Options Simplified

OPTIONS ARE A BET ON WHERE STOCKS WON'T GO,
NOT WHERE THEY WILL GO
WHERE HIGH-PROBABILITY OPTIONS TRADING FOR CONSISTENT INCOME THRIVES IN BOTH BEAR AND BULL MARKETS

March 31, 2020

Introduction:

Just before the COVID-19 pandemic struck the markets, Ray Dalio was recklessly dismissive of cash positions, stating “cash is trash”. Even Goldman Sachs proclaimed that the economy was recession proof via “Great Moderation”, characterized by low volatility, sustainable growth and muted inflation. Not only were these assessments incorrect but they were ill-advised in what was an already frothy market with stretched valuations. I’m sure Ray Dalio quickly realized that his “cash is trash” mentality and public statements were imprudent. The COVID-19 pandemic has been a truly back swan event that no one saw coming. This health crisis has crushed stocks and decimated entire industries such as airlines, casinos, travel, leisure a...

March 25, 2020

Introduction:

The coronavirus (COVID-19) epidemic has pummeled stocks and has caused a complete collapse of the entire market. Broader indices such as the S&P 500, Nasdaq and Dow Jones have lost over 20% of their value while most individual stocks have lost 20%-70% of their market capitalization. Airlines, cruise lines and casinos have been hit particularly hard. Other stocks have been hit due to the market wide meltdown and many opportunities have been presented as a result. I’d be remiss if I didn’t use this unique opportunity to start buying stocks and take long positions in high quality companies. Over the course of this market sell-off, I have started to take long positions in individual stocks, particularly in the technology secto...

March 3, 2020

Introduction:

The combination of CVS Health (CVS) and Aetna is proving to be a success after initial skepticism by investors. CVS has broken out recently due to a string of better than expected quarters in part attributable to the Aetna acquisition. CVS is generating large amounts of free cash flow, paying down debt and returning value to shareholders in a variety of ways. To further boost long-term growth prospects, restore growth and fend off potential competition, CVS combined with Aetna. This combination creates the first through-in-through healthcare company, combining CVS's pharmacies and PBM platform with Aetna's insurance business. The new CVS combines its existing pharmacy benefits manager (PBM) and retail pharmacies with the s...

February 23, 2020

Facebook Remains Compelling:

Facebook (FB) tanked after announcing its recent quarterly earnings despite beating on both the top and bottom line numbers. In addition to the strong revenue and income figures, user growth across its platform grew by a robust clip and the company authorized an additional $10 billion for its share repurchase program. The culprit was a sharp rise in spending and expenses to content with a slew of regulatory, user and legal battles the company is waging on the privacy front. This minor sell-off provides investors with a buying opportunity in top tier large cap company that continues to grow double digits with a long runway for further growth and monetization of its platforms....

February 15, 2020

Introduction:

International Business Machines (IBM) is fresh off its strong quarterly results followed up by news that its CEO is stepping down. Each event separately drove the stock higher as investors cheered the duo of better than expected earnings and a change at the CEO level. IBM continues its long turn back to growth, focusing on high-value faster growing business segments while embracing the future of technology with AI and hybrid cloud architecture via the Red Hat acquisition. Over the past few years IBM has taken a blended approach of M&A, realigning it business mix to current and future trends, maintaining its dividend payout and continuing to buy back shares while layering-in the major Red Hat acquisition.

IBM’s stock has bee...

February 10, 2020

Introduction:

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom line while continuing to roll out its growth initiatives via streaming. Disney’s growth rotation is still in the early stages with its remediation of its ESPN property and flurry of growth initiatives to meet the demands of the modern day media consumption trends. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power albeit the corona virus will damper its Shanghai and Hong Kong operations. Disney is going all-in on the streaming front and acquired full ownership of Hulu...

February 4, 2020

Introduction:

As 2020 unfolds and the markets continue to break through record highs, investors should heed these lofty levels. We’re in the longest bull market in history and the U.S. has started and ended a decade without a recession for the first time in history. By nearly all measures, these markets are overvalued with stretched valuations.    

