Citing “people familiar with the matter,” the Journal reported on Tuesday that members of Apple’s board discussed CEO succession options with executive recruiters. They are also alleged to have spoke with the head of one high-profile technology company.

“The conversations weren’t explicitly aimed at recruiting a new chief executive and were more of an informal exploration of the company’s options, said these people,” the report said. “The directors don’t appear to have been acting on behalf of the full board, some of these people said. Apple has seven directors, including Mr. Jobs.”

The authors said they reached out to Jobs in an e-mail on Monday with a series of questions. The chief executive reportedly responded with: “I think it’s hogwash.”

The alleged discussions on the part of board members are said to have taken place after the company announced earlier this year that Jobs would take another medical leave of absence from the company. Three people reportedly said that “a couple” of Apple’s directors held talks about the company’s leadership after they were informally approached by recruiters with search firms.

“Apple’s directors have made no decision about whether to retain executive recruiters, these people said. Some of the people who talked with Apple directors said they considered the conversations to be more than the routine discussions that they typically have with board members.”

A person who anonymously spoke with the newspaper revealed that Apple’s independent board members have discussed succession in private sessions without Jobs for the last 12 years. They said investors will only learn of Jobs’ successor when he decides to retire or if the board ousts him. They also reportedly acknowledged that any departure of Jobs “is going to be traumatic” for the company.

Chief Operating Officer Tim Cook is labeled as a “leading candidate” for the CEO role should Jobs leave, though it was said that Apple’s directors have a list of criteria they would like to have in the company’s next chief executive.

~Boo

 


A weeks ago we discusses a strategy for using put options to create money out of thin air. In our example, we sold put options on stock symbol CIGX for after commission proceeds of $0.35 a share. In order to put on this trade we had to tie up $4 in capital per share.

If the stock traded below $4 up until June 17th, we would be forced to buy shares of stock for $4 regardless of where the price went to. If the stock remained above $4, we would get to keep our original monies for taking on the risk.

In this, our third installment of creating money out of thin air, we wanted to give an update to how the trade played out.

On Friday June 17th, CIGX finished the day trading at $4.42, which was above our threshold of $4.00. This allowed our obligation to purchase shares for $4 to expire and we were able to keep the all the original money we took in for our troubles.

We are currently investigating this stock further and have not decided as to whether we will put on this same trade again for July expiration. At current price levels, we can sell put options and take in between $0.45 and $0.55 per share for agreeing to purchase the stock for $4.00 up to July 15.

This stock is risky, thus the high premiums you can receive for putting on this trade, however it is showing a lot of support at $4.00.

We will let you know if we decide to use this stock again or whether we choose an entirely different stock for this month’s put option sell.

~Boo

 


Just in case any of you decided to heed my advice and sell put options on CIGX as I discussed in an earlier post, I wanted to go back and give an update on this trade as it stands going into the Memorial Day holiday.

As I stated previously, I sold put options which expire the third Friday of June on the stock symbol CIGX with a strike price of $4.00 and the stock price at the time was just above $4.00.

For every 10 options that you could have sold, you would have made $350.00 less commissions. To put on this trade, you would have to have $4,000.00 in cash in your stock account for every 10 options. You would also have to have option trading privileges of course through your broker.

This stock has been outstanding this week as it has traded up to $5.00 on Friday, which is nearly a 20% increase in share price since Monday. The value of the sold put option has decreased from the $0.35 per share to a current bid of $0.25 and ask of $0.30. We could close this transaction by buying back the 20 options we sold and pocket $100.00, if we so chose to.

Now, for the option to end up hurting us it would have to close down over $1.00 between now and June 17, which is only 14 trading days away. I believe this stock has even more room to the upside, so our trade looks solid. If it can bust through prior resistance at $5.00, it may experience a huge move up…making us wish we would have purchased the stock outright instead of selling puts.

A quick check of after hours trades shows the stock trading north of $5.00 a share at $5.03. If the stock continues to climb in the next few days, we may close out our position for a quick gain instead of waiting for the June 17 option expiration.

We will scour the market for another potential put sell over the weekend and let you know what we come up with.

As always, our commentary is just for educational purposes. We may or may not have funds invested in the stocks profiled (in the case of CIGX we do). You own your own investments, so please do your own due diligence before making any transactions. Only you know what your risk tolerance is and whether or not a stock fits your trading style. We are not responsible for any losses you may incur by following our ideas.

