Russell’s Round-Up – Weekend Review

Barron’s –

The cover of Barron’s this weekend highlights the magazine’s favorite 10 stocks for 2012. The list appears below –

Berkshire Hathaway (BRK.A – 116,235.00)

Comcast (CMCSA – 22.68)

Daimler (DDAIF – 45.80)

Freeport McMoRan (FCX – 39.90)

MetLife (MET – 31.79)

Procter & Gamble (PG – 64.97)

Royal Dutch ADR (RDS – 71.90)

Sanofi (SNY – 35.53)

Seagate Technology (STX – 16.16)

Vodafone Group (VOD – 27.28)


Of these ten, eight have listed options and of those eight six (CMCSA, FCX, MET, PG, STX, VOX) have LEAPS expiring in January of 2013. These 2013 LEAPS represent a great expiration date for those considering a one year outlook. As always the holder of a LEAPS is not entitled to dividends paid and does not have the right vote on corporate actions.


Options Action –

A store probably on many people’s minds these days is Best Buy (BBY – 28.11) and running by for Christmas presents. The stock is also a focus for some as the company reports earnings on Tuesday. The options are pricing in a 7% move off earnings which is the average move over the last eight quarters. The trade recommendation is bullish in the form of a call spread. Using the December contracts that expire this coming Friday, buying the BBY Dec 28 Call at 1.05 and selling the BBY Dec 30 Call 0.30 at for a net cost of 0.75 is the trade recommendation. If the stock rallies to 30.00 or higher on this Friday’s expiration date the trade pays out 1.25 for a cost of 0.75. If the stock falls on earnings the potential loss will be the premium paid for the spread trade. 

The second recommendation is on Google (GOOG – 627.42) and focused on the March time frame. The feeling is the stock may trade up to 700.00 by March expiration. Based on this outlook a March put spread is going to be sold. This is a bullish strategy similar to the call spread in the previous trade, but done at a credit instead of a debit. The spread involves selling a GOOG Mar 625 Put at 37.00 and buying a GOOG Mar 600 Put at 27.00 for a credit of 10.00. Now here’s the interesting part – if the stock is unchanged at March expiration or at any price above 625 both options expire and the 10.00 per contract is a profit. Remember the target price thrown around was 700.00, so this trade profits even if the target is wrong. The downside is the stock under 600.00 at March expiration. In this case the trade loses 15.00.