Showing posts with label NVDA. Show all posts
Showing posts with label NVDA. Show all posts

Monday, January 27, 2020

Betweem 8.84% and 16.61% return in fewer than 60 days

Giddy - up:   Buying into weakness on four stocks with surprisingly good calls.

Below you will see four covered call tables illustrating the calls I made today on:

NVDA, DOW, SWKS and LVS.












This is good income investing in a down market.  Don't put all you eggs in these baskets.  But, nibbling when you can get good call premiums is worth the risk.

M* MoneyMadam

Long NVDA SWKS DOW LVS with calls





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Thursday, November 14, 2019

8 Day trade NVDA

I recently wrote a post about using short term calls in an effort to earn 8% a year from a combination of the call premiums and the dividends.

One stock I mentioned in my previous post was NVDA.  I have a $200 call expiring this Friday.  Based on today's reaction to their earnings, I think that trade will provide all benefits I had hoped for in a very short term.   In this market short term is appropriate.

I did it again today.  I bought at just over $208 and immediately sold the $220 call that expires a week from Friday, 11/22/2019.

So the point is, I wanted 3 calls per year on NVDA that generate at $4.50 per contract.  But in just two weeks, I have cashed a $3.44 call today and $ 2.30 call a week ago.  I am on track!



November 22, 2019 $220 call on NVDA


























Will the positive effect of NVDA's earnings carry it for another 8 days? Let's see what happens.

M* MoneyMadam

Disclosure:  Long NVDA with calls
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Monday, October 21, 2019

NVDA and AVGO two calls with different purposes

We income investors are struggling to keep the cash flow up.   Quality dividend stocks are expensive and value stocks have value for reasons that make ordinary investors nervous.

  • No commissions help  you be more creative to work call option income
  • Know your income goals and be flexible with strike prices and expiration dates
  • Stick with stocks that have good fundamentals but don't eliminate a stock just because it is not perfect

We have to employ our cash to earn income and hold our noses when all the numbers are not perfect.

Below are two calls, both executed today.  They are designed to deliver income yet each is quite different from the other.  One call expires in 12 days and the other call in 89 days.

AVGO - Broadcom


I own Broadcom and sell calls as often as I can.  Broadcom is not perfect.  The D/E (debt to equity ratio) is higher than other chip stocks such as Intel.  AVGO D/E = 1.75 whereas INTC carries a D/E of only .38 and Skyworks (SWKS) has no debt.

Moreover, AVGO has earnings per share slightly less than the dividend payout.  However, their cash flow per share is more than double their dividend.  EPS = $7.42, Cash Flow = $23.39 with dividend payout of $ 10.60.

I am putting more money to work in Broadcom and selling a call designed to deliver at least 10% in capital gain should the call be assigned (the call buyer actually buys my shares at the strike price.)  Another goal for this call is to received call premium greater than the quarter dividend.  Finally, I picked a strike price that captures the dividend provided the call buyer does not take my shares before the ex-dividend date.

One of the biggest benefits from owning Broadcom is the prodigious dividend growth.  Over the past 3 years the quarterly dividend increased from $ .51 to $2.65.   When you realize that your expenses will double in 20 years and if you expect to live for 20 more years,  you need your income to grow.  Broadcom, in my opinion is worth the risk.

See the two tables below:


AVGO Dividend Machine Fundamentals










AVGO January Covered Call Option


















NVDA - Nvidia


I also own Nvidia and I added a little today.  With this stock I am looking to cash a nice check quickly.   I have less interest in holding NVDA for the long haul because the dividend is low and their dividend increases are adequate but nothing like AVGO.

I am risking new capital but for only 12 days.  I picked a call that will deliver more in the premium than I can get in dividends when holding the stock for an entire year.   The risk is that NVDA is very volatile (52 weeks price range is between $124.46 and $235.32;  this means NVDA could be worth less than what I paid in just 12 days.




I picked a strike price that is very close to my cost  basis.   I get a little gain and I get to pocket a juicy call premium.  And the entire commitment is only 12 days.

Risk is an interesting issue.  Look at NVDA's fundamentals below and you can see that the share price may be volatile and prone to headline news and trade tweets, but NVDA has a solid balance sheet and cash flow that far exceeds dividend paid out.  I think 12 days of risk is ok.  Let's see what happens.

See the two tables below:


NVDA Dividend Machine Fundamentals










NVDA November Covered Call Option



















It is not easy to work your portfolio in this stock market environment.  No commissions helps me be more creative.  Know what your goals are so when you do execute your trades, you are confident your income goals can be realized.   When your proceeds are not eroded by costs, you can do a little more active call selling.

M* MoneyMadam

Disclosure:  Long NVDA and AVGO with calls
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Monday, August 12, 2019

A case for Selling Calls for the Income Investor

Call income seems to accompany dividends as the best income tools for August.  Bond interest is so low and quality dividend stocks are so expensive.  Therefore, I sell covered calls on existing positions hoping I do not lose too much opportunity by having my stocks called away.