For more information, read our previous article we posted a few days ago explaining the sell of puts on CIGX. This can be a great way to make additional income on stocks you would like to own. Click this link to read our earlier article.

~Boo

 


I have read numerous investing books over the years, and I try to implement as many of the strategies as possible from those books. I have read several books on trading stock market options and one of the most enlightening concepts is “the creation of money out of thin air”.

With this article, I am going to dive into this concept because most people are unaware that this is even possible.

Are there risks with this strategy?

Of course…as there are risks with all types of investments.

If you speak to someone that gives investment advice, they will tell you all about the pitfalls of clients who ordered them to purchase options who then went on to lose a ton of money. Most money managers do not endorse trading in options.

What makes options so difficult to invest in that money managers do not like investing in them? Statistics show that the large majority of individuals who buy options, lose money (some studies place this percentage at 80% or more).

Why do I think options trading is such a good strategy if the statistics are so heavily against the buyers?

The reason is because the people who are losing money in the options games are the ones buying options…the ones making a killing are the individuals selling options.

If 80% of buyers are losing money, that also means that 80% of option sellers are making money.

So, the game we like to play in regards to options is the selling of options.

On Monday May 23, 2011 I put in an order to sell 20 put options at a price of $4 on CIGX. I pocketed $675 dollars immediately from this transaction. I also had to tie up $8,000 in capital to cover the possible purchase of 2,000 shares of CIGX stock at $4.00 a share. CIGX was/is currently trading at $4.60. A quick glance at the stock chart for CIGX shows it in a recent uptrend. Over the past 3 months, it has risen from $1.75 to $5.00 where it traded down to around $3.00 near tax day. From that point onward it has been in a nice healthy uptrend. The main concept with this transaction is I would not mind owning CIGX stock at $4.00 a share. If you feel $4.00 is not a good price for CIGX stock, then you should not do this transaction.

So, in a nutshell the stock chart looks strong.

Now that the transaction is complete, what are the possible outcomes?
1. The stock stays above $4.00 and I get to keep the $675.00 from the put sell.
2. The stock goes below $4.00 and I have to purchase 2000 shares (ie 20 options = 2000 shares) at $4.00 even if the stock goes all the way to $0.00. (so there is a risk)

What do I do if the stock goes to $3.80 and I am forced to buy it at $4.00? I can do one of three things which are outlined below.
1. Take my new shares and sell a call option on it to earn additional money. (by selling a call I give someone the right to purchase my shares at a certain price for a certain time range)
2. I can do nothing and sit on my shares (this is what I won’t do)
3. I can sell the shares at a loss.

So, if I decide to do option 3 above, how much money will I lose if the stock price is at $3.80? I will lose $0.20 on the sell of stock, however I have made $0.35 a share on the original put sale.

I have actually made money on the overall transaction of $0.15 a share.

Thus, the beauty of the put sale. The real power of a put sale is when you pick out a stock you really would like to own in the near future for long term growth, but you aren’t in a hurry to buy the stock. If XYZ stock is trading at $20 a share and you feel it is a great buy at this price, then if you could buy it at $17.50 that should be even better for you.

So what I suggest you to do is to sell a put option on XYZ stock with a strike price of $17.50. You pocket the monies for the put transaction and if the stock does go below $17.50, you buy your shares. If the stock never goes below $17.50, you can re-sale another option the following month and make additional money.

If anyone has any questions, feel free to leave a comment or question in the comment box. You can also send an email or leave your email address in the comment box with your question and we will get back to you.

Hope you enjoy this new concept.

~Boo

 

UMC – Stock Chart. Please click on the image for a larger picture of the stock chart.

A near dragonfly doji on the chart Friday. This should hopefully signal a reversal with the stock moving higher over the next few weeks. I anticipate a move of at least 10% – 20% based purely off the stock’s technicals. I am going to investigate further about the fundamentals of the company, but I did take a starter position in the stock just before the close of the bell on Friday.

UMC Possible Turnaround Play

This is strictly my opinion, and I hope you will do your own due diligence before considering purchasing this stock. Do not invest solely on my opinion as I am never 100% right, I just like to think I am always right :).

Enjoy your weekend!

