Short, but what variety.

Short, but what variety.
The markets are fully congested and ready for a big move. We believe this the move is going to be a strong down move and will position accordingly. There are lots of options to do this:
Sell Calls
Buy Puts
Combination of the above

Fool AKAM post

http://boards.fool.com/Message.asp?mid=23716775

Hi Tim

Firstly, thanks for the fantastic analysis and continued thought on Akami.

After your initial recommendation, I quickly jumped on board for the following reasons.

• High fixed costs business with expanding sales, resulting in expanding profitability, i.e. more of there sales fall straight to the bottom line.
• Although there are some competitive risks, I saw and still see 2006 as the first breakout year for web downloads, on the road to downloads that will dwarf those of today. There needs to be some Moore like formula for web downloads, maybe Akami’s formula.

So I saw a company in the sweet spot, a spot that should get sweeter over the next year or two. With this P/E should expand as more coverage and enthusiasm builds, so expanding earnings with rising P/E multiple can only mean big price increases.

So where are we now,

EPS TTM .52

Price 02-16-06 26.67

P/E TTM 51

EPS high est 06 0.71 ( a 36% increase)

P/E forward 37.6

EPS high est 07 0.94 ( year on year 32% increase)

P/E forward 2 28.37

Looking at this makes me think a few things:

• Are analyst’s estimates too low? With AKAM expanding sales and margin could they blow these numbers away? Maybe.
• If they meet estimates then in two years at today’s price they would still have a P/E of 28. As they had been growing at 30%+ for a number of years they may be rewarded with a higher P/E, lets say 40, putting price around $37.
• What happens if they have one missed estimate, Google starts to move in, Apple gives them the flick or general market conditions deteriorate? P/E will compress as investors enthusiasm wanes, lets say it comes down to TTM P/E of 30. That would take the price back to $16, using forward eps of .71 price would be $21.

Other thought:

• I agree with Tim Hart, Google will start finding things harder. They don’t have trust. Heck I don’t trust them, even though I use their sites everyday. So why don’t I trust them? Probably, as in desperation their competitors have started spreading rumours and innuendoes about their motives. I have no real reason to distrust them, but just like Microsoft I do. Is big bad?

Disclosure: I own AKAM and recently traded Feb 25 Calls for a profit of .50. I am now looking at August Calls.

Roll CRYP or be called

CRYP Feb 20 Call.
The story here is different than AKAM, as it will definitely be called in 2 days and we will still own 300 shares. CRYP has had an excellent run from its lows to current 23.59 USD 1.27 (5.69%)

• Dividend coming due. US$0.07 per common share. The dividend will be paid on March 15, 2006 to shareholders of record as at March 8, 2006. The ex-dividend date will be March 6, 2006
• Looks like can only get .1 - .4 credit. Even at .4 and with dividend covering trading costs, it is only a 2% return for risk of holding.

Roll at .4 credit, as $320 (2%, annual 24%) is worth the downside risk.

Should I roll that AKAM Call

AKAM Feb 25 Call expires in 3 days, should I roll it as current 25.10.

1. May or may not be called, but I want to make decision, not let market make it.
2. Capital Gains, when did I buy? 27/07/2005 so to far, but should consider Aug Calls, to see.
   
3. Is call for entire holding, ie will I still profit in any further upside? Yes entire 500.

• Mar Call credit - .80. or $385 Net, for 30 days on $25 OR 3.2%, annual 38%
• May Call credit - 1.85, 93 days, 7.4%, annual 29%
  
• Aug Call credit - 2.7, 184 days, 10.8%, annual 21%
  

Go for Aug Call, as if price rises substantially can buy back option after 27/07 and sell shares with capital gain concession.
If share neutral then made 21% annual return.
If share falls can buy back option for cheaper and sell share, so limits downside risk.

Down side little participation in upside, need to investigate further to decide on upside potential.
The figures are:

P/E (TTM)	48.88		P/Sales	13.38
P/E (Forward)	35.31		P/Cash Flow	45.73
Earnings/Share (EPS)	2.2		Book Value/Share	4.11
PEG	1.35		P/Book	6.07
Debt/Equity	0.32		Cash Flow/Share	0.55

Yes AKAM is a cash machine with digital delivery. Digitial delivery is gonna explode, but Google is about to pounce and all it takes is one hiccup for price to slide.

Sell AUG Call, look to sell March Put.

Sitting Tight

Hold Telstra and NAB. Stories are improving at both. Sell NAB calls if good oportunity.

Confused? I am...but holding steady

The trust's US account continues to outperform the main US indexes. The account in now about 18% in cash and has a short term aim of 25% cash until the picture clears in the US. Despite the large cash holding the trust has still been outperforming during up weeks. The main reason for this is superior stock selection based on Motley Fool recommendations combined with option trading to generate income for the account.

David Nicholls projects a weekly close below 1261 will move markets in to secular bear with a 25% drop in to 4 year low in October 06. Well 950 on S&P would be scary, if this does occur the trust will be big buyers at that point. The cash holding has been built up with this downside risk in mind. As we are still invested 80% we will profit if market continues higher.

On the positive side Stealth Stocks Dennis Slowether (sp?) and McMillan are pointing for an up year. Analysts are pointing to International stocks heading higher and US stocks lagging.

The trust is happy with their current positioning and looks to decrease holding on further rises.

Holding Telstra

The Trust will continue to hold Telstra. The latest pop in share price on news of T3 in encouraging that the trustees original investment thesis will be fulfilled. The trust will be able to sell some of it's holding over the average paid and will have netted the attractive dividends for that period. Despite being in the troubled Telecommunications industry the trustees had believed if as the largest shareholder the government had known any information that would have led them to believe $5.25 for not a realistic price for T3 then they would have stated that and lowered their price accordingly. However, despite having the knowledge they did not lower their price target. This resulted in the Trusts purchase of a volume and portfolio percentage of the shares far greater than they would normally allocate to an individual share. The other contributing factor was the announcement of the special dividend combining to form $.40 a year in franked dividend. Was that a bribe to unload shares by the company?

At any rate the dividend has been better than interest and as stated the trustees believe they will get to sell above the average price, some time in the future. They will look at call options on Telstra.

Near term technical positive developments would be 20 day cross 100 day, MACD rise above zero, ie share price go up.

Fundamental improvements looked for : Positive wireless and broadband trends, T3, dividend maintained, upside earnings.

A Saucerful of Secrets

A Saucerful of Secrets is not a technical analysis term, it's not the new pot and handle formation. It is the name of one of the best Pink Floyd albums either, one of the two PF albums on which Syd Barrett wove his twisted genius. The album reminds me of the markets in many ways, it takes many twists and turns and the market is most certainly a saucerful of secrets.

With NAB rising steadily off its $26 low 117 months ago to trade above $34.50 now is a good move. Along with three dividends totaling $2.49 plus franking credits, it has been a good investment.

The trust does intend to have numerous banking and investment holding over the years and does plan to hold these shares for a number of years. However, covered call options will be written when the trustees believe the shares have risen close to a short term high. Puts will be written to purchase stocks. Transactions will be executed based on some or all of the following considerations; technical and fundamental analysis, portfolio, tax and income.

Based on the belief that NAB is close to a near term high and it's shares will be able to be purchased for around current values within the next year the trustees will look at possible options priced at 35. As the MACD is rising the trustees are happy to to look for an entry over the coming weeks.