Ansoft( ANST), a leading developer of electronic design automation software, is the perfect secular play on technology. It's almost like a mini-ETF on the sector.
In buying Ansoft, investors buy into cell-phone, microprocessor and computer game growth -- basically the continued miniaturization of electronics -- as well as the replacement cycles of all of these products in new-generation versions.
Ansoft offers answers for engineers who design electrical hardware. The company's electronic design automation (EDA) software analyzes electromagnetic interaction and helps design and test devices such as integrated circuits, antenna and radar systems, and microwave components.
The company's customer list includes
( MOT). Plus, Asia accounts for more than half of sales.
This is a software company, so gross margins are sky-high, but more importantly, it's been consistently free-cash-flow positive since 2003. All of this supports my decision to make this stock my deep-in-the-money call today. I have an order to buy 10 January 25s (UZDAE) for $6.50, or better.
Fielding Reader Email
Now, as we do every Friday, let's take a look at some of your questions.
How would you suggest new investors with limited funds use you techniques? Most of your calls price around $10,000, which represents far too much of my portfolio to risk on any one trade. Is it worth it to cut the position size down and still go deep in the money? Thanks for a great column.
The DITM calls strategy works just as well for the trader who needs to invest in smaller increments. Just remember that each contract purchased, when closed out for a win using my DITM calls strategy, will typically yield $100 in profits. So if you were to buy only one contract, when the trade closes for a win, you will profit by $100. If you were to buy five contracts, the profit would typically be $500, and so on.
Many followers of my investment strategy say they scale their investments to fit their personal investment budget. The fact that the profit percentage stays proportional regardless of how many contracts you purchase makes the DITM calls strategy attractive for many investors.
Mr. Lenny Dykstra,
First let me say that I look forward to your column every day. Your strategy works great and best of all is profitable! I have sent you numerous emails regarding the following issues regularly, but receive no response. It is important to be accurate and would like to receive an answer with these issues. Again, this week the Stat Book looks incomplete. I still don't see any stats on I2 Technologies( ITWO) (JQLC) December 15 DITM calls that you recommended in your column dated May 3, 2007, or the Enbridge (ENB) - Get Report (ENBJF) October 30 DITM calls that were in your column dated May, 21, 2007. Also, you recommended closing the Comcast (CMCSA) - Get Report position several times, but yet it still is open in your Stat Book. This is a little confusing. Is this an oversight? I have sent emails previously about this but have not received a reply, nor have I seen it listed in your column. Also, it would be helpful if you would let us know when we should cancel an order if it has not been filled yet, i.e., a time frame or price level, as there are recommendations that are open and never addressed again. How long do you hold these positions open? It is not very clear about how long to hold an order open. Also, you reference moving averages as a tool you use in your research. Do you use exponential, front-weighted, or simple moving averages or some combination of these, and what are the number of periods you use, 10, 18, 21, 50, 200? I would appreciate it if you could answer these questions for me.
Thank you for all your emails. I am fortunate to have many loyal readers who look forward to my daily column and profit from my DITM calls strategy. Additionally, I appreciate your comments in regards to the Stat Book and am sorry that I have not answered any of your emails to date, but due to the volume of email received, it makes it very difficult to answer each one personally. The answer to you questions are as follows:
1. ITWO was not filled within the time frame I've outlined for the column. If the option doesn't fill within the week after the column posts, it is listed in the Market Watch section of the Stat Book; if by the following Tuesday after the market closes, if it has not yet opened at the price recommended in the column, it is dropped from the Stat Book, and the order is canceled.
2. ENB falls into the same category. It did not fill on the date the column posted, so the next day in the Stat Book it was listed in the Market Watch section. The following week it was dropped, and the order was canceled.
3. CMCSA was recommended for a sell several times, you are right, but on each of those occasions, the good-till-canceled sell order was not filled at the recommended price. Therefore, the position remained in the Stat Book until we were able to score a modest win last Friday, June 15.
4. I like looking at the 21-day, 50-day and 200-day simple moving averages. However there are advantages to using other technical indicators as well. As an investor, you will have to experiment and use the indicators that work best for your personal investment strategy.
Thank you again for all your kind emails; although I cannot always respond to each one personally, I do try to answer most of the questions my readers ask, by selecting a short, concise email that addresses questions I find common to more than one email.
I'm confused. I've been trying to follow your picks for options. But so many times your pick moves beyond your price, even before the market opens. Like they see your pick and they jack up the price.Your pick of ACOLX at 3.60, closed yesterday at 3.30. Today it is up 70 cents, and the stock opened lower. What is the relationship between your pick and the price of the option the day you pick it? I really enjoy your articles. Please keep them coming!
There have been times when I have wondered the same thing. Unfortunately, though, as a mere human, I don't have the power to influence the opening price of an option. There are no mystical or any other forces out there set on running up the price of my selections; it's just the way the market works sometimes. It's just timing, and
is just an example of one that got away. It happens.
But we can't be sentimental about the process. If a DITM call shoots to Pluto before we can buy it, we must not dwell on the missed opportunity, we have to focus on the plays we can win with and our next DITM opportunity.
I'm a regular reader of your articles and monitor your score card. Not all of you DITM selections show up in your score card. My question is, if your buy limit is not met on the day of the call, do you keep it active until canceled? If so, you might want to list the still open calls on the score card.
Thank you for your email. Many readers have posted the same question. As I mention aboved, when an option does not fill after being listed in the Market Watch section of the Stat Book for a week, we drop the position from the Stat Book and cancel our DITM order. With the DITM calls strategy, it is important that we don't chase after a position. If it hasn't filled within seven to 10 days, chances are strong that the option price has moved beyond what we consider attractive.
At the time of publication, Dykstra was long MOT.
Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s, including the world champion 1986 squad, and the Phillies in the early 1990s.
Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.