~Boo

 

Hackers Penetrate NASDAQ Computers

Hackers have repeatedly penetrated the computer network of the company that runs the Nasdaq Stock Market during the past year, and federal investigators are trying to identify the perpetrators and their purpose, according to people familiar with the matter.

The exchange’s trading platform—the part of the system that executes trades—wasn’t compromised, these people said. However, it couldn’t be determined which other parts of Nasdaq’s computer network were accessed.

Investigators are considering a range of possible motives, including unlawful financial gain, theft of trade secrets and a national-security threat designed to damage the exchange.

The Nasdaq situation has set off alarms within the government because of the exchange’s critical role, which officials put right up with power companies and air-traffic-control operations, all part of the nation’s basic infrastructure. Other infrastructure components have been compromised in the past, including a case in which hackers planted potentially disruptive software programs in the U.S. electrical grid, according to current and former national-security officials.

“So far, [the perpetrators] appear to have just been looking around,” said one person involved in the Nasdaq matter. Another person familiar with the case said the incidents were, for a computer network, the equivalent of someone sneaking into a house and walking around but—apparently, so far—not taking or tampering with anything.

A spokesman for Nasdaq declined to comment.

A probe into the matter was initiated by the Secret Service and now includes the Federal Bureau of Investigation.

The mystery surrounding the hackers and their motives is worrying investigators, who remain unsure whether they have been able to plug all potential security gaps—especially since invaders typically seek new ways to breach systems.

The case involving New York-based Nasdaq OMX Group Inc. is part of what cyber-crime authorities see as a broader problem of hackers nosing around corporate computer networks, with varying degrees of success.

U.S. companies are a continual target, and sometimes their public websites are vandalized. It is rarer for perpetrators to penetrate internal systems. Such breaches rarely come to light because companies fear that acknowledging them would alarm customers or encourage copycats.

Tom Kellermann, a former computer security official at the World Bank who now works at a firm called Core Security Technologies, said the most advanced hackers in the world are increasingly targeting financial institutions, particularly those involved in trading.

“Many sophisticated hackers don’t immediately try to monetize the situation; they oftentimes do what’s called local information gathering, almost like collecting intelligence, to ascertain what would be the best way in the long term to monetize their presence,” he said.

People familiar with the Nasdaq matter said the Secret Service first began investigating last year. Investigators have informed White House officials of the case, according to the people familiar with the situation, who said that such a move is typical in hacking investigations, particularly in the early stages of the probes.

Authorities haven’t yet been able to follow the trail to any specific individual or country. Those familiar with the case said that some evidence points toward Russia, but the person or people responsible could be almost anywhere, perhaps using computers in Russia merely as a conduit.

The case poses two concerns for authorities: preserving the stability and reliability of computerized trading, and ensuring that investors have full faith in that system.

Stock exchanges know they are frequently targets for hackers.

“We take any potential threat seriously and we are continually working to ensure that our systems operate at the highest levels of security and integrity,” said Ray Pellecchia, a spokesman for NYSE Euronext, which operates the New York Stock Exchange.

He declined to discuss any specific instances of computer-hacking attempts against that exchange.

In 1999, hackers vandalized Nasdaq’s publicly accessible website. In that incident, a group of hackers quickly claimed responsibility for defacing the site, as well as major media websites. Nasdaq officials at that time said the company’s internal network wasn’t affected.

Computer hacking is a problem for many countries. In recent years, U.S. authorities have dealt with cyberattacks linked to computers in Russia, China and Eastern Europe.

Hackers can use geography as a foil. Prosecutors said Albert Gonzalez, perhaps the most renowned hacker, perpetrated his biggest theft with help from computers in Eastern Europe even though he lived in Miami.

According to a 2009 federal indictment, he used computers located in the U.S., Latvia and Estonia, in a conspiracy that netted more than 100 million stolen credit-card numbers.

The case is considered the largest hacking crime in U.S. history. Mr. Gonzalez eventually pleaded guilty and was sentenced to 20 years in prison.

~Boo

 

The overwhelming volume of sell transactions relative to buy transactions by company insiders over the last six months in key leading sectors of the market is the worst Alan Newman, editor of the Crosscurrents newsletter, has ever seen since he began tracking the data.

The strategist looked at insider trading activity amongst the top ten companies that make up the Nasdaq such as Apple, Google and Amazon.

Then he analyzed the biggest members of the Retail HOLDRs ETF like Gap, Target and Costco, as well as the top insiders in the semiconductor industry at companies such as Altera, Broadcom and Sandisk.

