We took profits and closed a number of trades at options expiration. At the same time, there are still a number of promising situations where our investment thesis still holds. We like to own large cap stocks that trade at a discount to the market on a valuation basis. We also like stocks that are not overly levered and that have the ability to buy back stock will excess cash flow. We believe these kinds of stocks have more upside potential, than downside risk making them good candidates to own, and sell cash covered puts or put spreads against. With this in mind, we did the following:
| Ticker | Action | Quantity | Expitation | Strike | Type | Price | Underlying Price |
| DISCA | Sell | 1 | 7/21/17 | 27.50 | Put | 0.90 | $29.16 |
| Buy | 1 | Cash | 27.50 | ||||
| Debit | $26.60 | ||||||
| ESRX | Sell | 1 | 8/18/17 | 70.00 | Put | 5.40 | $66.46 |
| Buy | 1 | 8/18/17 | 65.00 | Put | 2.88 | ||
| Credit | -$2.52 | ||||||
| HCA | Sell | 1 | 6/16/17 | 87.50 | Put | 5.30 | $83.55 |
| Buy | 1 | 6/16/17 | 82.50 | Put | 2.65 | ||
| Credit | -$2.65 |
We think Discover Communications (DISCA) will still drift higher over time making it a great candidate for selling cash covered puts. On January 30, 2107, we wrote an April 21, 27.50 Strike put that expired worthless. Click here to see the original article. We suggest selling another $27.50 strike put with a July expiration for $0.90 or better.
Express Scripts (ESRX) and HCA Holdings (HCA) are two inexpensive companies in the healthcare field. ESRX trades at a PE of 12.3 and HCA trades at a PE of 12.50. They are the victims of uncertainty around healthcare reform. (Click on the names/tickers to go to the original articles.) Since investors are unsure what the health insurance and doctor/hospital reimbursement landscape will look like going forward, these stocks have been tossed aside. We believe investors will mark these stock prices higher to reflect their true value at any time. We suggest rolling them the put spreads out from the April to later dates as indicated in the table above.
Bear in mind that ESRX will report earnings today, HCA Holding Reports earnings on May 2, and DISCA will report on May 9. We are not expecting any surprises announcement from the companies, so from this perspective, you should have the opportunity to get good execution. Try to get the prices suggested above or better.
There is one issue that may through a monkey wrench into the works. France held the first round of elections on yesterday and two outsiders Emmanuel Macron, Former French Minister of the Economy, Finance and Industry and Marine Le Pen, President of the National Front will be having a showdown in May. The European and US Equity markets are ripping higher on the news. As a result, you must be careful if you try to buy into these positions. Use limit orders and get the price you want. Do not fret if you cannot step. We will have other ideas over the weeks and months ahead.
