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EXTR – Extreme Network Inc

2017-12-17

I am currently down past my stop level. Friday was an extreme selling day – very volatile 7%. I’m holding because I expect a bounce off of this. IBD Rankings are still strong. There is still time before the next earnings announcement.

2017-12-11
I am currently down $.43 /$13.03 = -3.3%. The past week hasn’t been trading right for this stock. The MACD is trending towards to the zero line and the Histogram is negative. In fact the Histogram turned negative the day I bought this. The Slow Stochastic has been close to being oversold. The volume has been decreasing since the large drop.

I’m expecting support at $12. My stop loss is $12.09, but I may give it more room. The trading history is much more volatile than GLW.

Checking the Options
$15 Jan 19 Call
35 Days
Bid .05 Ask .25
352 Open Interest
50%IV and
.16 Delta.

I would be able to get filled at .15 with 2 contracts. This is 1% and would cover commissions. I’m waiting for the shares to rebound to sell the options. I am watching this and waiting

2017-12-05
I bought EXTR – Extreme Network Inc yesterday, because I closed out my other holding and was looking for another opportunity. I bought 200 shares and got filled at $13.03. My stop loss is at 7% and will walk away at $12.09. Although this has a more volatile trading range and could need a wider stop.

This is a lower priced stock and have options available. I am legging into a covered call. The next earnings announcement is  Feb 6th. This was featured in Investor’s Business Daily – New America Vol 34 NO35 for this week. It was also featured in the Stocks in the Spotlight.

Their IBD rankings at the time are:
99 Composite
94 EPS
97 RS
52.37% ROE
75% Debt
113.4 shares outstanding

The $15 call for Jan 19th have Bid/Ask mean of .30 or 2.3%. The $15 would have a capital gain of $1.97 or 15%, but this option has a delta of .22. So the the market doesn’t think this is highly probable to be profitable option to buy

Bryan

 

2017-11-14

Corning Inc – GLW

I bought today at 31.77. This had been on my short list for some time, because I’ve wanted to own this company for a number of years. This was a internet bubble darling and I still wanted to stay I’ve bought them at least for a little while.

This company is a larger cap stock and have a liquid option market. Right now there is low implied volatility.

The next earnings date is Jan 23, 2018. Based on the chart pattern it is shaping up to break out and the upside is about $4.00 32-28 = 4/32 = 12.5%. The $28 is about the bottom of the cup of the cup with handle base. The upside is targeted to be $36.

The downside at 7% loss is $29.55. If the stock gets to this point I’m really wrong

This was listed in Investor’s Business Daily and the EPS and RS rankings were below 80 and breaks my trading plan. The chart pattern and liquid options is why I bought this over KRO

2017-12-04

I closed out my position, because I did not like the way it was trading. Last Friday there was a 4% shake in the stock. This was a red flag for me and feel that a drop that large is not really normal for this company. There was nothing in the news that would have caused that wide of a range.

Bryan

MBUU 2017-10-23

I was called out of my position of SQ when the options expired and I was looking for a new stock to roll into. I came across Malibu Boats Inc MBUU in Investor’s Business Daily Vol 34 NO 29 Week of October 23, 2017 – Your Week in Review.

I keep a short list of stocks that I am watching, but many are reporting earnings within the next standard option cycle due on November 17th. So I had crossed many off of my list.

I purchased the stock today 31.77 and plan on selling the $35 call for .65. I am legging into a buy/write. The volume is low currently and the delta is at .28. So I’m correct and the stock increases then I will be able to sell the call for more, but even now it’s still a good 2% gain.

Buy 100 shares MBUU $31.77

Current price
Sell to Open 1 Contract of MBUU NOV 17 2017 35.00 C  at Limit Price of $0.65. Duration of this order is Good until Cancelled.

A recommendation from Allen Ellman and most of the the books on covered call writing is: Do not sell a call during earnings reporting period. This is due to volatility. So, I then checked EarningsWhisper: MBUU for the next earnings release. That is for Nov 1 so the Oct 20, 2017 call option is available.

Remember to do your own due diligence. This example is used to illustrate a trade.

