- The widow of Steve Jobs makes her move.
- Trump breathes life into his enemies.
- The easiest money of the next six months.
The widow of Steve Jobs just bought a majority stake in The Atlantic.
I happen to respect The Atlantic.
So if you’re a reader, Laurene Powell Jobs — you have my applause.
Jobs is expected to assume full ownership of The Atlantic within five years.
I wonder if Mr. Trump considers The Atlantic part of the “fake news” media.
(More on that in a moment.)
Meanwhile, The New York Times Co. (NYT) sits at a 52-week high.
Wait! Aren’t newspaper companies — heck, publishers in general — supposed to be near extinction?
Yet here I am reporting bullish news on the maligned industry.
Clearly, powerful forces are at play.
In fact, shares are enjoying a push from the most powerful force on earth…
President Donald John Trump!
Yup. Every time “the Donald” rails against the media, he adds millions in market capitalization to the company.
Viewed through such a lens, the president should consider stopping his vendetta.
So if you’re a reader, Mr. President — please stop.
If the president can let it go, well… then The New York Times will die on schedule.
Of course, Trump won’t let it go.
Therefore, buying a few call options on NYT is virtually certain to pay off.
If you’ve never traded options, fear not.
Hutch’s full report is below.
Ahead of the tape,
Chief Investment Strategist, Wall Street Daily
Martin Hutchinson: Today I’d like to talk about LEAPS, which stands for Long-Term Equity AnticiPation Securities.
These are publicly-traded options with maturities of more than one year.
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They generally open on the September through November option roll dates with maturity in January of the third year. So, for example, the January 2020 LEAPS will start trading in September through November 2017.
LEAPS also exist for indexes. The S&P 500 futures options trade on the Chicago Board Options Exchange for December 2019. The 2020 options will appear in December 2017.
Like ordinary options, each contract represents 100 shares, so a January 2019 $150 call on Apple priced at $15.25 will cost you $1,525.
Before you buy options, check the volatility which affects the price of the option. More volatile shares have more expensive options.
For the volatility (services will usually tell you what the volatility is on an option) 20% is low and, 50% is high.
If the options are expensive and you still want to buy, then consider moving further out of the money. On that Apple example, you could buy $116 instead of $150 for those Apple calls.
There are three very substantial uses for LEAPS.
Firstly, you can take a bull position at the lower cost.
If you think Apple’s going to soar, you can buy the upside on 100 Apple shares with $15,000 – that’s the value – for only $1,525 using LEAPS. You’re getting 10 to 1 leverage essentially, provided that Apple goes above $150 before January 2019.
Second, they’re an efficient way to go short.
If you buy LEAP puts, it’s cheaper and less risky than shorting the stock. You get a lot of leverage for not much money, and again, you’re getting a decent maturity. So if you’ve got a reason for a stock you think is overvalued, you’ve got time for it to go wrong.
And then thirdly, you can hedge against an overall market meltdown using S&P 500 long-dated out-of-the-money puts.
For example, the December 2019 SPX $1,400 puts are currently trading at $25.70. So that’s $2,570 for one contract. If the SPX falls 60% to $960, which is less than it fell in 2008 and 2009, you’ll make $44,000 which will offset your other stock losses and will give you money to reinvest at the bottom.
The bottom line is that LEAPS, in three different ways, are one of the most useful investment tools you can have.
Thank you. This is Martin Hutchinson, signing off.
Senior Analyst, Wall Street Daily