Options EducationThis section is for those who are using option selling strategies:

  • cash-secured put selling for building stock positions and generating income
  • covered call writing for trimming positions and generating income
  • LEAP call buying for when large opportunities present themselves, such as after major corrections 

While we do not use call strategies often, we do use cash-secured put selling regularly. By taking advantage of people's emotions which cause volatility, we can often sell a cash-secured put on a stock or ETF we like longer-term and generate income while building a position as some of the puts get "put to us" meaning we buy the underlying security. It is a professional strategy that takes some getting used to, however, if you are a long-term investor with a contrarian streak who likes to add income to the bottom line, this is THE strategy worth learning.

Before making any options trades, read Characteristics & Risks of Standardized Options, study the CBOE Education Center and engage in paper (pretend) trading for an extended period before trading options.

Most trades are hidden, however, several have been released to serve as samples. More will be released as the options expire.

I am currently listening to the Exact Sciences earnings call. The Anthem news is excellent. Revenue is going to be good. Kevin affirms test volume. Points out focus on controlling costs. Looks like company can be profitable by Q4 2016 or Q1 2017.

I am buying the January 2018 $8 calls with a limit price of $2.50 for 1% of the Punch Card Stocks portfolio.


Fundamental Trends


These trades are for the Retirement Income Options portfolio, each for approximately 2% of net asset value. These companies represent the risky components of that portfolio. If you are underweight these names in your equity portfolio, but already hold some, I believe you can add as well. In general the story on all five stocks are that the names are extremely oversold based on their inherent risks. I believe the risks are overstated and do not play well a year or so from now, that is I think all three stocks rebound sharply in the next year or two. You can find further research and discussion in the forum and research briefs.

Chesapeake Energy (CHK) - sell the April $4 puts with a limit at the bid and not below .60. I expect oil and gas stocks to be bottoming about then and would be happy to add more shares of Chesapeake as a view them as a survivor in the space.

3D Systems Corp (DDD) - sell the May $7 puts with a limit at the bid and not below .90. The company has been making the right moves lately, has a good balance sheet and is still a leader in a fast growing industry. I am happy to have these shares assigned to me as well.

Exact Sciences (EXAS) - sell the April $6 puts with a limit at the bid and not below .50. The company's ramp up is still moving along at a growth rate in excess of 100%, however, revenues will miss in Q4 this year by a million or two, which is creating a sell-off today. The bigger news is that Anthem Blue Cross of California signed on for Cologuard adding 4.5 million new non-Medicare patients who can take the test with insurance coverage and that a new modeling using a widely accepted process shows that Cologuard is roughly as efficient at saving lives as colonoscopy. I believe Cologuard eventually takes essentially all of the FIT market and about one-third of the colonoscopy screening market with peak revenues in excess of a billion dollars per year by 2020. I happy to have shares put to me.

Micron Electronics (MU) - sell the April $12 puts with a limit at the bid and not below .90. The sell-off in semi-conductors is getting overdone and this company is a part of the crash in prices. With leading edge technology and suitors in the market, I believe that Micron shares will double to triple from here within 1 to 3 years. I am happy to have these shares put to me as well.

These are all highly volatile stocks. That is why the premiums are high. I recommend buying the basket for diversification and not cherry picking.

Kirk Spano

Fundamental Trends