We made it to the final selection in the series raptors: ORCL.

music selection: “Slient Lucidity” — Queensryche

By most counts Larry Ellison is a megalomaniac.  The kind who builds a rock solid company.  His products are high margin and “sticky.”  Thus his margins are stable and his cash flow is strong.  P/E of Oracle Corporation (ORCL) is under 19, P/B is under 4, and P/S is under 5.  We can earn a current dividend yield of 1.4% on this 190 billion mega cap.  Twenty three percent of market cap is tied up in cash and marketable securities.  This more than covers long term debt.  Bankruptcy isn’t even on the horizon.  And fresh cash in the form of free cash flow is gushing in at a 14 billion dollar a year pace.  This dividend is increasing and the company is repurchasing shares.

At today’s price we can get ORCL150717P00043000 for 1.11.  That is 23.56% annualized for capital at risk over 40 days.  Seriously?  You can outpace Warren Buffet by investing in big slow moving mega caps with a mountain of cash on the balance sheet?  The markets must be mad.

Devour your prey raptors!

Write Puts on Big Cheap Tech 5 of 5

Never miss another opportunity to devour prey!

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2 thoughts on “Write Puts on Big Cheap Tech 5 of 5

  • June 11, 2015 at 4:29 pm
    Permalink

    Selling naked puts works until you have a market correction occur. Then, you own all of those stocks you wrote puts on, at say 10 percent below your strike price in a 10 percent correction. So now you try to repair your positions by writing out of the money covered calls. The market continues to slide south to 15 percent down. Now you can’t write covered calls at 10 or 15 percent price premium from market – too little or no premium. I’m just trying to say your strategy works well with a slow, upward grinding market like we have had for several years now. But there is no free lunch – those put buyers will eat your lunch some day!

    Reply
    • June 11, 2015 at 4:54 pm
      Permalink

      I recommend selling cash secured rather than naked puts. I also recommend only writing puts on companies you’d be glad to own at the strike price. You are certainly correct that some trades will lose money. This is why I never write with less than 12% indicated annualized return. I have to be compensated for my risk. Your Mileage May Vary.

      Thanks for reading!

      Reply

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