Cashing in on Tech Sector Volatility

Bryan Perry

Bryan Perry has three decades of experience inside Wall Street. Bryan’s experience has given him a unique approach to high-yield investing.

Without question, the sector most favored by traders is technology, and for a number of reasons.

Most great technological advances are the brainchildren of Americans and thus are seeded, nurtured, fostered and taken public as some of the most dominant domestic companies ever created. Ingenuity is an American staple, with more than 90% of all new ideas generated in the United States.

Technological innovation is what provides America its leading edge against all other economies in the world. The technology sector provides constant change and a daily stream of exciting stories to latch on to and get truly excited about when life-changing applications and tools are introduced to the business and consumer marketplaces that advance society to operate more efficiently.

The benefits of technological advances can be seen almost immediately, which greatly satisfies investor desire for immediate gratification for revenue and earnings growth. Merger and acquisition activity is always at work in the tech sector. Good companies get gobbled up faster in the tech space than all the other industries combined.

We just don’t hear much about the hundreds of private tech companies that get swallowed up by Google, Cisco, Oracle, Microsoft, Apple, Salesforce and the rest of the big serial acquirers. The last behemoth takeover was when Dell bought EMC for $67 billion in late 2015. In June of last year, Microsoft shelled out a whopping $26 billion for LinkedIn, making it the priciest company the tech titan has ever bought.

In addition, while hundreds of companies use “financial engineering” techniques (issue cheap debt to buy back stock to reduce share float to shore up earnings for lack of revenue growth), the leading tech companies continue to post strong top-line growth that fuels bottom-line earnings, which also augments stock repurchase programs. Plus, tech stocks for the most part are apolitical and don’t get pushed and pulled by overarching changes in health care, tax, energy and financial regulation policies that materially can impact those sectors with high exposure.

Exclusive  The High Cost of Reorganization: GM Waves Bye-bye to Profit Growth in 2014

Technology is about as agnostic a sector as the stock market has to offer and even meets the stiff criteria of most socially conscious funds. By and large, the tech sector has bullish catalysts for just about every type of investor with the exception of the most ardent government or municipal bond investor.

Investing in technology can take the form of corporate bonds, convertible debt, preferred stock, common stock and the trading of options. The selling of call options for income is what gets the attention of many investors these days and for good reason. The volatility associated with technology can play to one’s favor if a well thought out covered-call strategy is utilized properly.

The advisory service Quick Income Trader does just that by investing in no more than seven high-growth stocks, most of which are technology related, and sells out-of-the-money call options against those positions on a monthly basis. I employ a two-step process to produce 7-15% monthly returns. Using technical analysis, the stock is purchased and then a limit order is entered at a price that only will be executed if and when the underlying stock rallies 3-5%. The combination of capital gains and call option premium is how we can generate 2-3 times the total return than just owning the stock outright.

Based on the trading parameters of working with stocks priced between $15 and $70, most investors are in a position to manage a portfolio consisting of seven holdings where 5-6 call options can be sold over the course of a year on each holding. Ideally, when we find a stock that consistently affords us steady upside appreciation and meaningful volatility that is reflected in superior call option premium, we run with that stock all year until the fundamentals weaken for some reason and then we move on.

Exclusive  Daily Data Flow: U.S. Stocks Up; Euro Falls; Echoes of 1987

We’ve found good fortune selling calls against stocks such as NVIDIA (NVDA), Salesforce.com (CRM), CyberArk (CYBR), Activision (ATVI), Fabrinet (FN), Barracuda Networks (CUDA) and SPDR Technology ETF (XLK). These stocks and others continue to feed the income stream of cash from the immediate credits to our accounts that foster steady performance month after month.

This effective income strategy not only makes good money, it makes good sense and is very easy to put to work to where it starts paying right away. More information on Quick Income Trader can be found by clicking here. It only takes about 10 minutes and a cup of coffee per week to follow my simple instructions.

In case you missed it, I encourage you to read my e-letter from last week about how the Fed’s interest rate hike will impact you.

Like This Article?
Now Get Bryan's FREE Special Report:
My Top Monthly Dividend Payer

Get paid every single month by some of the world’s biggest companies.

Get Access to the Report, 100% FREE


img
previous article

After explaining the basics of a trading plan using the Dow Jones Industrial Average (DJIA) index in a previous article, I will repeat the process one more time but use equity options in the following example.

Analysis first
First, we must determine the market trend. Is the market bullish, bearish or neutral? We will use the basic 20-day and the 200-day exponential moving averages (EMA). [caption id="attachment_28362" align="aligncenter" width="1542"]

PREMIUM SERVICES FOR INVESTORS

Dr. Mark Skousen

Named one of the "Top 20 Living Economists," Dr. Skousen publishes 5 different investment newsletter advisories, including the award-winning Forecasts & Strategies, which has beaten the market over the last 15 years.

Product Details

LEARN MORE HERE

Bryan Perry

A former Wall Street financial advisor with three decades' experience, Bryan Perry focuses his efforts on high-yield income investing and quick-hitting options plays. Bryan's four newsletter and trading services include:

Product Details

LEARN MORE HERE

Nicholas Vardy

A Stanford and Harvard Law graduate, Nicholas Vardy scours over 40 different global markets every day to uncover new profit opportunities for subscribers. His 3 advisories and trading services include:

Product Details

LEARN MORE HERE

Jim Woods

A 20-plus-year veteran of the markets, Jim Woods has varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor.

Product Details

LEARN MORE HERE

Bob Carlson

In Bob's monthly newsletter, Retirement Watch, he provides independent, objective research covering all the financial issues of retirement and retirement planning. In addition, Bob serves as Chairman of the Board of Trustees of the Fairfax County (VA) Employees’ Retirement System, which has over $2.8 billion in assets.

Product Details

LEARN MORE HERE

Mike Turner

Mike’s financial, mathematical, computer science and engineering background serves as the foundation for his disciplined, rules-based approach to trading. Mike’s three services include:

Product Details

LEARN MORE HERE

DividendInvestor.com

Used by financial advisors and individual investors all over the world, DividendInvestor.com is the premier provider and one-stop shop for dividend information and research.

Product Details

Popular tools include our proprietary Dividend Calendar, Dividend Calculator, Dividend Score Card, and many more.

LEARN MORE HERE

DividendYieldHunter.com

Editor Tim McPartland has published Dividend Yield Hunter since 2006. His web site features three model dividend portfolios along with timely income investing alerts.

Product Details

LEARN MORE HERE