Parabolic Profits
by cbitugs | July 26, 2022 10:51 pm
Just watched a TradeSmith[1] video moderated by Mike Burnick[2], founder of the newsletter Parabolic Profits. He states that purchasing 1 share of the “alt-stock” of a large company stock, such as Coca-Cola, at 1/10 or less of the stock’s price. How is this possible? Also, you can place a covered calls on this 1 share WITHOUT owning 100 shares! Did anyone else see the presentation? If so, please explain?
Endnotes:
- TradeSmith: https://www.stockgumshoe.com/tag/tradesmith/
- Mike Burnick: https://www.stockgumshoe.com/tag/mike-burnick/
Source URL: https://www.stockgumshoe.com/2022/07/microblog-parabolic-profits/
And @Travis, could you, please ask the Thinkolater what these so called “alt-shares” really are? I searched for “alt-shares” and found nothing.
Mike says he will explain exactly what alternative shares are and how to use them. But he does no such thing. He says only that these shares are purchased by Wall Street firms, but he does not disclose anything about what these alternative shares really are.
I tried to watch it but it but ended up reading the transcript. He told us what alt shares are NOT, and that is options, but I still don’t understand what they are.
Her’s my guess. It looks like the alt shares are deep-in-the-money call options. I just read a TradeSmith email, where he talks about buying Boeing alt shares when BA was at $128 versus later at $163. During the same time frame, the BA Aug 19 ’22 $100 call went from about $36 to almost $59. The difference is 63% gain vs 27% gain, which are the same percentages he quotes. If he is selling “covered” calls on this option, I guess it is only by buying a call spread, or by taking assignment at $100 and selling call options later. If you didn’t want to purchase the shares when BA was at $128, you could have bought the August $100 Call and sold the July $150 call and later the August $180 call. That way, you get the benefit of the call purchase and get to keep the price of the call sales. Keep in mind that I am only offering those numbers with a little hindsight. Unlike Mike, I would never have been able to predict in early July where BA stock would be today. And, of course, if you sold the calls at too low a price, the stock would be called away and you would have only the profits to show for it.
@ rswayne, I think your guess is wrong. At the very start of his presentation Mike told us that the so called “alt-shares” are not options, and he also told us that only 900 companies out of the many thousands of public companies can issue ‘alt-shares”. This clearly eliminates options as a possibility for being the “alt-shares” he described.
I just received this email:
Parabolic Profits- (Released on July 26th!) Our Senior Analyst, Mike Burnick has done it again! Mike has created a complete methodology for everyday investors to capture many of the same huge profits normally enjoyed by only the savviest professional investors on wall street. Mike’s strategy gives you all the tools to transform the way you think about investing using what he calls alt-shares, or LEAPS,
The strategy involves buying LEAPS, which are simply options that expire much further out, two or three years out, than traditional short-term options. They cost more, due to their time, but are otherwise very much like short-term options (calls or puts) but do not pay dividends. Their price basically has the same dependencies as other options (in or out of the money, strike price, time) and are contracts for 100 shares.
Instead of buying the shares, you can buy a LEAPS contract for a fraction of the share price, just like short-term options, and then use the contract to “cover” a call option, just as you could have used shares. All of the risks of prices falling, getting called, etc., still apply.
This strategy is not new or unique to Burnick, but well known, but somewhat more sophisticated than typical share-covered calls. Burnick’s “value,” in theory, as with any newsletter writer, is that he will do all the research and select LEAPS (i.e., companies) that will go up long term, or at least allow for some good covered-call selections, so that you will, hopefully, profit. Even assuming he does his job well, this strategy realistically does require starting funds of at least a couple of $tens of thousands. If you were to try it with say $5,000, you would likely only get in on one or two deals, since LEAPS contracts each generally run in the $thousands. If you have the $1,700 to pay each year (less discounts,) then that’s probably not a problem, but still something to be aware of.