The upside is $35.00 a share. This will generate a $3.23 in capital gains or 10%
35.00 – 31.77 = 3.23 / 31.77 = 10%

Selling the call gives me $65.00
$0.65 x 100 shares = $65.00
This is another 2.0% in yield

So the total return on the upside is $3.88 a share or 12%.

My downside limit is 7%, but the extra $0.65 gives a higher probability for a successful trade. My cost basis for the stock is now $31.12 and a 7% loss is at $28.94
31.77 – .65  = 31.12 * .93 = $28.94

If this stock drops down to $29 a share I’m really wrong on the setup and will sell to preserve capital

Checking the Fundamentals for a profitable company:

Gross Margin (TTM) 26.62%
Operating Margin (TTM) 13.99%
Pretax Margin (TTM) 17.26%
Net Profit Margin (TTM) 11.02%
This company has good margins and Net Profit Margin tells you that out of every dollar of sale 11.02 hits the bottom line.

P/E excluding extraordinary items (TTM) 20.2

P/Sales (TTM) 2.3 You’re buying the company 230% of current revenue and anything under 2 is considered cheap.

They have some cash on hand:
Current Ratio (MRQ) 1.8
Debt: 1.1 They have 110% and are heavily leveraged
Debt/Equity (MRQ) 1.1

I like companies without a lot of debt, because that commits revenue. So, if it needs quick cash it will be able to meet short term needs it will be able borrow for the money.

Return on Equity (TTM) 87.91%

EPS (TTM over TTM) 1.51

Book Value per share 2.74 This should be bottom line in pricing for liquidation

Let’s look how this is currently trading. Cover call strategy requires a positive overall trend. Starting with a longer view point helps give some perspective on the current trading cycle.

The charts are from bigcharts.com:
This is the current 5 yr chart

Next a current 1yr weekly chart.

3 Month Chart.

Bryan

2017-11-14 Update

I was wrong and was stopped out of my position.

I had written down the next earnings date as Dec 7, 2018 and planned on selling the November 17th call. The earnings announcement was on November 7 and they disappointed. This caused the stock to fall past the stop point.

The days before were not acting right and was close to selling the position at a slight loss instead of the greater loss

 

SQ 2017-09-01

I closed out my position with KBH, because the stock did not act right. I had seen support at $23.oo a share and the stock slipped past that and then it started to roll over. I closed out at $21.34 at a 8.3% loss
$23.29 – $21.34 = $1.95- / $23.34 = 8.3%

I had wanted to own this company, tried to buy on a dip, and then sell a $25.00 call when the price rebounded. It was a profitable company and felt that it was oversold. It didn’t work out as expected – the market, sector, stock, or timing was wrong. So, I went to my short list of stocks that I’m considering.

I had come across Square Inc – SQ. This was in the price range that I am considering, because my line is limiting my choices right now and needed a lower priced company I bought 100 Shares of SQ at $25.796 plus commissions = $2,586.55

This was in Investors Business Daily, IBD Weekly, Vol 34, N.O 18, Week of August 7, 2017 IPO Leaders

I am selling a $27.00 Oct 20th call option against this stock for $.95 a share.
Sell to Open 1 Contracts of SQ OCT 20 2017 27.00 C (SQUARE INC) at Limit Price of $0.95. Duration of this order is Good until Cancelled.

A recommendation from Allen Ellman and most of the the books on covered call writing is: Do not sell a call during earnings reporting period. This is due to volatility. So, I then checked EarningsWhisper: SQ for the next earnings release. That is for Nov 1 so the Oct 20, 2017 call option is available.

Remember to do your own due diligence. This example is used to illustrate a trade.

The upside is $27.00 a share. This will generate a $1.20 in capital gains or 4.6%
27.00 – 25.80 = 1.20 / 25.80 = 4.6%

Selling the call gives me $95.00
$0.95 x 100 shares = $95.00
This is another 3.6% in yield

So the total return on the upside is $2.15 a share or 8.3%.