The largest companies in three of the most important leading sectors of the market have seen their executives classified as insiders sell more than 120 million shares of stock over the last six months. Top executives at these very same companies bought just 38,000 shares over that same time period, making for an eye-popping sell to buy ratio of 3,177 to one.

The grand total for the three sectors are “as awful as we have ever seen since we began doing this exercise years ago,” said Newman, who was ahead on such trends as the dangers of high-frequency trading and ETFs before the ‘Flash Crash’. “Clearly, insiders are seeing great value only in cash. Their actions speak volumes for the veracity for the current rally.”

But the overall market doesn’t seem to care. The S&P 500 is up 16 percent since its 2010 low hit on July 2nd on the back of strong earnings driven by cost-cutting and the hopes for even more quantitative easing from the Federal Reserve.

The insider data “is good reason for considerable caution once the price action fades,” said Simon Baker, CEO of Baker Asset Management. Still “insiders normally buy early and sell early too. Longer term — 12 months out — it is more of a red flag.”

Newman isn’t alone in warning about insider selling. The latest report from Vickers Weekly Insider, a publication that makes investments based upon these transactions, shows that total insider sell transactions relative to purchases on the New York Stock Exchange are running at a ratio of more than four to one over the last eight weeks. The normal reading, because of options selling and other factors, is about 2 sales for every buy, according to Vickers.

To be sure, many investors feel the heavy insider selling is just an anomaly based on other reasons.

“These are folks that have had to dip into their stocks for the first time in years, as their salaries have been cut and their bonuses, outside Wall Street, have been significantly curtailed,” said J.J. Kinahan, chief derivatives strategist for TD Ameritrade. “ This may speak more to a cash flow problem, then a market belief.”

Still Newman, who is also a favorite commentator of Barron’s columnist Alan Abelson, sees the insider selling as just the latest reason, along with the mortgage foreclosure mess and fully invested mutual fund managers with no fresh powder to put to work, to be cautious on the market.

“At the risk of sounding like a broken record, we expect a significant correction,” said the newsletter editor.

~Boo~

 

Stock Market Study – Symbol ZGEN

ZGEN

ZGEN

Tonight we are going to get into a little more technical chart reading. Tonight’s stock is ZGEN and it is currently working off a rising W-formation, which is typically very bullish. So, you might ask, what is a rising W-formation?

A stock trades up and down over time, and when a stock drops from previous support and then consolidates, followed by a rise in the share price (like a V or U shape). Next the price runs into overhead resistance and it traces back down as before except this time it does not go as low as it did during the previous drop. In essence it forms a higher low than the previous low. This is followed by a rise in the share price.

What has this told us happened in the trading of the stock? Sellers were able to push it down to $5 and it then rose all the way to $6. Next it dropped back down to only $5.29 (29 cents higher than the first drop). Now it is trying to move up through the massive resistance between $6 and $6.20.

Just today the sellers were able to push the stock down to $5.84 where buyers jumped in and pushed it back up all the way to $6.03. This rejection of price on its drop today and subsequent rise back above the $6 level is very bullish. Volume has also really dried up which tells me most investors are keeping their shares.

I believe this stock will bust through that $6.20 resistance and shoot up to between $6.60 and $6.80. If we get through $6.80, the next stop is $7.25. This stock looks good for at least a 10% move. Since nothing is ever certain in the stock market, I would also place a stop loss order in at the $5.80 level. This is the level it bounced off of before it turned around and went back above $6 today. Make sure you use stop loss orders if you don’t plan on holding these stocks long term. Capital preservation is just as important as capital appreciation.

Full disclosure, I do not currently own any shares of ZGEN, but I am considering purchasing 1000 shares. This is not a recommendation to buy or sell any security, but only an opinion. Make sure you do your own due diligence before purchasing any stock.

To follow up on our previous picks, YONG is still doing quite well (I wish I had bought it). We profiled it a few weeks ago at $8.50 and today it got as high as $9.25. As we predicted, that $9 level is major resistance and it doesn’t want to push through it and close there. As soon as it does, it will go up much further.