August is a pretty typical month for call expirations.  History tells us 90 percent of calls expire without action and 10 percent are assigned.   In the table below, I have 18 calls with August expiration dates.

As of today, I have 4 in the money which means the current stock price is above the strike price and 14 out of the money where the current stock price is below the strike price of the call. See the table below.



Only one of these stocks does not pay a dividend and that is YELP.  When I realized YELP was not going to perform quickly, I sold a call very close to the current price and my basis and am hoping it is called away which means the call buyer not only paid me a premium for the option but will also pay me the strike price.  That makes me even on the stock and the call premium in my pocket.

Three other stocks have low dividend yields, MSFT, NVDA and SWKS.  I consider a yield low if it is below the 2 year U.S. Treasury yield so SWKS with a yield of 1.99% may not be considered a low yield stock for some.

I like MSFT but with such a low dividend, as an income investor, I am willing to lose part of my position to the call buyer.  I am underwater on NVDA and will hope the China situation improves at some point.  I will continue to sell calls that are close to my basis so that I can unload NVDA in a similar fashion to YELP.

FOUR IN THE MONEY CALLS

The four income money calls are:   MSFT $135, WDC (Western Digital Corp.) $52.50, CVS $57.50, and YELP $34.   Expiration dates are August 16, 2019 except where noted.  My reasons for risking losing these stocks to the call buyer are:

  • MSFT - yield is too low
  • WDC - yield is good but not growing, EPS are less then dividend paid out but growing
  • CVS - (August 23 expiration)stock price is weak, I added to my shares that are underwater, and sold calls against the low buys
  • YELP - no dividend and stock price is not performing as hoped 

The downside of selling covered calls is two fold. one is lost opportunity.  The call buyer was right to pay you the money for the option to buy, they execute the call and then the stock soars and you miss out on the growth.    If you always look back and are cannot afford to lose a favorite stock, don't sell calls against your beloved stock.

The second risk is your shares are on call, the stock price tanks, you would like to get rid of the stock but cannot unless you pay money to buy back the call.   This risk is untenable for an income investor.  We don't pay out, we deposit funds.  The moral is to pick the underlying stock carefully.

FOURTEEN CALLS OUT OF THE MONEY

The 14 out of the money calls are listed below.  Each stock pays a decent dividend and I am willing to keep them.  I am hoping for additional volatility that may allow additional call selling.  But I am not in such a hurry to lose these stocks so I pick strike prices that I think are harder for the stock to attain before the call expires.  Expiration dates are 8/16/2019 except where noted.

  • MSFT - $145 low yield but upside potential for this very well run company 52 week high $141.68
  • COP - $67.50 nice dividend increases of 7+% recently  
  • LVS - $62, $65, $67.50 High yield with enough volatility that strike prices well above my basis are available.
  • M - $23 High yield with an improving balance sheet and very low P/E (price earnings ratio)
  • WSO - $180 Nice yield, with good fundamentals, headline risk due to global exposure provides strike prices well above my basis
  • SWKS - $82.50, $85 Decent yield, good balance sheet, nice volatility, I have been able to sell calls two - three times per year
  • WMT- $115 Walmart does not raise the dividend much and the yield is mediocre, strike prices near the 52 week high of $115.42 pay enough premium to make WMT a hold.
  • WDC - $55 High yield and improving fundamentals
  • SWKS- $81 (August 23 expiration) Decent yield but enough volatility to enjoy call premiums more than once a year
  • RDS.A - $63.50 (August 23 expiration) Very Good Yield, calls available only about once a year and I sell calls on only part of my position always above my basis and hopefully pick a strike price high enough that I am not called away.
  • NVDA- $185 (August 30 expiration) my worst performing stock of the group.  Not enough dividend to care if it is called away.   
In my case 22.22% of the calls are likely to be exercised versus the historical average of 10% but we still have to see what happens the rest of August.  This post illustrates how conservative income investors can use call options to boost their income during a time when quality dividend stocks are expensive and quality bonds are outrageously expensive.

M* MoneyMadam



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Tuesday, July 23, 2019

Nvidia chips for income

The chip sector is incredibly lucrative for selling covered calls.  You don't get paid much to wait with this chip stock, Nvidia symbol NVDA, less than a 1% dividend yield, but the calls allow you to roll them frequently.  Sell calls with short expirations is how I roll the calls on growth or low dividend yielding stocks.  I am an income investor.

NVDA $187.50 August 30 Covered Call


In this call, I bought NVDA today at $175.66 and immediately sold a $187.50 call that expires on 8/30/2019.

If I am assigned on the expiration date, I should still get the dividend.  But the dividend is barely important.

The call premium alone yields 2.33% nearly as much as INTC 2.45% and if I am assigned, I realize a 9.17% total return on these shares in 6 weeks.






M* MoneyMadam

Disclosure:  Long NVDA
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Friday, April 26, 2019

SWKS and NVDA taking advantage of chip weakness

My weakness is chips; potato chips.  I also like the chip space but I hate overpaying.  While Skyworks is not exactly a dividend machine because the yield is low, it has beta (volatility) which means I can take a chance with a covered call and if my new shares are not called away by the call buyer, I am getting paid nearly 2% to wait.  And this stock has no debt.

