do that by looking at how much the company pays on its debt.