My downside limit is also 8%, but the extra $0.95 gives a higher probability for a successful trade. My cost basis for the stock is now $24.85 and an 8% loss is at $22.86. This is
25.80 – .95  = 24.85 * .92 = $22.86

Checking the Fundamentals for a profitable company:

Gross Margin (TTM)	36.64%
Operating Margin (TTM)	-3.80%
Pretax Margin (TTM)	-4.01%
Net Profit Margin (TTM)	-4.13%

This trade is all off based on the fundamentals with negative margins!

Net Profit Margin tells you that out of every dollar of sale -4.13% hits the bottom line. This is currently loosing money.

P/E excluding extraordinary items (TTM) -121.70 They are losing money

P/Sales (TTM) 5.35 You’re buying the company 535% of current revenue and anything under 2 is considered cheap.

They have some cash on hand:
Current Ratio (MRQ) 2.3
Debt: 0% Investor’s Business Daily has 0%, but Yahoo has Total Debt/Equity (MRQ) 49.73

I like companies without a lot of debt, because that commits revenue. So, if it needs quick cash it will be able to meet short term needs it will be able borrow for the money. This is why the Quick Ratio does not bother me.

Return on Equity (TTM) -13.37%

EPS (TTM over TTM) -121.70

Book Value per share 1.84 This should be bottom line in pricing for liquidation

Let’s look how this is currently trading. Cover call strategy requires a positive overall trend. Starting with a longer view point helps give some perspective on the current trading cycle.

The charts are from bigcharts.com:
This is the current 5 yr chart

Next a current 1yr weekly chart.

3 Month Chart.

Bryan

KBH 2017-07-24

I have been assigned the call from my last position in CTRL. That would have been approximately 8% gain for 33 days when I placed the transaction. The actual execution and the trading costs turned out to reduce the gain down to 5%. I created a page on slippage to detail this out. Having a small account these extra charges can dramatically change the profitability on a trade.

I bought CTRL at $19.72 and it closed at $23.32. By selling a covered call at $20.00 I missed the last $3.32 past that $20.00 a share. I am OK with this, because I was receiving a good return in a short time frame and it was a successful trade.

I now have cash available to find another opportunity. Over the past few weeks I’ve been researching Investor’s Business Daily for stocks between $15 – 30 that have earnings being released beyond the next expiration on the 3rd Friday in August 2017-08-18.

KB Homes KBH popped up, because it had the price range, technicals, and earnings are being posted September 26, 2017. I am looking to buy 100 shares at $23.30 and selling the Aug 18, 2017 $24.00 call

I bought 100 shares as a market order to be executed tomorrow 2017-07-23. I have considered placing a Good Till Cancelled order for the last closing price, but I decided to simply buy the stock and then sell the call later. I am expecting this to rise and would receive a better premium later.

The last price was 23.30 and looking at the chart I think that this may not hit this last price. If a GTC order for 23.30 is placed and if it doesn’t touch that price then the order would not be filled and I would miss owning this stock. I’m expecting that this to open higher and may not touch the 23.30 price point

This is a chart snippet from Bigcharts.com KBH. This stock looks like it has strong support at $23.oo a share. There was a huge spike in buying on strong volume at the end of June. This is a sign of Accumulation and the stock has been drifting off the new high on light volume

I will be legging into a covered call position. Right now the option premium is low <2%.

Current Day	2017-07-22
Ticker	KBH		Max Cap Gain	0.7
Current Price	23.3		Cap Gain Percent	3.004291845
Strike Price	24		Yield	1.716738197
Expiration Date	2017-08-18		Total Return	4.721030043
Bid	0.4		Days	27

A recommendation from Allen Ellman and most of the the books on covered call writing is: Do not sell a call during earnings reporting period. This is due to volatility. So, I then checked EarningsWhisper: KBH for the next earnings release. That is for Sep 26 so the Aug call option is available

Remember to do your own due diligence. This example is used to illustrate a trade.

I am looking to sell the $25.00 call, but will have a small profit selling the $24.00 call. The down side at an 8% loss would be $21.44 and based on the chart if this point is touched then the downtrend will be larger.

