The “dog days” of August are here.
Vacations… lazy summer days … and lighter trading volumes.
But the stock market has been unstable due to news on trade tariff wars, uncertainty over future Fed action and a slowing economy.
That means elevated volatility for weekly option sellers.
Elevated volatility means rich premiums and that make this August a good time to sell weekly options.
Here are 3 stocks I like to sell weekly options on right now.
General Motors (GM)
Mary Barra has done it again.
Who, you might ask, is Mary Barra?
The head of General Motors (NYSE: GM) and the best CEO in the United States.
She expertly steered the focus of a giant multinational firm from market share and revenue to profits. It seems Wall Street has failed to understand this shift, though, as the stock is shockingly undervalued.
The company reported second-quarter revenue and earnings Thursday that exceeded analyst estimates, despite weaker sales in China. This success was largely due to strong sales of more profitable pickup trucks and SUVs.
Management forecasted that the second half of the year would be even stronger than the first half. They also reaffirmed their full-year earnings outlook of $6.50-$7 per share, while the Street’s consensus was for EPS of $6.59.
I see no reason why management would fail to deliver on this and think their estimates may even be on the conservative side.
Gasoline prices are fairly low by historical standards and likely to fall next year. When gas prices go down, people are more willing to buy pickups and SUVs, which should lead to continued strong sales of these high-margin vehicles.
Despite the continued tariff wars, GM stock has held up making it a good candidate to sell weekly options against.
Micron Technology (MU)
Micron Technology (NASDAQ: MU) is one of the largest suppliers of NAND flash memory chips, which go into mobile devices such as phones, tablets and laptops. It is the technology leader in this market, giving the company the ability to charge more for its chips.
Business is good, based on the last earnings announcement, and management forecasts a rebound in memory demand for the rest of the year.
The stock cratered in the second half of 2018 on concerns of trade disputes hurting Chinese demand. This shows how myopic (or stupid if you’re feeling less generous) Wall Street can be.
Demand for mobile devices isn’t going anywhere — here or abroad.
MU has rebounded nicely off last month’s lows, helped by recent analyst upgrades.
I expect shares to continue their uptrend creating short-term weekly option income opportunities.
Delta Airlines (DAL)
I’m looking to repeat our recent success trading Delta Air Lines (NYSE: DAL).
Earlier this week, the company reported better-than-expected quarterly earnings and record revenue. Management also raised full-year guidance.
CEO Ed Bastian noted that five of the company’s 10 best revenue days in its history occurred in the past month.
This is likely due in part to the fact that Delta does not operate the Boeing (NYSE: BA) MAX, which was grounded following deadly crashes.
And I believe Delta will retain some of its recent market share gains even after the MAX issues are resolved.
Shares ran up following the earnings announcement but remain undervalued. The combination of a low valuation, terrific fundamentals and large option premiums make DAL a great put-selling candidate.
We are going to pick up a large chunk of cash for selling an in-the-money weekly put on Delta in August.
Selling Weekly Options
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About The Author
Michael Shulman is a 30 Year Veteran of the financial markets – as a trader, a financial analyst, a financial writer and most recently as an educator.
Mr. Shulman made his first option trade in 1985 – COMPAQ Computer calls – a position that expired worthless. His second trade broke even; the third brought him a year’s salary, a near twenty to one return on his investment. Michael has never looked back. He entered the financial publishing business formally in 2001 as director of research for ChangeWave Research’s institutional research business and as the writer and editor of Hedge Fund Investing.
He has published two books – Sell Short and Made in America – both of which can be found on Amazon.com and is a frequent contributor to reputable financial sites like Seeking Alpha, MSN, MainStreetInvestor, and Traders Reserve.
His trade recommendations in his Options Income Blueprint, Perpetual Income Portfolio Club and Income Masters services maintain a 98% success ratio, meaning his trades produce the expected income 98% of the time. No one’s perfect.