Hot Stock Confidential: 100%-plus gains on “Options Confidential” beta trade
Today's Financial News - Posted January 6, 2009
Our premium service Hot Stock Confidential is kicking off the new year with some serious gains… including a cool double on a “belts-and-suspender” options straddle!
by J. Christoph Amberger
Baltimore — (TFN): The team at TFN’s premium service Hot Stock Confidential kicked off the new investing year with taking profits on some of the remaining 2008 positions. Today, we sold the second half of our position in Alon USA Energy (NYSE:ALJ) for 24% gains and closed out Medical Properties Trust (NYSE:MPW) at a 38% loss (not counting the dividend).
Yesterday, TFN’s Laura Cadden took a cool 20% gain—in less than 4 weeks!—on Supervalu Inc. (NYSE:SVU).
Even better, our “Options Confidential” Beta Trade involving YRC Worldwide (NYSE:YRCW) is doing even better than we expected. As I write, the total return on this covered call position is up over 100%. Because this is a unique strategy, we have a few options going forward.
We can close the options side of our play by purchasing the call options we sold. But those options are selling for a hefty premium as share prices soars. The only way we would want to buy those options is if it looks like the rally will last past their expiration in April.
Our underlying shares have been on a wild ride over the past week, but the gains will not continue much longer. Our options have a strike price of $5. That means we could be forced to sell our underlying position if share price is over $5 at expiration.
The goal is to have shares trading at just under the strike price come expiration. That way we can hold onto our shares and enter a new covered call in an effort to generate even more income.
Finally, we can purchase puts and create a collar position, limiting our downside. With this strategy, we minimize our risk and lock in our current profits, just as the belts and suspenders system is designed to do.
Our first beta play has been an overwhelming success.
To get in on more of these safe-profits oriented “belts-and-suspenders” options plays, sign on for your trial membership at Hot Stock Confidential.
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