Solid Stocks for Summer Option Profits
![Tropical paradise](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
Fact is, options traders do not have the luxury to do the ‘Sell in May, go away’ baloney. You have to research the underlying, find the right trade, and send it in with the hope you get a decent fill. And once you’re in you have to check the position four times a day to make sure it doesn’t get away from you.
It’s nearly summer. Is there such a thing as an option trade that lets you relax in the hammock for a bit?
Our options trading experts considered this and responded with six trades that give the investor some peace of mind. First, they chose solid-as-a-rock stocks like McDonald’s (NYSE: MCD), IBM Corp. (NYSE: IBM) and Caterpillar (NYSE: CAT). Then they focused on farther-out months, so you don’t have to worry about expiration every few weeks.
Please click through to find six option trades that offer summer profits and relaxation.
IBM Corp. (NYSE: IBM)
By Sam Collins, Chief Technical Analyst, InvestorPlace
Coca-Cola Co. (NYSE: KO)
By Sam Collins, Chief Technical Analyst, InvestorPlace
Caterpillar (NYSE: CAT)
By Chris Johnson and Jon Lewis, The Winning Edge
The decline caused the shares to hit their most oversold level since last August, right before CAT embarked on an eight-month rally that covered more than 80%. You can’t keep CAT down for long, though, as the stock has started to rebound higher off its 100-day moving average.
Sentiment toward CAT is surprisingly mixed. The put/call ratio is rising, and nine of 24 analysts still consider it a “hold.” That tells us there’s enough pent-up buying pressure waiting in the wings.
CAT is a strong global company that should continue to prosper as the world economy picks up steam. The recent pullback and technical bounce suggests it’s a great time to jump aboard the CAT bandwagon. Buy the CAT Nov 110 Call for less than seven bucks.
McDonald’s (NYSE: MCD)
By Chris Johnson and Jon Lewis, The Winning Edge
Despite the recent success, we’re seeing healthy skepticism toward the shares that should keep the rally going (the “wall of worry” is intact). The put/call ratio is coming off a peak, suggesting that pessimism among options players is starting to unwind. And nine of 24 analysts rate MCD a “hold” despite the stock outperforming the broader market for more than three months.
Nobody knows how to thrive in the rough-and-tumble world of fast food better than MCD. There may be some bumps and bruises along the way, but the company … and the stock … always manage to navigate through the obstacles. Buy the January 2012 80 Call for five dollars or less.
Corning (NYSE: GLW)
By Michael Shulman, Editor, Short-Side Trader
Corning is the maker of something called GorillaGlass and it is used in iPads. The stock took a hit, stabilized around $20, and is now rising as the company is clicking across the board. The company is selling at less than half the market multiple — ridiculous given its position in the real world. I recommend long term calls on GLW, January of 2012 or January of 2013, $25 strikes or higher if you get to this after the stock begins to run.
SanDisk (NASDAQ: SNDK)
By Michael Shulman, Editor, Short-Side Trader
SanDisk is the world’s premier maker of NAND flash memory in the world. Guess what kind of memory is used in tablets and most smart phones. The company both makes the products and receives licensing fees from other makers of these products. SNDK is very volatile, which is unusual given the position of the company in the marketplace and its very low valuation — less than nine times earnings, half the market multiple. If you can forget the volatility, it is a great longer term play. Look at calls in October or later and strikes of $50 or above.