Deploying a put spread strategy is a great way to define your risk while leveraging a minimal amount of capital to maximize returns. Whether you have a small account or a large account, a put spread strategy is an effective way to limit risk with a high probability of success. Trading options on stocks like Expedia (EXPE), Tesla (TSLA), Ulta Beauty (ULTA), Apple (AAPL), Disney (DIS),...

February 2, 2020

Introduction:    

The market has rendered AMC Entertainment (AMC) a worthless company. The stock has nosedived from a 52-week high of $17 to $6.50 per share resulting in a 62% reduction in market capitalization. Even worse, AMC was $33 per share in 2017 resulting in a multi year meltdown of 80%. The catastrophic stock collapse has occurred in the backdrop of record numbers at the domestic and worldwide box office. There’s a paradoxical disconnect between the record multi-year box office stretch and AMC’s stock price.

AMC recently posted a strong quarter and has diversified its revenue stream by rolling out its own loyalty program that now has over 900,000 members to evolve a large segment of its business mix towards a subs...

January 27, 2020

Euphoric 2019 and Bleak 2020 Forecast:

All three major indices ended 2019 in rarified territory as the Santa Claus rally capped off a euphoric market. The S&P 500, Nasdaq and Dow Jones ended 2019 at all-time highs. The S&P 500 posted its best return in nearly 20 years, coming in at a 28.9% return.

2019 was a unique year on multiple fronts where the markets roared higher despite impeachment proceedings, U.S.-China trade war, Federal Reserve actions, inverted yield curve and slowing economies abroad. Furthermore, for the first time in history, the U.S. economy has started and ended a decade without a recession with the economy expanding for a record 126 consecutive months (Figure 1).

Figure 1 – All three major indices reached all-time h...

January 18, 2020

Introduction:

American Airlines (AAL) is a cheap stock by many metrics and currently presents the best value in the airline sector based on valuation. Boeing’s (BA) 737 Max groundings have already been absorbed by the airline and moving forward American is looking to settle with Boeing. Boeing took a $4.9 billion after-tax charge in Q2 to compensate airlines for the grounding. American is expected to see some cash from that amount once a settlement is reached between the two parties. The company is reducing its debt load, increasing free cash flow, returning value to shareholders, expanding its network while having the youngest fleet among the major airlines. American Airlines is near a 5-year low on the cusp all the aforementioned aspe...

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Noah Kiedrowski

Founder: stockoptionsdad.com

 

I'm Noah Kiedrowski, founder of stockoptionsdad.com. Where high probability options trading for consistent income thrives in both bear and bull markets. Options are a bet on where stocks won't go, not where they go. Enabling investors to mitigate risk and circumvent drastic market moves while generating consistent income in a high probability manner.

The vast majority of my trades are risk-defined while leveraging a minimal amount of capital in order to maximize return on investment. My average income per winning trade exceeds $100. For any given trade I target roughly 10-15% ROI with a delta of ~0.15 or ~85% probability of winning the trade at expiration. In doing so, I typically hold ~50% of my portfolio in cash.

I always strive to trade in high implied volatility environments across a wide array of tickers to maximize sector diversity at an ~85% probability of success. Trading across uncorrelated tickers and maximizing the number of trades is essential for the probability of success to play out.

 

Did you know that a staggering 92% of actively managed funds do not outperform their benchmark? Interestingly, 39% of stocks in the Russell 3000, comprising the largest 3000 companies in the U.S., were unprofitable investments while 64% of stocks underperformed the index. Shockingly, only 25% of stocks were responsible for all the market’s gains from 1983-2006! Taken together, investors only have a 36% chance of picking a winning stock that may or may not outperform the broader index. Options trading provides a statistical edge in trading that individual stock investing simply can't offer.

To this end, stockoptionsdad.com is a venue I created to share investing ideas and strategies with an emphasis on options trading. My aim is to empower investors and traders alike to leverage options trading as part of an overall investment strategy. I offer many tutorials, ideas, strategies, timely trades and actionable updates for the retail investor. My goal is to provide real-life examples of options trading from a peer investor in an effort to demonstrate meaningful portfolio returns while mitigating risk and accentuating returns.

 

 

Contact us via email:

stockoptionsdad@gmail.com

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