|Company||Ticker||Price Change||Volume Change|
|Allied Irish Banks Adr||AIB||7.33%||176.88%|
|Encorium Group Inc||ENCO||44.44%||2635.25%|
|E*Trade Financial Corp||ETFC||13.10%||414.20%|
|Glu Mobile Inc||GLUU||19.05%||1923.97%|
|Helicos Biosciences Corp||HLCS||36.72%||438.60%|
|Martha Stewart Living A||MSO||12.92%||666.27%|
|Silicon Laboratories Inc||SLAB||3.84%||212.99%|
|Tiffany & Co||TIF||11.32%||243.68%|
Many of these stocks are up big on earnings announcements, therefore it may be a good idea to wait for some profit taking and purchase the stocks on weakness. The stock which is most attractive to me this week is Tiffany & Co (TIF). Below is a trade idea which I may be using in the week(s) to come. To learn more about the risks, pricing, calculations, strategies, and options in general click here.
Tiffany Trade Idea: I have been looking to get long Tiffany stock for my investment portfolio for some time now, however it ran too fast and I feel I have missed it. I am not going to chase it, because I feel some profit taking could occur before it moves higher, therefore I will be using the strategy outlined below.
As stated previously I don't mind owning Tiffany shares, but at a lower price, so I will be selling naked put option contracts for the October 34 strike. The current theoretical premium received is $1.00 per option contract, with that premium I will use it to make an all out bullish bet on Tiffany by purchasing out of the money November 45 call options for $50 per option contract.
If the stock happens to sell off and expire below 34 a share at October expiration, I get my shares and my cost is $33.50 per share or 10.83% lower than Friday's close price. If the stock continues to climb higher, moves lower but by less than 4.57 points, or happens to move sideways over the next 47 calendar days I will bank 100% of the premium ($50 per option contract). In the case that the stock continues rising the call for November options expiration will also rise allowing for more profit on the long side.
I use this type of option strategy as a way of setting limit stock orders. This strategy will allow me to participate in Tiffany's stock instead of sitting on the sidelines waiting for the chance to purchase it lower. It also allows me to capitalize on an upward move by purchasing a longer dated out of the money call option, which would be paid for in full by the premium received from the put sold. I decided to choose the higher strike longer dated November options, because I believe they will benefit from increased sales speculation going into the holidays (December options are not yet available), which may drive Tiffany shares higher... Let's face it that blue box sells!
The ideas outlined above involve the use of stock options. The reason option volumes have surged in the last 5 years is because they are a great way to hedge your portfolio as well as create income off of your shares (see option volume chart)
These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.
Disclosure: No Positions
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