Cree (NASDAQ:CREE) is the world leader in LED technology – and sells a lot of products as well. I was in Costco (NASDAQ:COST) the other day – why is my COSTCO such a pit, it isn’t the fine people who work there, but the rabid customers running you over to get a one half-inch sample? Where was I? Oh, LED light bulbs – prices are coming way down and the same people willing to commit murder for free mystery meat are buying LED bulbs. They can last a couple of decades – yes, decades – and radically reduce electricity costs. So I see Cree as a fundamentally sound and growing company and better still, there are weekly puts on the stock.
And the premiums on these puts are outrageous given the almost non-existent volatility in the market. You can approach Cree in two ways – sell some weekly puts or buy the shares and sell some calls.
The stock has pretty good support around $52.50 and any decision you make should consider that level as short term support. Also know earnings are coming up on April 23 and the stock will move on earnings one way or another.
If you sell a $52.50 put and do it fifty times a year with equal success, your annualized gain is 57%. If you buy the stock, a bit above $53 as we speak, and sell the weekly $55 call, is about 12% — plus any appreciation you get in the stock if you roll the calls forward as the stock rises. I think the stock is good for $68 in a year or so if earnings continue to grow as they have the past two quarters. Yes, the puts look better, but take a look at both options.
And go buy some LED bulbs.
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