Comment by phil

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phil
June 25th, 2015 at 12:03 pm

You're welcome Jeff. 

CNX/Albo – Coal is not coming back unless the figure out some way to clean up emissions – doesn't matter who owns it.  

You're welcome Savi.  Keep in mind it's just doing exactly what we expected – putting in the lows on rollover day.  Just make sure you know what amount you want to be at when we cross back to break-even and don't let greed drive your trading. 

MON/Options – We kind of knew that because other countries are outlawing round-up.  Not only that, but look at the trend in the US of companies switching to non-GMO foods.  There's more lost business for MON so it's not a stock I have any interest in these days.    

FTR/Options – We just did them:



Submitted on 2015/06/16 at 10:00 am

FTR/Albo – $283M is only about 5% of their revenues and FTR only serves about 3M customers so what I liked about them was they were regional and steady.  What I'm worried about is perhaps FTR biting off more than they can chew with this deal though it could also be a huge windfall for them as they are getting paid to do something they want to do anyway (expand their broadband coverage base).  

On the other hand, I live maybe 600 feet away from a street that has FIOS and VZ has long decided it isn't worth it to run their lines up my block so better numbers guys than FTR employs have told VZ that there's no return on some investments.  Of course, my block doesn't have Federal grant money, which might have tipped the scales.  

Let's divide the $283M x 10 years = $3Bn divided by the 650,000 locations they plan to service.  That's $4,615 per location – not a bad subsidy!   HOWEVER, FTR did add 200,000 locations in 2012 and 2013 and that tanked their stock at the time and they were only just starting to reap the rewards (which is why we started with them around $4) and now they are going to do it all again?  



So, that's my long way of saying yes, I like buying FTR but only scaling in and expecting to get lower entries as time goes by and investors sour on waiting for this very capital-intensive expansion to show some payback.  Probably the reason the puts pay so much is because they are an accurate estimate of where the stock will be in 2017 BUT selling the $5 puts for $1.30 nets you in at $3.70 and pays you 3 years worth of dividends (0.42) in 18 months so why bother owning the stock at all.  

The delta is 0.44 so another 0.50 down on FTR gives us a $1.50 entry and that's about where I'd pull the trigger in the LTP, but well worth watching.  From an allocation perspective, if you went in now and were willing to own $10,000 worth of FTR (2,000 shares), I'd start with 8 short puts and, if they go up, you keep $1,040, which is 10% back on $10,000 you never had to spend.  If they go down, you don't worry until $3.70 and, if assigned there, you sell the 2-year $3 puts and calls for $2+ and you net $1.70/2.35 on up to 1,600 shares and if those fail you can do it again for 3,200 shares at less than $2, which is only spending $6,400 on 3,200 shares vs spending $10,000 now on 2,000 and 2,000 shares will have to make you 0.50 each just to get the same return you get from the short puts with SO MUCH LESS RISK AND SO MUCH MORE FLEXIBILITY!!!  

Still the same price.