AKG - Update to a WDB Options candidateHello all,
While I am really not surprised, it would seem one of our WDB options setups is looking technically quite bullish at the moment. To that end I thought as apposed to just updating the original post I would take the time to review the trade in earnest and publish a new one. The notes you see on the chart are the same from the original post. I did that on purpose as I believe they are as accurate today as they were when published. The point of this post is to point out the rather bullish technical developments of late, First and foremost, price itself has registered a rather well defined double bottom when it recently moved through the March highs at $2.46. That move broke the highlighted down trend line and came on heavy volume. The move too also initiated an 'upthrust' in Willy which has recently come off a 'stupid' oversold condition. $3.80 seems very achievable and would represent a more than 50% returns from the breakout level. A lot has changed for this stock. After a prolonged down trend, there are clear signs of bullish enthusiasm. A retest of that significant trend line is possible but considering the fundamental backdrop, I believe the wind is at this one's back going forward - at least over the near term. Technical levels hit on pullbacks should be considered buying opportunities as we work our way up to indicated levels.
Of course, WDB options players would have been long for some time now and actually got paid to take the position.....wtg WDB, score another one for efficient value investing....
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Wdboptions
AKG - Gold sector starting to shine fundamentalllyThe gold sector has been rather sanguine of late and considering the lack luster performance of the underlying, that sector under performance is understandable. I believe there are areas within the gold space that are starting to offer 'value' investors some very interesting propositions. The great part of 'value' investing is we are often presented ideas when nobody else is interested. In fact, for one reason or another, the public is generally selling when we are thinking of buying. Because we are buying 'value' (and not too concerned about day to day fluctuations) we seem to get lots of time to accumulate our positions. Once these names put in 'technical' bottoms (which seem to come around our 'value' levels but can take some time to develop) price seems to take off very quickly. Anxiety can get high during those breakouts and FOMO can often lead to poor trade location decisions. So the question is, as 'value' investors what's the most efficient way to be a shareholder? Interestingly, Options by far are the most efficient way of become a stockholder but very few in the public understand how they work. Put-option-writes are, in my opinion, the only way investors should ever take long positions in large cap stocks. Not only does one buy the stock with the Put-option-write (keep in mind we fully expect to get exercised) but we also get to take advantage of bearish sentiment (through inflated premiums). Indeed, the case for writing options gets even more compelling if you understand how the modern day brokerage system works. If you chose to hold the position on margin in your brokerage account, you can literally collect enough of that bearish sentiment premium to pay the margin requirement to hold the stock indefinitely (as long as it stays 'option eligible') and get a little bit extra too - my 'get paid to buy stock' scenario....Here then above is a graphical demonstration of the WDB model in action. The model suggested we could get paid $3.10 by writing the August, 2014 $5.00 Put. If done and exercised, the margin requirement to hold the $5.00 position would be $1.50 (30% of underlying). Keep in mind, we were paid $3.10 (more than a 200% premium) ahead of time....Target to sell half the position is double our cash cost price ($3.80) which should create a 'risk free' trade on the remaining shares. That level seems achievable considering it is well below the natural 38.2 Fib & 200 week sma.
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