Take a look at a transaction I made today.  I added to SWKS and immediately sold this call.









Price on Open
Call Expiration


swks
$86.82
6/21/2019


Cost Basis: 
Price on Option Contract Open
$86.82


Strike Price:

$92.50


Call Premium:

$2.20


Dividend
Ex Div Expected mid May
$0.380






Call Yield on Basis

2.53%


Call + Dividend Yield on Basis

2.97%


$ Gain if Assigned

$8.26


Max Return  if Assigned

9.51%







I like a greater than 1% yield from the call premium and this call meets that hurdle.  Moreover, if my shares are called away, I get a total return of over 9% in a very short time period.

Now here is another call I sold today.   For the higher risk investor but in the same industry.


























My kind of income investing.

M* MoneyMadam
Disclosure:  Long SWKS and NVDA  with calls
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Monday, February 11, 2019

Nvidia very short term call for income

Nvidia, symbol NVDA is not exactly a dividend machine but it does pay a dividend.  Yet, in this trade today, the dividend is irrelevant as the call expiration is 4 days.  Nvidia's next expected ex-dividend date is later in February.  The point of this call is simply quick income.

I don't really want to own NVDA as a long term holding.  I am hoping to make a quick 2 percent of income in 4 days and bag a small capital gain should NVDA be called away.  If it is not called away I will sell it right away provided it is at or above my cost basis less the income from the call.  The adjusted cost basis in this case would be $146.09 less the income from the premium of $3.00 or $143.09. 

If it is above my cost basis, I will probably continue looking for short term calls until NVDA is called away.   I have done this before with NVDA.  This is not a conservative investor's trade.  It is controlled risk to boost income. 



Nvidia's Fundamentals:




NVDA has good enough fundamentals that I am not too worried about it going belly up.  However, it is extremely volatile and could sink to the 52 week low or go lower on some catalyst that I do not know about.

Short Term Call:

Call prices vary all day long.  You may not be able to get this trade tomorrow and I could not get this published before the market closed.  Yet, you may be able to do even better.  It all depends on the call buyers.





Pressure is being placed on corporations to not pay out dividends.  We income investors are already suffering from having no safe place to earn income and with dividend payouts pressured, covered calls become even more important.

If you have cash to put work, consider a trade like this.

M* MoneyMadam
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Wednesday, August 23, 2017

Rolling a few expired calls: NVDA, SWKS

8/31/2017

Rolling Calls Update SWKS and ARCH


I continue to work the call rollovers today.  I still needed to fill the second Skyworks (SWKS) call.  Today I took a November 17, 2017 expiration with a strike price of $115 and received $1.65 premium.  Their next ex-dividend has not yet been announced.  If they follow their typical dividend history, the next ex-dividend date should be about 11/15/2017 meaning I should also get the quarterly dividend of $.32.

The table below presents the data on this lot of SWKS.





Next I was able to sell a call on Arch Coal, symbol ARCH.   I own ARCH because of a bond default that resulted in my receiving shares and some cash for the bond.   My basis is about $90.   Trying to make lemonade out of lemons, I am working the calls to try to get back some of my money.  This is the second call I have been able to sell on ARCH.  I will receive the dividend of $.35 per share as it went ex-dividend on 8/29/2017, however, should my shares be called away before or on the call expiration date of 10/20/2017, I will not receive the next dividend.

See the table below.




I still am not happy with the call premiums I find for Apple (AAPL) so I will continue to be patient and look for the best opportunity.





Thanks for reading M* MoneyMadam
Disclosure:  Long SWKS, NVDA, AAPL, ARCH all except AAPL with calls

Original Post 8/23/2017

Four of my calls expired last week and I have been looking for new opportunities for making money by selling more calls on those stocks.

Yesterday I sold a call on Skyworks, SWKS, and today I sold a call on Nvidia, NVDA.

I like to extend the expiration dates to after the next ex-dividend date and I like to ladder the strike price.  For instance, I have an October $190 working on NVDA so if I extend the expiration to November I want more than $190 and the next strike price available is $195.   NVDA's ex-dividend date is September 17, 2017 so I should receive the dividend as well as the call premium by selecting a November expiration.  NVDA's dividend is very small but I want it anyway.

For Skyworks, I had a $105 expire and I wanted to replace that with a $110.   I also had a $115 expire and hoped to find something better than or equal to $115  in November but have not yet found a call to my liking.   Skyworks next ex-dividend date should be about Nov. 4, 2017 so if my stock is called away on expiration of the October $110 call, I will not get that next dividend on this lot.  I don't love that but I am still long on the other lot of SWKS and will look for a call with an expiration date after Nov. 4. 

The table below summarizes my progress to date.  I find no calls on ARCH and the AAPL calls that I like are not yet paying enough.






M* MoneyMadam
Long:  SWKS, NVDA, with calls and ARCH and AAPL

http://www.nasdaq.com/article/yieldboost-skyworks-solutions-from-13-to-48-using-options-cm834786
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