There are not too many historic moments one get to see in their lifetimes. One of such moment came this week when Egyptian President Hosni Mubarak resigned after 30 years of rule ! Congratulations to all of Egyptians for this historic moment !
2/11 would have same kind of profound significance in Egyptian history as 9/11 has on American history.
I was glad to see the peaceful revolution of 18 days and final outcome. There was every possibility that outcome at Tahrir Square could have been similar to another Square starting with "T" 22 years ago. But Egyptian Military had displayed great level of maturity and sensibility in handling this revolution. We all hope that they continue to display this going forward and take this moment to make some real changes which could lead to overall reforms not only in Egypt but also in Middle-East.
Markets continue to show great level of resilience despite so much turmoil and un-certainities in Middle-East. Even though oil went above $90 in late Jan, it receded back below that level after seeing peaceful demonstrations. Emerging markets have been losing some ground in 2011 due to revolts in Middle-east and inflation worries across many countries including BRIC. Most of the emerging market indices are down in 2011 while their counterparts in developed markets have risen over 5% in less than 2 months. Money being so liquid, it is moving fast and furious between these markets. Currently best performing asset class is US small-caps which are up by 7-8% YTD.
At these heights, investors need to be careful and position their portfolios for upcoming correction. Here is one recommendation:
Covered Call Strategy:
Since DOW is already over 12250, one should start selling "in-money" covered calls. For example: If you own 500 shares of BAC (which is trading at $14.77), sell 5 Mar 15 covered calls (at 42 cents). This should create about $200. If stock remains above $15 on Mar 19, these calls would be assigned means your shares would be sold at $15. If they are below $15 on Mar 19, calls would expire and you can keep your shares and $200 you got from selling call premiums. Alternatively you can sell "in-money" calls (Mar 14) at 1.02 earning about $100 per contract. Markets are due for correction. So if it went down, you would have at least protected your long-term holdings by generating some income by selling covered calls.
Now coming to this week's stock recommendations:
Since markets are quite high, my recommendations this week are more of defensive or beaten down stocks:
2/11 would have same kind of profound significance in Egyptian history as 9/11 has on American history.
I was glad to see the peaceful revolution of 18 days and final outcome. There was every possibility that outcome at Tahrir Square could have been similar to another Square starting with "T" 22 years ago. But Egyptian Military had displayed great level of maturity and sensibility in handling this revolution. We all hope that they continue to display this going forward and take this moment to make some real changes which could lead to overall reforms not only in Egypt but also in Middle-East.
Markets continue to show great level of resilience despite so much turmoil and un-certainities in Middle-East. Even though oil went above $90 in late Jan, it receded back below that level after seeing peaceful demonstrations. Emerging markets have been losing some ground in 2011 due to revolts in Middle-east and inflation worries across many countries including BRIC. Most of the emerging market indices are down in 2011 while their counterparts in developed markets have risen over 5% in less than 2 months. Money being so liquid, it is moving fast and furious between these markets. Currently best performing asset class is US small-caps which are up by 7-8% YTD.
At these heights, investors need to be careful and position their portfolios for upcoming correction. Here is one recommendation:
Covered Call Strategy:
Since DOW is already over 12250, one should start selling "in-money" covered calls. For example: If you own 500 shares of BAC (which is trading at $14.77), sell 5 Mar 15 covered calls (at 42 cents). This should create about $200. If stock remains above $15 on Mar 19, these calls would be assigned means your shares would be sold at $15. If they are below $15 on Mar 19, calls would expire and you can keep your shares and $200 you got from selling call premiums. Alternatively you can sell "in-money" calls (Mar 14) at 1.02 earning about $100 per contract. Markets are due for correction. So if it went down, you would have at least protected your long-term holdings by generating some income by selling covered calls.
Now coming to this week's stock recommendations:
Since markets are quite high, my recommendations this week are more of defensive or beaten down stocks:
- GenON Energy (GEN) at $4
- Sandridge Energy (SD) at $7.7
- PMI at $3.20
That's all for now !
/Shyam
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