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

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...

January 5, 2020

Introduction:

2019 has shaped up to be an historic year for the stock market indices. The S&P 500 posted its fourth best annual return in over 20 years, coming in at a ~29.5% return. Only two other years have outpaced these 2019 returns. These occurred in 1995 and 1997 posting returns of 34.1% and 31.0%, respectively. 2019 was a unique year on multiple fronts, most notably because the market returns outpaced even the most bullish forecast by any Wall Street analyst. The markets roared higher in the face of 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...

December 29, 2019

Introduction:

Baby Yoda and the phase one trade deal comes to Hasbro’s (HAS) recuse after a disastrous Q3 earnings call that resulted in the stock sinking 17%. Per Brian Goldner, “the threat and enactment of tariffs reduced revenues in the third quarter and increased expenses to deliver product to retail”. I feel that management was remiss when they forecasted their ability to circumvent the tariffs and then used the tariffs as a scapegoat to justify the company missing its numbers on both top line revenue and bottom line profit. Now the backdrop has changed in Hasbro’s favor with the phase one trade deal with China being reached and of course the new internet sensation Baby Yoda.  

The company is in a solid position moving into the holi...

December 26, 2019

Introduction:

Impeachment proceedings, U.S.-China trade war, Federal Reserve actions, etc., dominate the headlines and move markets in lock-step. The broader indices are at all-time highs and continue to set new high after new high despite the aforementioned variables. The markets have been on a steady rise for months without much resistance and overall volatility remains low, indicating that market participants have become overly confident and complacent. The S&P 500 has had a banner year in 2019, posting a year-to-date return of over 25% through mid-December. A “blow-off” rally may be under way at this market juncture and locking-in portfolio gains while mitigating risk is prudent. An options-based portfolio can offer a superior metho...

December 20, 2019

Introduction:

HealthEquity’s (HQY) tie-up with WageWorks is starting to bear fruit. The synergies of this combination were evident in the company’s Q3 2020 quarterly results as the stock rallied over 12% post earnings. HealthEquity made a bold move to acquire WageWorks for approximately $2 billion in an all-cash deal. This acquisition has expanded HealthEquity’s moat in the Health Savings Account space while providing new revenue verticals in complementary product offerings. This move is already expanding HealthEquity’s total addressable market as Consumer-Directed Benefits (CDBs) via pre-tax spending accounts such as additional Health Savings Accounts (HSAs), health and dependent care Flexible Spending Accounts (FSAs), health reimburse...

November 23, 2019

Introduction:

CVS Health (CVS) and Walgreens Boots Alliance (WBA) have broken out recently due to a pair of better than expected quarters and speculation of being taken private, respectively. These stocks have been beaten down for years with CVS and Walgreens plummeting by 54% ($113 to $52) and 49% ($97 to $49), respectively from their multi-year highs. Over $110 billion in combined market capitalization had been erased from these two companies. As of late, CVS has broken out to the mid $70s and Walgreens has demonstrated strength into the low $60s, well of their respective lows.

The single payer narrative being pushed by presidential frontrunners and the Amazon threat via its acquisitions of PillPack/Whole Foods potentially displacing t...

November 16, 2019

Introduction:

Disney (DIS) just delivered a stellar quarter beating on both the top and bottom line while continuing to roll out its growth initiatives. Disney’s growth rotation is still in its early stages with its remediation of its ESPN property and flurry of growth initiatives to meet modern day media consumption trends via streaming with its Disney+ property. In the backdrop, the company continues to dominate the box office year after year with a long pipeline of blockbusters in the queue, notably Frozen 2 and Star Wars: The Rise of Skywalker. Additionally, its Parks and Resorts continue to be a growth avenue with tremendous pricing power.

Disney is going all-in on the streaming front and will inevitably acquire full ownership of Hu...

November 10, 2019

Introduction:

2019 has ushered in one of the most surprising bull markets that nearly no one saw coming. The vast majority of Wall Street analysts underestimated the strength of this bull market as we enter into mid-November. Expectations for 2019 were largely muted when factoring in a slew of potentially negative economic issues such as the U.S./China trade war, Brexit, inverted yield curve, potential recession, Federal Reserve actions and the presidential impeachment efforts. Despite all of these headwinds, the indices continue to post record highs with the Dow Jones and S&P 500 notching gains of 18% and 23%, respectively.   

This market has been dubbed the “most hated bull market in history”, illustrating the point that the abili...

November 3, 2019

Introduction:

How can you effectively run an options-based portfolio when trading with a small account? How can you trade options on stocks like Tesla (TSLA), Ulta Beauty (ULTA), Apple (AAPL), Disney (DIS), Facebook (FB), etc., that possess such a high price per share when account balances are limited? People often shy away from options trading due to low account balances. Limited capital doesn’t preclude you from trading options and in fact you can run an effective options portfolio regardless of account size. Options enable you to leverage a minimal amount of capital which opens the door to trading virtually any stock all while defining your risk.

Over the past 13 months, ~315 trades have been made with a win rate of 86% and premium ca...

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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.

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.

 

 

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