By Warren Kaplan
The Stock Option Writer
© Warren Kaplan 2011-2014
September 4, 2016
I love Barron’s. It is a weekly newspaper that comes hand delivered every Saturday about 6:00 AM. I cannot be sure because I don’t get up that early but I once got up at 7:00 AM and found that Barron’s had been delivered. I don’t get up that early on a Saturday on purpose. It just happened. So what is in Barron’s? First there is the social/business commentary of Randell W. Forsyth. He is witty and on the social issues, he is very sharp. His column “Up & Down Wall Street” alone is worth $1.00 for the issue.
Next up is Ben Levisohn’s column, “Streetwise”. Ben is always full of investment ideas and stocks and he passes the thoughts of what other Street people are thinking onto his readers. His column gives me ideas of which stocks I may want to write options on.
I use the column “This Week’s Previews” to see which company that I follow is having a report or meeting this week. I note that option premiums are higher the week when a report is expected. This allows me to glean extra premiums from these stocks that I am interested in. The beauty is that this page is included in my $1.00 cost.
There is a follow up page. That page follows up previous Barron’s recommendations with usually specific advice to buy or sell that stock.
Reporters like Andrew Bary, Jack Hough and David Englander usually give a report on a specific area of stocks and lets the reader decide, which one is the best for them. This requires further research but at least your nose is pointed in the right direction. All of this is in the first section of Barron’s for $1.00 a week. At the very least, you become a far more knowledgeable and interesting person.
Now, their second section is where there is real “meat” for me. Vito J. Racanelli’s The Trader is full of ideas. He always starts with a summary of the past week and then gets into what other analysts are saying followed by stock investment ideas. This is another must read column.
European Trader by Jonathon Buck is a one-page review of European investment ideas. We all know that one day, Europe is going to get out of its own way and give investors a home run appreciation. If you have the inclination to absorb a currency risk as well as a basic economic risk, then this is a must read.
Finally, there is a woman reporter. Shuli Ren covers the ever-challenging Asian Trader. She covers various specific investment opportunities in her area of the globe. Her column is ½ of a page shared with Craig Mellow’s Emerging Market. In August, I wrote a position of selling puts on the ETF TUR (Turkey) with a $33 strike price for $1.10 that expire on September 16th, 2016. Craig wrote a recent article on Egypt and explained how to invest in that country. After all, 82 MM people have needs and using an ETF gets you knowledeable people who know how to manage their stock market.
What about bonds? Well there is Amy Stone writing in her column called Current Yield. She is constantly reviewing the dangerous current bond market looking for the surprise that will send bond prices sharply down thereby raising yields for new buyers. Bonds were once a quiet dull no-risk market but no more. Ms. Stone has an exciting well-informed column to keep you abreast of the current thinking.
My favorite is Striking Price by Steven M. Sears. This is the column about stock options, which is near and dear to me. Although I am only involved in stock options, Steven’s column includes other options such as currency. For me, this is a must read so that I can better understand what others are thinking. I wish he were given a full page for writing rather than ½ a page.
There is even a column on commodities called Commodities Corner well handled by Stephanie Yang. One week may be about copper and the next may be about coffee. It just depends. However, Ms. Yang is constantly scouring the Street for the best ideas and she is not afraid to give her thoughts as to the current price of a commodity product.
There is a page devoted to a round up of Street research reports and then there are a huge amount of pages devoted to raw numbers. I use that section to monitor my investments in closed-end bond funds as well as closed-end country funds.
All this for $1.00 a week. That is a lot cheaper than hiring a money manager for 1% of assets, which can be 20-30% of your interest and dividend income. Yes, you have to make your own decision but Barron’s offers a sound guide. The magazine even offers investment advice, which is great for people who have investment decision difficulty.
This past week, an analyst at Morgan Stanley lowered his/her outlook on the cruise industry and it brought my favorite stock pick, CCL Carnival Cruise Lines into my buying range. All day Friday I was writing put options at various levels and various time periods. My family owns a travel agency and we are on the front lines while the analyst sounded to me like someone who is guessing and does not know how that industry can react to any crisis. The current crisis is the Zika challenge. Well, the analyst did not take into account the fast growing number of cruise ships in Asia and which has just begun. The truth is, there is a lack of cruise ships and the industry has already laid out plans for bringing on new ships up to 2022. Cruising is the safest way to travel around the world and with a growing leisure population with more disposable income, I am confident that CCL will see $100 a share within 5-years and dividends will increase to over $2.00 a year. Currently, the stock sells at $46.39 and pays a $1.40 annual dividend for a yield of 3.02%. Selling covered calls adds to my income and in this case, I sell far out of the money calls. I spend most of the dividend and call income on traveling. CCL shareholders owning 100 or more shares can get a Shareholder On Board Spending Credit when they cruise any of the Carnival brands.
Warren Kaplan has been writing options for 50 years. He has been a stockbroker, investment banker and brokerage owner. He currently owns and operates Kaplan Asset Management, a provider of financial assistance for small to middle market businesses. He has more than a half-century of experience in dealing with financial markets, giving guidance and consulting with management, and assisting in the development of business strategies and solutions. The Company has assisted and consulted many successful companies, such as Natures Bounty (NBTY) and Action Products International (APII), helping them to go public and trade on the NASDAQ stock exchange. His philosophy is to “do something with the profits.” “If you make $100 in the stock market, take 50 percent and invest it back into the market. Then, take the other 50 percent and buy yourself something.”
Additional disclosure: I am not a registered investment adviser and I do not give investment advice. Nothing in this article should be construed as investment advice. Investors are encouraged to do their own research and seek the advice of an investment professional before investing. Writing options is not for everyone. This article was written for informational purposes only.