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Strategies & Market Trends : The Covered Calls for Dummies Thread
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To: Uncle Frank who wrote (4490)10/9/2006 8:35:10 AM
From: Bridge Player  Read Replies (1) of 5205
 
I am mindful of something that you may have mentioned from time to time......only sell a put on something that you wouldn't mind owning at the price. Right now, that includes energy as a common theme. I think the exploration and production companies are fairly cheap. HD, and recently DOW and WMT a little lower, strike me as quality, well-managed companies that are pretty cheap relative to their historic metrics. Also include Intel in that list although the premiums for their puts are pretty sparse. I do like technology and high-growth companies providing their multiples are lower than their conservatively-estimated growth rates. For example I think Intuitive Surgical ISRG is quite likely to grow at 40-50% for some time, and their margins and recurring revenue stream from disposables and services are impressive. I'd be happy to own it under 100.

Another thing I look for is the ability to sell continuing calls on something if I am assigned and turn out to be wrong on the evaluation of the underlying. For example, last spring when RIMM was in the low 60s it seemed to me that even if their growth rate slowed down I would likely be able to continue to sell 60 calls long enough to eventually be bailed out even if put. Right now, at 110, even though the put premiums are high, that prospect strikes me as far more remote.

Loved Symantec in the mid teens a few months ago and like BSX right now for similar valuation reasons although I was assigned some at 17 1/2 and still like it. I think their earnings hiccup was primarily a merger-related problem and the bad publicity from recalls was no help either.
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