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Friday, December 7, 2012

New Born To Sell Newsletter

Below is the most recent Born To Sell Newsletter.

Sum Of All Fears (Time Premium)
Right now there are 136,136,068 open call option contracts across all underlying stocks, ETFs, expirations, and strikes. The sum of all the time premium (not including intrinsic value) in those 136 million contracts is $12,370,031,659.88. That's $12 billion of wasting assets. Of course, 60% of those contracts will be closed prior to expiration, but at least $5 billion willtime decay to zero, and some of that will go to us covered call writers.
AAPL Weekly Trade
Followers of our blog know that we've had a good track record of weekly buy-writes on AAPL (24 out of 24 trades closed profitable). We believe this week's pull back is another good entry point.
What has changed in the last few days to justify a 70 point drop from 590-ish to 520-ish? Nothing fundamental to their business. Yes, there are fears of increased competition, but it's mostly a combination of tax-selling (people taking gains this year in advance of feared increases in capital gains rates next year) and margin requirements being increased for some AAPL shareholders.
We believe there is an opportunity this week. For details see our blog article onshort-term buy-write in AAPL.
Scanner Nominated Again
Born To Sell's covered call investment tools have been nominated (again!) for a trading software award. Help us win (by voting) and you are automatically entered into a drawing for $10,000 of trading software. Please vote for us in the Trading Software category. We are listed as "Covered Call Investment Tools":
Thanks! And good luck in the $10,000 free drawing!
How Professionals Use Options
A recent Options Industry Council article interviewing managers of a $200 million fund on how they use options stated: "(1) we don't own more than 15 names; we know these companies quite well and only deal with names we want to own, (2) if you can write calls 3 or 4 times per year you can increase returns substantially, and (3) we tend to stay within 90 days, and include dividends when we can."
Sounds like a reasonable strategy: Not chasing high flyers, being consistent in their use of options over time, and using relatively short time frames.
Buy-Writes By Pension Funds
Pension funds, who have historically been shy about using options, are beginning to see the wisdom, according to an article on MarketsMedia. Not all option strategies are created equal, and the income-generating technique of writing call options against stocks they own has some appeal.
"A buy-write strategy generated about 5-8% more than a long-U.S. equity strategy in 2011, when stocks were highly volatile yet finished roughly flat", according to Phil Gocke of OIC.
Read the full article Pensions Warm Up to Options Slowly.
AAPL And 3 Other Covered Calls For Dec 22 Expiration
With just over 2 weeks to go until the December options expire, the top 4 covered calls Born To Sell members have written are (in order of popularity):
(Note: Born To Sell members have access to the full Top 10 Covered Call list, as well as having this list update real-time as members change positions. These are not recommendations, they are merely a reflection of our members' current positions.)

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