The Vintage Viewpoint Blog

Vintage Capital Advisors Welcomes Humberto Salinas to the Team!!!

Mon, 26 Sep 2011 19:04:00 GMT

Vintage Capital Advisors would like to welcome Humberto Salinas to the firm. Mr. Salinas comes from 16 years of asset management experience and is part of a successful team of advisors in Mill Valley, CA area, each of whom will be announced as they come on board. Mr. Salinas specializes in risk management strategies for clients consisting of individuals, institutions and retirement plans, including 401K, pension and profit sharing plans. Mr. Salinas can be reached at 415-317-1864. We welcome him to the team and encourage anyone who is seeking an investment advisor in the San Francisco area to please give Mr. Salinas a call as he will be very happy to speak with you, and to work toward meeting all of your investment goals and objectives.

Welcome Humberto!!!

The Management Team

Vintage Capital Advisors, LLC

Results of Bull Put Spread Blog of 12/29/2010

Wed, 23 Feb 2011 20:47:00 GMT

We are very happy to announce that the results of our Bull Put Spread, blogged on 12/29/2010, worked out favorably. The stock closed at $39.19 per share, above our high short strike of $38. Therefore, under this scenario, we were able to keep the net premium generated by the transaction and never had to lay out any additional capital for this transaction.

If you have a strategy you would like us to review for you, please do not hesitate to contact us.

Is it true you can own a stock without paying for it right now? Yes, it is!!!

Thu, 10 Feb 2011 17:39:00 GMT

As an investment advisor, one of the comments we hear in a regular basis is, “I really like this company and/or the market, but I’m not sure right now is the right time to buy. I wish there was a way to buy it without putting too much into it right now.” Our response to them is simple. “You can, and we have the solution.” To illustrate the point, we will talk about an actual transaction we executed on 1/31/2011. The stock is one which has reasonable growth prospects as the market recovers, has a good balance sheet, and has recently experienced a pullback. The company is Las Vegas Sands (LVS) trading about $46.50 on 1/31/2011, and the strategy is a Vertical Spread used in combination with a Short Put. This strategy is a bullish strategy and creates a synthetic long position in the stock.

The way the strategy works is as follows:

We create a Vertical Spread on the stock by selling the June 2011 LVS $57.50 strike call option, and we simultaneously buy the June 2011 LVC $46.00 strike call option.
Next to cover the difference in premium on this transaction, and since we are bullish on the stock at $46.50 per share anyway, we sell the June 2011 LVS $43.00 strike put option.

So here are the real life results of this transaction:

Our Vertical Spread yielded us a premium by selling the call of $2.19, and our purchase of the call option cost us $5.87 per contract. This results in a net cash outlay of $3.68 (5.87 paid – 2.19 rec’d).
Our Short Put yielded us a premium by selling the put option of $3.82.
The result of this strategy is a net premium received is $0.14 (a little better than zero cost).
Breakeven is the amount of our long call less our net premium received or $45.86 per share, and our risk is having to buy the stock at $43 if is drops precipitously and closes below $43 per share at expiration.

Now we are net long, for less than $0.00, through our call option at $46 and participate in the upward movement in the stock up to $57 per share where our gain is capped. Our put option will expire worthless as the stock goes up and we keep the premium.

Best Case: Stock continues up and at expiration the stock is above $57 per share at expiration for a net gain of $11.14 per share ($57 - $46 - $0.14) or a net gain of 24.29% for this 6 month option strategy.

Moderate Case: Stock closes below $57 per share, but above $46 per share at expiration. We now own the stock, but as long as it is above our breakeven of $45.86 we are ok.

Worst Case: Stock is below $43 per share at expiration and we are required to purchase the shares at $43 per share. Since we are bullish on the stock at $46.50, buying it at $43 is better provided nothing fundamentally has changed with the company.

The idea behind this strategy is to participate in the upside of the company, up to the cap or of your short call, without actually putting any money into the stock.

Bull Put Spreads – an alternate strategy going into the New Year!

Thu, 30 Dec 2010 21:59:00 GMT

Bull Put Spreads – an alternate strategy going into the New Year.

Since we are all concerned about where the market will be going after the first of the year, a bull put spread is a way you can participate if the market continues an upward trend, but without the cash outlay or risk level of purchasing the stocks outright. Here’s how it works:

Strategy: sell the higher strike put, and buy the lower strike put; Goal: Stock price stays above high strike put or at least above the high strike put less the net premium received; Risk: the difference between the high strike put and the low strike put, less the net premium received; Uses: when you are uncertain about the stock, expect it to go up, but aren’t willing to buy it outright, and want to hedge risk.

XYZ (this is an example of an actual transaction placed 12/29/10, with actual values and ticker changed)

Sold 10 February $38 Puts @ $2.56 = $2,560 Received

Bought 10 February $35 Puts @ $1.36 = $1,360 Paid

Net Premium Received = $1,200.00 or $1.20 per share

Max Risk: $38 - $35 - $1.20 = $1.80 per share or $1,800.00

Best Scenario: Stock closes above $38 at expiration and we keep the premium

Moderate Scenario: Stock closes at or above $36.80 at expiration… we own it, but we’re at or above breakeven.

Worst Scenario: Stock closes below $35 at expiration and we were required to purchase it and put it as one transaction, and our max loss is $1,800.

Comparative Analysis: Purchasing stock outright and placing a worst case 7.20% downside stop would cost you $38,000 in cash. Upside is unlimited, downside is $2,736. More cash outlay and more cash risk, but higher reward. However, option premiums erode over time and as they erode our gain goes up over time provided the stoke stays above our breakeven.

Give us a call if you have questions regarding this strategy or any others you may be assessing, and we can work with you to come up with a strategy that may be right for your portfolio.