Our other pick was a complete dud. BWEN came out with earnings which where horrible and the stock has been pummeled the past 2 days. I hope you took my advice and had a stop loss order in so that you didn’t lose a lot of your money. As I mentioned in the article, I did own 1000 shares of this at $5.24. I didn’t like the price action and happened to sell in the pre-market for $5.50. Just when I was kicking myself for selling too early as the stock climbed to $5.70 area, it tanked the following day. This was absolute pure luck on my part. I went from kicking myself one day to patting my lucky ass on the back the next.

The one issue I completely missed with BWEN was the earnings date. Do not ever trade a stock around it’s earnings date unless you are very certain the announcement will be positive. Stocks rise and fall tremendously around earnings, so never forget this advice. I got lucky, very lucky.

To view a large graph, just click on the chart and you will be able to see an enlarged version.

~Boo~

 

Stock Market Study- Symbol BWEN

BWEN

BWEN

BWEN seems to have turned the corner and stopped it’s most recent downtrend from just under $10.00 which it got to around the end of last year. It has touched around it’s low area of 4.80 to 5.00 three separate times, early November, late January and early February. It has consolidated around the $5.00 level for about 2 weeks with low volume. This tells me the sellers are drying up and long term holders are now coming into the stock. Sellers have been unable to push the stock below $4.80 over the prior 5 months or so. This area has good support and I look for the stock to continue it’s move from Friday in which it rose solidly through $5 and closed at $5.24. If we get some positive volume, this baby will take off.

This stock has some resistance in the $5.50 to $6.15 area, but once it gets through those levels it shows little resistance all the way to $7. If we get through the resistance at $7.50, I look for it to reach $8 and then back to it’s high around $10. This will be a little longer term hold as it still has some decent resistance to get through between $5.50 and $6.15. I plan on holding this until $7 and re-evaluating it further from there.

As always be sure to place a stop loss order at the support level (where it has not broken down through recently which is currently below $4.80) as nothing in the stock market is ever guaranteed.

If you have any questions, drop me an email and I will respond to you as soon as I can.

Full Disclosure: At the time of this posting I do own 1k shares of the company mentioned above, which I bought on Friday. This is not a recommendation to buy or sell the mentioned security. Do your own due diligence and decide for yourself.

To briefly follow-up on our post last Sunday, YONG is still looking pretty solid. It started the week off at $8.44 and then rose as high as $8.92 on Tuesday. YONG finished the week at $8.59. Like I mentioned in the prior post, it has resistance in the $9 level. It will have to fight to get through that level.

Always remember, patience is a virtue while investing in the stock market. Never invest money you can’t afford to lose and have guidelines in place before you put your hard earned money on the line. Set stop losses and cut losers quickly, while letting your profits run. Don’t get greedy or too emotional in the stock market.

~Boo~

 

Stock Market Study- Symbol YONG

YONG

YONG

YONG appears to be in the midst of a very nice uptrend. From looking at the chart above, you will see this past Friday it broke through it’s downtrend which started around mid-October at a share price of $12. The two main components that drive a stock’s price performance are price and volume. Notice the volume surge over the previous 2 days. The stock fell all the way down to 6.73. The current price is around 8.50 with upward resistance around 9.00 and then 9.39 and 10.19.  This stock looks good for at least a $0.50 profit and if it can keep building momentum, it could get all the way back up to around the $12.00 level.

As everyone knows, nothing is a guarantee (especially in the stock market), so if you are willing to buy, I would put a stop loss order(automatic sell if the stock drops below a level which you determine) in at $7.50. If you are wondering why I chose the $7.50 level, look at the chart above and notice the 4 days of support the stock had at this level. Four consecutive days sellers were not able to drive the price below this level.

The three month average daily volume on the stock is 835k shares and the volume Friday was 1.55 million, or nearly double. The sentiment is definitely upwards, but remember to cut your losses short and let your profits run.

Over time I will opine on many different stock market related concepts and theories to better educate everyone, but I wanted to get a very nice looking chart posted for everyone to see and study. If the stock chart is not visible, you can go to stockcharts.com and insert the symbol YONG and pull up the full chart. We have a link on the main blog page to stockcharts.com and it is the best charting website out there.

If you have any questions, drop me an<a href=”mailto:boo@badgoneblog.com”>email</a> and I will respond to you as soon as I can.

Full Disclosure: At the time of this posting I do not own any shares of the company mentioned above. This is not a recommendation to buy or sell the mentioned security. Do your own due diligence and decide for yourself.

~Boo~

 




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