Dividend Stock During Downturn

This downturn should be a reminder to us to look to either start or add to positions that carry high dividend yields. Over the long term, this strategy has done very well. The important step is the research you do in finding stable stocks. A few stocks that I have found to have a high dividend yield compared to their average are GE, Exxon Mobil, Johnson and Johnson, and Kraft. I am sure there are others. Please post what you find.

GLD, GE, and PBW

- It looks like my call spread trade with gld will be in a holding pattern until time value expires. I could have done a better job of analyzing the pricing on the options throughout the spread cycle.

- GE seems to be a holder but I cannot do much with it right now. I am holding as they are looking to sell some businesses.

- I am thinking that PBW is at a bottom for the rest of the year. The down trend which was fierce the last month has stopped completely. That is not to say that the ETF is moving up. Just that the down trend has stopped.

This type of financial environment is volatile to me but not scary. It is the reason I bought GLD in the first place. I believe every market has its opportunities. You just have to find them. If you have a strategy, then you will find a market or stock for that strategy. Be patient and do the work necessary to find those positions.

learning to make money with spreads

Hey

Recently I started to look into investing in spreads to minimize the risk, yet still make a decent profit. My first trade was with PBW. The stock had gotten taken down in January and formed a buy doji the length of a runway. For protection, I went out six months to buy the June 22/24 call spread. The stock had gotten as low as 18 but because I had time on my side, I still held. Well, in May the stock moved up to my sell point and I was out of the position with a 47% gain.

Wow! 47% on the first trade. This looks like something I can do with my extreme discretionary funds.

The next trade I made was with GE. I bought the 32/34 Dec call spread thinking that the formula worked once, why not again. But right now the stock is around 27 with new earnings out that met expectations. I still feel pretty safe with this trade because I believe the downturn was the fault of the earnings miss the previous quarter. They also are looking to sell some divisions that should boost the earnings and the stock price.

I have also recently purchased the Dec GLD 92/94 call spread. I purchased this two weeks ago when the ETF was at 91 and today it is at 95. With both calls in the money, I figured that I would carry the two dollars and sell. Wrong.

It seems time has a strange formula that I had not picked up on with PBW. With PBW, there was barely any time value left on the trade. So the spreads were basic. But this is not the case with GLD as there is still five months to go before expiration. The time value for the 94's is currently more than the time value for the 92's. So much so that I am going to have to wait for my profit and now have the risk of the ETF going down during that time. This is an eye opener and I will have to add that to my list of issues with trading spreads.

low dollar problems

Hey



There is an interesting article below that talks about the level of petrodollar union being busted for a petroeuro system because of the falling value of the dollar. That could cause some trouble bond wise.

http://www.enn.com/energy/article/24437



The markets bounced yesterday. Continue to buy the basic companies with strong earnings and dividends (PEP, GE, GS) while continuing your research into oversold financials. I know there are some out there who didn't get sucked into the sub prime hype like Goldman Sachs. They are the ones to buy. Did I mention Goldman Sachs isn't in trouble? I just want to make sure I mentioned that Goldman has so far avoided the subprime mess.

Speaking of subprime, the Wall Street Journal has an article today talking about the smart banks and the dumb banks. As I do not have a subscription, I cannot provide a link. I can only let you know that it is on page A2 of today's paper.



Keep an eye on Apple. The stock was hit to a tune of 20% and that to me sounds alarms technically. If it does not eclipse its high during the Xmas shopping season with the new Ipod Touch (which is certainly possible), I would look to sell.

Like I said in a previous post, I am currently only holding retirement accounts while continuing my education. But come the first of the year, I will be investing again.

Pepsi's earnings

Hey

Here are some stories that explain the earnings for this past quarter.

http://www.businessweek.com/investor/content/apr2007/pi20070425_529061.htm?campaign_id=yhoo

http://www.thestreet.com/_yahoo/newsanalysis/food/10352721.html?cm_ven=YAHOO&cm_cat=FREE&cm_ite=NA

As for my GE trade, I think I was the last person to sell. I really sold at the bottom! Crazy, but it happens. Like I said before, on to the next trade.

The Wikiwealth portfolio consists of the following:
Pepsi Stock (www.pepsi.com)
Sharebuilder Money Market (www.sharebuilder.com)
Optionsxpress Money Market (www.optionsxpress.com)
Have any ideas, questions, comments, web sites or different blogs to look at? Do you want to be notified when there is a new blog entry? Email at keanemd@gmail.com and let me know.

stopped out

Hey

For all my and brilliance on the June 35 call, I was stopped out and sold. As much as I didn't want to be stopped out and hold on, the facts are the facts. The call reached the price, and I sold. On to the next trade.

Earnings for Pepsi come out tomorrow. I would assume they will match or beat by a penny as is customary for this company.

Cheers!

GE

Hey

As I mentioned on Friday, I have bought a June 35 call. There are a few reasons why I feel this is a correct trade.

- First off, I know what my max loss will be. Entries into a market are important, but if you don't know how or when to exit, you won't do very well.

- Secondly, this stock is technically ready to move. The 200,50, and 20 day averages are all together. The Bollinger Bands are within 1 1/2 points from eachother. That is a very tight range and a good indicator of upcoming volatility. There has been a 50% Fibonacci retracement from 38 back to 35 after a move from 32 to 38.

Earnings were good and positive. They mentioned a low exposure to the subprime sector. There are also 20 Million less shares shorted than in March.

These things combined with my rules for what I buy told me that this particular option is the one with the most reward for the least risk. I have my stops put in and I feel good about this trade.

New High

Hey

It looks like the Dow has exploded! I read a bit about the lack of supply recently from Cramer at www.thestreet.com.

I just purchased a June GE 35 call. I feel comfortable that it falls within my parameters. It is right at the money. It is at a support. The trend lines (200,50,20) have all converged at 35. The earnings were solid.

There seems to be plenty of volatility coming alive. Options might be a way to exploit it. But be smart.

Oh, Pepsi hit a new high! Yeah for retirement.

Cheers
The Wikiwealth portfolio consists of the following:
Pepsi Stock(www.pepsi.com)
Sharebuilder Money Market (www.sharebuilder.com)
Optionsxpress Money Market (www.optionsxpress.com)
GE June 35 Call (www.ge.com)

Have any ideas, questions, comments, web sites or different blogs to look at? Do you want to be notified when there is a new blog entry? Email at keanemd@gmail.com and let me know.