Checking the Fundamentals for a profitable company:

Gross Margin (TTM) 15.24%
Operating Margin (TTM) 4.84%
Pretax Margin (TTM) 4.63%
Net Profit Margin (TTM) 3.13%
Net Profit Margin tells you that out of every dollar of sale .03 hits the bottom line. These are low but the overall market action is positive

P/E excluding extraordinary items (TTM) 17.9 – This is low compared to industry. I am not bothered by high P/E ratios. William O’Neil discusses this at length and I highly recommend reading his books Reading List

P/E Normalized (MRFY) — 20.8 and is lower than industry average

P/Sales (TTM) .5 You’re buying the company 360% of revenue and anything under 2 is considered cheap.

They have some cash on hand:
Current Ratio (MRQ) —
Quick Ratio (MRQ) —
LT Debt/Equity (MRQ): 1.4
Total Debt/Equity (MRQ) 1.4

There is a large amount of debt based on the fundamentals from Scottrade, but IBD has Debt% at 0. This is a large discrepancy! This company is a leveraged company.

I like companies without a lot of debt, because that commits revenue. This company has no debt. So, if it needs quick cash it will be able to meet short term needs it will be able borrow for the money. This is why the Quick Ratio does not bother me.

Return on Equity (TTM) 7.17%

Sales (5Yr) 22.26%

EPS (TTM over TTM) 35.20%

Tangible BV per share (MRQ) 20.72 This should be bottom line in pricing for liquidation. The purchase price of 23.30 is only about 15% above this bottom level.

Let’s look how this is currently trading. Cover call strategy requires a positive overall trend. Starting with a longer view point helps give some perspective on the current trading cycle.

The charts are from bigcharts.com
5 yr chart. Looking at this if this stock clears the $24.00 resistance level then there will be a large gain.

Next 1yr weekly chart. This is above the 50, 100, and 150 day trend lines and they are spread out as a clear uptrend.

3 Month Chart. This is just above the 20 Day EMA. The MACD is still positive and Slow Stochastic is just off of an oversold condition.

Bryan

2017-08-13

KBH $22.70

The stock as been under pressure, but is not at the 8% stop loss limit at $21.43. This was slowly consolidating at $23 as share over the past couple of weeks and that price point held until…

Thursday 20017-08-09
KBH $22.50 – .70

This was on less than average volume and this was a bad day on the DJIA. This was on light volume and there is no aggressive selling. I am still holding on and may still write a call for next month.

I am also looking at another company in case KBH hits my stop loss. The desire is to keep the cash active in order to generate income. I am considering:
Planet Fitness – PLNT. The just posted earnings and the stock jumped.
Square – SQ. This is a volatile stock, but have no debt.

I will be waiting on how the next few days have traded. If I do not see active accumulation I will be rolling into another investment.

2017-08-28
I closed out my position yesterday, because my loss limit was reached. I bought 100 shares of SQ and will be updating my blog with the numbers
Sold 100 Shares of KBH at $21.34

This was at my 8% loss. So something was wrong with the market, sector, or company. I prefer to accept this in order to free up the capital for something new….

CTRL 2017-06-18

I have been assigned the call from my last position in QIWI. That was approximately a 10% gain for about 44 days. This turned out to have been one that I could have used management techniques to capture more out of this.

I bought this at $18.63 and 45 days later it QIWI closed at $25.20. By selling a covered call at $20.00 I missed the last $5.20 past that $20.00 a share. I am OK with this, because I was receiving a good return in a short time frame and it was a successful trade.

I now have cash available to find another opportunity. I came across CTRL

I bought 100 shares as a market order to be executed tomorrow 2017-06-19. The last price was 19.35 and I need to place the sell to open for a covered call with the $20.00 call. The Jul 21st is going for bid: .80 and ask: 1.00. I will be asking for .90 a contract. 

This will be $65 in capital gain (20.00 – 19.35) and $90 in option premium. This will be approximately 8% return for 33 days

Control4 first came to my attention when it appeared in IBD50 in Investor’s Business Daily, VOL 34 NO 8, Week of May 29, 2017 at #10. The closing price was $18.07. The stock climbed higher and is currently pausing.

A recommendation from Allen Ellman and most of the the books on covered call writing is: Do not sell a call during earnings reporting period. This is due to volatility. So, I then checked EarningsWhisper: CTRL for the next earnings release. That is for Aug 3 so the July call option is available

Remember to do your own due diligence. This example is used to illustrate a trade.

