CEO & Portfolio Manager at Moat Financial
Member since: Feb '25 · 21 Opinions
He likes Canadian energy where such companies make good energy, valuations are attractive and are coming back after being overlooked for US energy. Many are returning capital to shareholders as they control spending. Overall, are strong financially. Also, he likes the car-makers who also make a lot of money, have good PEs and are buying back shares. He likes Ford, but is neutral the Canadian auto-parts-makers.
It enjoys little competition. If you sold the February $62 calls (now $64.60), so if you do nothing between now and Friday, you will get called away. So, you can roll that option: buy back the call that you're short, then sell a new call further into the future to replace it. So, pay $2.65, then roll it out to May, sell the $62 again, and collect $3.15.
Covered calls make tons of sense when the market is sideways or moving up a bit, but underperform in a raging bull market like last year. Owning blue chip names and selling some calls. If you're not that overall bullish, set premiums for a short time and a lower price. You give up some upside, but capture more of the premium. Also, if you do this several times a year, then your gains add up.
Trades under 12x PE and are buying back lots of shares. Likes it. Options: sell the April $25 call and get 20 cents, not a big premium, but leaving lots upside to get closer to the upper-$20s. But he is not selling calls on CVE, because he expects the share price to recover. But at $27-28, he will sell at $30s. For new money, he will sell $20-22 puts.
Options add or remove risk, depending on whether you forecast the current direction of a stock. Also, they can create a lot of leverage. You buy a call when you are bullish a stock; you have the right, no obligation, to buy a stock at a certain price by a certain date. A put is the opposite. A cash-covered put means you will sell a put--give somebody the right to sell you a stock at a certain price below the current price by a certain date; the cash part means you actually have the money, and aren't using leverage.
Trades around 20x PE. Options: implied volatility is over 30, so you're paid twice as much as the broader market. Because the stock has been under pressure for a long time, these options are more expensive than others. Currently, at May $70 puts you can get $3.90, an attractive 5% return if shares stay flat over 3 months.
Doesn't own high-PE tech names like this, and shares have run up so much. Maybe wait for a pull back to $90-100 to enter. In this case, he'd sell a put: sell the May $100 put for $8.85; this will generate nearly 9% over 3 months if the stock doesn't drop more than 12%. Can't recommend this. Then again, you can make money if this stock doesn't rise above current levels.