The recent market gains are making it even harder to find new positions with cheap option premiums.
We cannot go with the big cap leaders because the LEAP premiums are out of sight until the market retraces some of its gains. However, there are a few stocks that were not on the leading edge of the big cap rally where we can find some decent premiums. Unfortunately, they are hard to find.
After closing several plays last week that were LEAPS spreads it became apparent that even on the wide spreads, when the markets are in blowout mode, the ITM premiums are not declining. Normally when two strikes $20 apart are more than $20 ITM the premiums revert to intrinsic value and time value declines to near zero. That allows us to exit for the full value of the position. However, that is not happening in the current market. The time premium is not declining and we were not able to fully profit from the spreads we closed.
I am going to try and find simple long call LEAP positions in 2018 that we can put on without turning it into a spread. It may mean paying some higher premiums but in the long run it should be worth it.
FLIR - FLIR Systems - Company Description
FLIR Systems, Inc. develops, designs, manufactures, and markets thermal imaging systems, visible-light imaging systems, locater systems, measurement and diagnostic systems, and threat-detection solutions worldwide. The company operates in six segments: Surveillance, Instruments, Security, OEM and Emerging Markets, Maritime, and Detection. The Surveillance segment provides enhanced imaging and recognition solutions for various military, law enforcement, public safety, and other government customers for the protection of borders, troops, and public welfare. This segment also develops hand-held and weapon-mounted thermal imaging systems for use by consumers. The Instruments segment offer devices that image, measure, and assess thermal energy, gases, electricity, and other environmental elements for industrial, commercial, and scientific applications. The Security segment develops and manufactures cameras and video recording systems for use in commercial, critical infrastructure, and home monitoring applications. The OEM and Emerging Markets segment provides thermal and visible-spectrum imaging camera cores and components that are utilized by third parties to create thermal, industrial, and other types of imaging systems. The segment also develops and manufactures intelligent traffic systems; imaging solutions for the smartphone and mobile devices market; and thermal imaging solutions for commercial-use unmanned aerial systems. The Maritime segment develops and manufactures electronics and imaging instruments for the recreational and commercial maritime market under the FLIR and Raymarine brands. The Detection segment offers sensors, instruments, and integrated platform solutions for the detection, identification, and suppression of chemical, biological, radiological, nuclear, and explosives threats for military force protection, homeland security, first responders, and commercial applications. The company was founded in 1978 and is headquartered in Wilsonville, Oregon. Company description from FinViz.com.
The short description is that FLIR makes night vision equipment for the military. They are the primary provider of these high tech night vision systems and they are very expensive. With the military budget being greatly expanded in 2018 and probably 2019, FLIR is going to be getting a lot more contracts for new equipment and for replacement equipment and parts.
For Q3, FLIR reported earnings of 52 cents that beat estimates for 48 cents. Revenue of $464.7 million rose 14.7% and easily beat estimates for $446 million. The surveillance segment revenues rose 7.6%, instruments rose 10.5% and OEM and emerging markets revenues rose 39.1%. Detection systems revenues rose 18.9%. The security segment sa revenues rise 16.5%. The marine segment was the slacker with only a 4.2% increase. Order backlogs rose 10.1% to $709 million.
The company guided for full year earnings of $1.83-$1.88 up from $1.81-$1.91 with revenue of $1.78-$1.83 billion.
Earnings February 13th.
Shares rallied last week to close at a new high at $48.25 and just over two-month resistance at $47.90. If this breakout continues, it should produce some short covering given the long period of consolidation after the spike from Q3 earnings in October.
They do not have LEAPS but we can buy the July calls very reasonably.
Buy July $50 call, currently $2.50, initial stop loss $45.50.