The upside is $20.00 and with the option premium my effective purchase price is 18.55.

The down side at an 8% loss would be $17.06 and based on the chart if this point is touched then the downtrend will be larger.

Checking the Fundamentals for a profitable company:

Gross Margin (TTM)	50.12%
Operating Margin (TTM)	2.88%
Pretax Margin (TTM)	2.62%
Net Profit Margin (TTM)	3.31%

Net Profit Margin tells you that out of every dollar of sale .03 hits the bottom line. These are low but the overall market action is positive

P/E excluding extraordinary items (TTM) 67.2 – This is low compared to industry. I am not bothered by high P/E ratios. William O’Neil discusses this at length and I highly recommend reading his books Reading List

P/E Normalized (MRFY) — 35.5 and is lower than industry average

P/Sales (TTM) 2.2 You’re buying the company 360% of revenue and anything under 2 is considered cheap.

They have some cash on hand:
Current Ratio (MRQ) 3.9
Quick Ratio (MRQ) 2.9
LT Debt/Equity (MRQ): 0
Total Debt/Equity (MRQ) 0.1

The amount of debt is a large reason I chose this company over other opportunities I considered.

I like companies without a lot of debt, because that commits revenue. This company has no debt. So, if it needs quick cash it will be able to meet short term needs it will be able borrow for the money. This is why the Quick Ratio does not bother me.

Return on Equity (TTM) 5.43%

Sales (5Yr) 17.46%

EPS (TTM over TTM) -23.83% Warning sign

Tangible BV per share (MRQ) 5.79 This should be bottom line in pricing for liquidation

Let’s look how this is currently trading. Cover call strategy requires a positive overall trend. Starting with a longer view point helps give some perspective on the current trading cycle.

The charts are from bigcharts.com
5 yr chart

Next 1yr weekly chart.

6 Month Chart.

Bryan

I am purchasing 100 shares and the current price is 19.03

Current Market Price	19.03
Target Gain 20%	22.836
Close Position 8%	17.5076

I think that this will be higher than 20% on the up side. Cut losses at 8% and looking at the charts it should find support around that level.

Remember to do your own due diligence.

Looking at these numbers I want to own this stock outright, but will be considering writing a covered call against this with a bounce in the stock price. Right now this is oversold and the margins are pretty good. These are lower than industry, but my portfolio size limits my choices. These numbers currently are from Scottrade.com

Gross Margin (TTM)	24.05%
Operating Margin (TTM)	17.66%
Pretax Margin (TTM)	15.18%
Net Profit Margin (TTM)	15.55%

P/E excluding extraordinary items (TTM) 10.5 – This is low compared to industry and S&P

P/E Normalized (MRFY) — No earnings

P/Sales (TTM) 1.4 Very Low. You’re buying the company 140% of revenue and anything under 2 is considered cheap.

They have cash on hand:
Current Ratio (MRQ) 2.6
Quick Ratio (MRQ) 2.1

They are heavily leveraged 65% of company is debt, but this could be a good thing right now if they took on the debt to expand capasity
LT Debt/Equity (MRQ) 0.5
Total Debt/Equity (MRQ) 0.6

Return on Equity (TTM) 37.00% =Net Income/Sales 37 cents hits the bottom line for every dollar of sales

Sales (5Yr) 13.53%
EPS (TTM over TTM) 305.25%

Tangible BV per share (MRQ) 10.28 This should be bottom line in pricing

Let’s look how this is currently trading. The charts are from bigcharts.com

5 yr chart

1 year chart with 20 EMA, because I’m considering options for this and that’s approximately 1 month

I am looking for support at the 20 EMA. Looking at a 6 month chart, this is still in positive territory with the MACD and oversold with Stochastic

NASDAQ Analyst Rating is a strong buy

2017-05-14

I didn’t sell during this earnings period and closed out my position. These values include commissions with a small account.
I bought at 19.32
I sold at 21.89
That was $257 profit in capital gain

I sold one call and received 42.30
I sold another call and received 67.30
That’s $109.60 in yield

Total profit $367 in 3 months on 1932 = 18%