Selling puts on CHK, DDD, EXAS & MU

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