The Lizard King is currently fully invested.  He does not however want to leave loyal readers without any trade ideas in case they are playing the home game version.  The next five articles explore five trades in what I like to call “Big Cheap Tech”.  These are all mega cap technology companies with their go-go years of expansion behind them but respectable expansion remaining and are gushing cash flow to return to shareholders.  Blue chips to be sure but their presence in the tech sector tends to yield fatter than normal put premiums.

Music selection: “The Thrill is Gone” — B.B. King

The first company in the series (presented in no particular order) is Intel Corporation (INTC).  INTC has a 161 billion market cap and a sleepy 0.94 Beta.  You could call it boring and boring is beautiful.  Price to Earnings is around 14, Price to Book is about 2.8, and Price to Sales is 2.8.  These are already pretty good numbers but from the perspective of an owner things are even better than the first blush statistics.  You see, Intel carries over 8% of its market cap in cash and short term securities.  This is a no net debt situation.  Super safe and cheaper than advertised.  What isn’t to love?

How much can you make on a near the money put?  Well, INTC150717P00034000 is fetching 1.11 as of this writing.  For the 51 days your capital would be exposed, you are earning an equivalent 23.37 percent annualized yield.  Your downside, if you can call it that, is owning a great company at a favorable price.  The company returned 13.9 billion in cash to shareholders between dividends and buybacks.  That is a shareholder yield over 8 percent.  And you can write covered calls for fat premiums to juice returns further.  Are you licking your lizard lips yet?

Devour your prey raptors!

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Write Puts on “Big Cheap Tech” – Part 1 of 5

Never miss another opportunity to devour prey!

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3 thoughts on “Write Puts on “Big Cheap Tech” – Part 1 of 5

  • May 29, 2015 at 2:02 am
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    Why not buy calls in stead of selling puts? When selling puts your reward is limited but your loss is open ended. Calls on therhand are assymetric (in your favour).

    Reply
    • June 1, 2015 at 5:57 pm
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      IT, thanks for reading. Sorry about the delay in approving your message. I have been out of town visiting friends. I did a post on why raptors sell options awhile back. The short version is you have to be not just right but “right enough” with a long option to overcome the time value debit. When you write options, you collect immediate income. If things go your way or just go sideways you win. If things go against you, so long as they move less than the premium collected, you still win! Like the Hunger Games, I want the odds to e’er in your favor.

      Reply
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