Nov 16, 2021

Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized
Options before deciding to invest.

Tom 's Por t f olio Alph a Boost t o du plicat e Tom 's por t f olio.
Tr ades can be f ou n d by click in g HERE.
Sh or t : /NQ, Chip stocks, Bonds
Sign up to get 3x per week, trade ideas:
Neu t r al: Crude Oil, Nat Gas, Rut
https://info.quietfoundation.com/alphaboost
Lon g: China, IBM, ZM

Cr ypt o M oves All of these coins can be traded

Editor 's note. Chip stocks examples are AMD, on tasytworks. Here is the price movements:
MU, INTC or the Semiconductor ETF (SMH).
Bonds can be played with the 20+ year bond ETF
(TLT). Or futures /ZN or /ZB -- be careful with
size.
Crude Oil can be played using the oil ETF (USO),
or /SMO and /CL futures.
Natural Gas is /NG or the Natural Gas ETF (UNG).
Careful with size.
Rut can be played with the futures (/RTY) or the
ETF (IWM).
China can be played with the large caps (FXI) or
ASHR. Or individual stocks: BIDU, BABA, KWEB,
etc.

Bat 's Por t f olio

Sh or t BBY
Neu t r al TSLA, KWEB, FB, AMD and
short premium in all of these. Have a great week trading! Keep those positions small!
Lon g V, PTON (long by default M ich ael Rech en t h in , Ph D
from earnings)
Jam es Blakew ay
Pr of essor Clem en s Kow n at zk i, Ph D
Basic Dividen d Discou n t M odel
Ever wondered how financial analysts are valuing companies? To be fair, it is more of an art than a
science but there are some basic elements that all look at series of discounted cash flows expressed in
today's dollars. Before getting into the finer details of discounted cash flow valuation methods, here's a
neat shortcut to value a firm simply based on their dividends.
The formula is super simple: Dividen ds ÷ Discou n t Rat e = Est im at ed St ock Pr ice
where dividends are expressed in dollar amounts per year and the discount rate is an assumed cost of
capital for the firm in percentage terms.
Obviously, there are a ton of firms that don't pay dividends just look at your typical tech company that is
positioned for growth. And while this formula clearly isn't going to give you a perfect value for most
firms, it's a fast and dirty back of the envelope formula to get you somewhere in the ballpark (hint:
ballpark means that you can easily be 50% above or below their current stock price). Nevertheless, with
this caveat and the understanding of a rough approximation, let's take it for a quick spin.
An older tech company like IBM may be a good candidate. IBM is paying dividends of $6.56 per share
and let's assume a cost of capital of 6%. Ergo, $6.56÷0.06 = $109.33. As of today IBM is trading at $118
per share. We are indeed fairly close to their current stock price. Go ahead and try it with your favorite
dividend paying company and see what you get. Again, please be aware that your valuation based on
this model can be quite far from the current stock price. Then again, even the most sophisticated
valuation models currently show many stocks far away from their fundamental value based on realistic
assumptions.
Next week, we'll do an extension to this model and consider companies where dividends are expected to
grow in the future. We can then also look at the math that allows us to come up with such a super simple
formula.
Clem en s Kow n at zk i Ph .D. M BA
Depar t m en t Ch air of Accou n t in g,
Fin an ce & Real Est at e
Assist an t Pr of essor of Fin an ce
These Dow stocks
currently pay dividends

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 Target (TGT) hit an all time high
yesterday. Earnings are expected
tomorrow morning. With an 81%
implied volatility for Nov options,
there's a ±$14.13 expected move by
Friday expiration.

Lowe's (LOW) is up 2.4% this

morning in solidarity with the Home
Depot (HD) move post-earnings.
LOW reports earningsbefore the
bell tomorrow. Expected move by
Friday is currently ±$10.55

Natural Gas is on the move again.

UNG still has an IVR over 70.
Traders should always keep in mind
that UNG is a futures based ETF and
does can exhibit drag and under
performance due to it's futures
exposure

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 In t er est ed in join in g t h ou san ds of ot h er f in an ce geek s?
Sign up for a free weekly subscription at:
info.tastytrade.com/cherry-picks

Bu bbles, ou r
Ch er r y Pick s
m ascot

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Glossar y
IV. Implied Volatility is the estimated volatility of a security?s price derived from its option price; the higher the IV,
the more expensive the option and therefore the larger the expected price move. IV is an annualized number of
volatility, e.g. a IV of 27 means the option?s market is pricing in an annualized price range, either plus or minus, of
27%.
IV Ran k . IV by itself doesn?t tell us if if the volatility is high or low - but IV Rank does. An IV Rank of 70 means that
the IV is 70% between its low and high IV over the past year. The higher the IV Rank, the higher the security?s IV is
compared to its past year. We provide six levels to make evaluating easier
Opt ion Liqu idit y. At tastytrade we have our own theoretical measure of option liquidity, Poor, Moderate, Good,
or Great. It examines the options?bid/ask spread, open interest, and the number of strikes with non-zero bids
Cor r elat ion w it h S&P 500. Correlation is a statistical measure of how strong a relationship two securities have
with one another. A correlation of -1 means the stocks are perfectly negatively correlated (they move in opposite
directions), while a correlation of +1 means the stocks are perfectly positively correlated (they move in the same
direction). A correlation of 0 means there exist little relationship.
Ear n in gs. The earnings date of the security. In practice we tend to see stocks have a larger amount of implied
volatility (IV) nearer to earnings as the market is pricing in the fear of the upcoming earnings announcement. In
parenthesis, is BTO or AMC; "Before the Open" or "After Market Closes", respectively. Upcoming earnings dates do
sometimes change.

Disclosu r es
Options involve risk and are not suitable for all investors. Please read Characteristics and Risks of Standardized
Options before deciding to invest in options.

tastytrade content is provided solely by tastytrade, Inc. and is for informational and educational purposes only. It is not, nor is it
intended to be, trading or investment advice or a recommendation that any security, futures contract, transaction or investment
strategy is suitable for any person. Trading securities can involve high risk and the loss of any funds invested. tastytrade, through its
content, financial programming or otherwise, does not provide investment or financial advice or make investment recommendations.
Investment information provided may not be appropriate for all investors, and is provided without respect to individual investor
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comparison, statistics, or other technical data, if applicable, will be supplied upon request. Multi-leg option strategies incur higher
transaction costs as they involve multiple commission charges. tastytrade is not a licensed financial advisor, registered investment
advisor, or a registered broker-dealer. Options involve risk and are not suitable for all investors. Please read Characteristics and Risks
of Standardized Options before deciding to invest in options.

Futures accounts are not protected by the Securities Investor Protection Corporation (SIPC). All customer futures accounts' positions
and cash balances are segregated by Apex Clearing Corporation. Futures and futures options trading is speculative and is not suitable
for all investors. Please read the Risk Disclosure for Futures and Options prior to trading futures products found in Disclosures under
the Documents tab.

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