When the market opened yesterday, Monday, August 17, one of our members sold just-out-of-the-money covered calls on Novavax (symbol NVAX), expiry date this coming Friday, August 21, as we discussed in yesterday’s post. (Just-out-of-the-money ($147) bid/ask stood at $8.60/$9.10. NVAX C 21AUG20 147.00)
She reported making $US21, 477.28 for the week in one of her portfolios of about half a million. She did not tell us about her other portfolios.
Another member drew attention to the fact that Morningstar reported the fair value for NVAX to be $US103.92.
Fair value $US103.92 for a stock selling at $US147.00 suggests high risk.
A return of $US21, 477.28 on $US500,000 = 4% for the week, is an exceptionally high return.
The member reporting this return has done it three weeks in a row.
Using valuation metrics to make investment decisions can be unreliable. Barron’s has an in-depth article on the subject. It could be argued that the entire market is overvalued.
Present returns on safe investments have never been so low. Could that be why the market is so high?
Before next Monday, we will report on Novavax derivatives in time for our members to act on our findings when the market opens, if they wish.
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