Russell’s Round-Up – Weekend Review

On my Sunday to do list were three things – 1) Go Running, 2) Write Blog, and 3) Yard Work.  Number 3 got rained out. Thanks Mother Nature.

I ran in my Nike shoes listening to music on my Apple iPhone and then watched Options Action. If I had to fulfill my yard work obligation then I assume Home Depot would be mentioned below as well.

Options Action –

The guys continue to be a bit bearish on the overall market and the focus of their recommendations on individual names. 

The first recommendation was a put spread on Apple (AAPL). The stock is 8% off its all time high. This is a catalyst (or lack of catalyst) trade revolving around a developer’s conference coming up in a couple of weeks. The idea is a lack of new products or news from AAPL resulting in a lower stock price. Focusing on June expiration, which comes after the developer’s conference, the recommendation was a June 310 – 320 put spread which would incur a 0.90 debit to initiate. If AAPL is under 310 at June expiration the payout would be a 9.10 profit based on a 0.90 cost to initiate the trade. 

The next recommendation was a bearish position on Nike (NKE), another Put Spread is recommended with a target of 75.00 by June expiration.  NKE earnings come out in a couple of weeks and the idea involves earnings resulting in pressure on shares. Although a short term trade recommendation part of the thesis sounds more like a long term fundamental call involving higher costs (labor, shipping, materials) putting pressure on margins. If you agree with the thesis, you may consider some longer term option strategies to ride a downtrend in the stock.

Barron’s –

Barron’s was a bit light due to the holiday weekend however the Striking Price column was pretty interesting. The column was entirely focused on selling puts on stocks you are willing to own. This is commonly referred to as a cash secured put as brokerage firms will have you put up margin in the form of cash that will be required to purchase shares if you are called on to make good on the obligation to buy shares that goes along with a short put position. The two stocks discussed are AT&T (T) and Verizon (VZ) as recommended by Michael Schwartz of Oppenheimer. More information on cash secured puts is available at

www.cboe.com/Strategies/EquityOptions/CashSecuredPuts/Part1.aspx.

Also, the CBOE has an index based on this strategy known as the CBOE S&P 500 PutWrite Index. If you have more interest in this you can visit

www.cboe.com/put.