Stephanie Link Buys Fortinet; Do Buy/Write Covered Calls Or Sell Cash Secured Puts
The strategy is simple. Pick good under valued dividend stocks. I pick stocks with active and liquid options that can be used to generate weekly and monthly income by selling covered calls and puts.
By Donald E. L. Johnson
Cautious Speculator
FTNT is bouncing back and its technicals are starting to look bullish.
The stock is a bit over its estimated fair value and way under analysts’ target prices.
FTNT’s price to free cash flow ratio is expensive.
Possible covered calls and cash secured trades look like they will provide good returns on risks.
FTNT’s April expiration options are active and liquid.
Stephanie Link, a professional portfolio manager, is one of CNBC’s best contributors and stock pickers. On CNBC’s Half Time Report, she just announced that she bought back Fortinet (FTNT), which she sold late last year. FTNT is a cyber security company.
FTNT is trading at $314.31, up $10.52. The stock is expensive with a P/FCF of 48.8. StockRover.com’s FVE is $292. Wall Street analysts’ mean target price is $368. The high target is $425, the low one is $305. Support at the 50-day moving average price is about $306.
Income traders looking for a good quick profit and a nice hedge could sell FTNT $320 strike (delta .46) covered calls for about $12.30. That would provide an annualized RoR of about 51% if the stock closes below the $320 strike and a 76% ROR if the stock closes above $320 and is called.
A speculator who wants to buy FTNT at the support price could sell FTNT 4.14.22 $300 strike (delta .33) puts for about $9.40. That would provide about a 39% annualized RoR. Delta suggests the probability that an option will be exercised. There is about a 33% probability that FTNT $300 strike puts will be assigned.
Question: Do you have any trades that you’d like to discuss? Please use the comments section below to discuss.
LINKs:
Home Page. See previous articles on other stocks and watch lists. If you read several of these articles, you’ll learn how this strategy is meant to work. No guarantees.
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Beware
Like all investing, trading stocks and options is risky. If you can’t sleep with market risks, you might want to let someone else do your trading. Consider an option trading ETF like XYLD, which I own. I also trade its calls and puts. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I do not own and/or have options positions on the securities mentioned above. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content.
@realDonJohnson. Because I don’t want to litter subscribers’ in boxes with emails, I write only one or two newsletters a day. I’m active most days on twitter where I tweet about stocks, options trades and other topics.