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Winter Weather Mixed with Options Offers Investment Opportunity

During the last few days, we‚??ve experienced arctic chills with roughly half the country covered in snow. There are a number of ways to play these freezing temperatures.

Last week, I had the opportunity to once again appear on “Money with Melissa Francis,” which airs on FOX Business. During the segment, we touched on the new marketing initiative underway at Carnival Corp. (CCL), as well as the woes at Urban Outfitters (URBN) and some crafty marketing at Kmart, which is owned by Sears (SHLD). Of course, I enjoy humorous and interesting advertising as much as you do, but when contemplating a company‚??s revenue, we have to ask whether or not a crafty ad will get you into the store to¬†actually buy the product.

Behind the marketing hype, I see companies that are struggling with their message to consumers. For Urban Outfitters and Kmart, this couldn‚??t be happening at a worse time of year, given how significant the holiday shopping season can be in driving retail sales. As an investor and as I share with my graduate students at the New Jersey City University School of Business, it‚??s very hard to justify getting behind a company that can‚??t communicate what it does in a clear manner or explain how it differentiates itself and adds value to its customers. Simply put, these companies look lost to me, and that makes it easy for me to give them a quick ‚??no thanks.‚?Ě

Rather than focus on all of that hot air, my PowerTrader subscribers and I prefer to focus on the breaking news that is going to tilt the stock market in one direction or another. During¬†the last few days, we‚??ve experienced arctic chills with roughly half the country covered in snow. While there are a number of ways to play these freezing temperatures —¬†from clothing retailers to, arguably, Amazon.com (AMZN) as we head into the holiday shopping season, to Netflix (NFLX), given the more than five feet of snow in western New York — I‚??ve recommended something different. As the temperatures drop, we‚??re inclined to turn up our thermostats, and that means good things for electric utilities like Con-Ed (ED), Pepco (PEP), Duke Energy (DUK) or Southern Co. (SO).

One problem I have is this: if there are so many utilities to choose from, how can the trader optimize their position?

That‚??s the beauty of exchange-traded funds (ETFs) —¬†not only can you buy and sell them during the day, but you can add options to enhance your returns. Looking at the cold weather that way, it became pretty clear to me that pairing shares of Utilities SPDR (XLU) with an out-of-the-money call option offered a great combination of low beta, diversity, dividends and leverage that has the makings of a great trade as we bundle up and get ready to pay higher utility bills this winter.

Looking at the market through my PowerTrend lens and pairing stocks and ETFs with call options is the hallmark of my PowerTrader service. It‚??s a great way to get the underlying stocks and ETFs while potentially profiting big with options. If you‚??ve never traded options before, you‚??re not alone. Did you know that in the last 12 months, more than¬†70,000 TD Ameritrade (AMTD) clients placed their very first options trade? That’s something to think about‚?¶ And that’s also why — from time to time on these pages — I’ll share with you my new options tutorial videos, as part of our ongoing PowerTrend Options Education series. Look for the next one soon.

Later this week will be my favorite holiday —¬†Thanksgiving. I say that not only because I have many reasons to give thanks but also because — unlike other holidays that are celebrated by different religions or cultures — I think that when each of us looks around at our lives and our family, we all can see¬†something to be thankful for. As you celebrate your holiday and think ahead to next year, I want to invite you on a cruise with Newt Gingrich, Mark Skousen and me, among others. Come spend seven fabulous days aboard the six-star luxury liner, the Crystal Symphony. We will travel from New York to Montreal with a roster of noted historical scholars, political pundits and renowned market experts who will share their insights and perspectives on the current environment in Washington and Wall Street. For further information, including how to sign up, visit www.PoliticsAndYourPortfolio.com.

Have a great Thanksgiving holiday with your family, friends and loved ones, and I hope to see you on the Crystal Symphony!

In case you missed it, I encourage you to read my e-letter column from last week about avoiding hype and focusing on products, strategy and management. I also invite you to comment in the space provided below my Eagle Daily Investor commentary.

Written By

Chris Versace is a financial columnist and equity analyst with more than 18 years of experience in the investment industry. He has been ranked an All Star Analyst by Zacks Investment Research and his efforts in analyzing industries, companies and equity securities have been recognized by both Institutional Investor and Thomson Reuters‚?? StarMine Monitor. He‚??s frequently published in The Washington Times and is a frequent contributor to the daily radio show ‚??America‚??s Morning News‚?Ě and ‚??America‚??s Radio News‚?Ě. He has been quoted in the Wall Street Journal, Investor‚??s Business Daily, The Street, USA Today and other publications. In addition, he can be frequently seen on television‚??s ‚??Fox Business‚?Ě show.

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