ups

For those of you who are able to trade options, I have been writing more and more about naked puts, "selling to open" stock options that I have been doing all year with great returns due to an overabundance of fear.

Yesterday I reviewed one example in Chasing Value: GE -- maybe not eating out of trash cans after all, and today I review some of my favorite ways to make money and improve my portfolio.

Let me start with United Parcel Service Inc. (NYSE: UPS), a company with a great balance sheet, strong management, and trading 29% off its 52-week high, about where I sold it last year. I bought it earlier this year at the bargain basement price of $44, and now wished I had bought more.

FedEx (NYSE: FDX), the delivery company that competes with United Parcel Service (NYSE: UPS), issued its Q4 earnings report on Wednesday. At first glance, it's scary. On a GAAP basis, FedEx said it lost $2.82 per diluted share during the quarter. You say to yourself, "Man, has the recession gotten worse!" Then you take a breath and see that the loss is sourced back to goodwill charges related to the Kinko's and Watkins Motor Lines transactions. Therefore, adjusting for those elements, FedEx earned $0.64 per diluted share.

You feel a little better as a shareholder when you realize the loss has some accounting context surrounding it. The bad feelings return, however, just like a package that you forgot to put postage on, when you check the results achieved in the year-ago period. You find out that FedEx earned $1.45 per diluted share at that time. Is there any saving grace now?

Most astute market watchers have known for a long time that the package delivery companies Federal Express (NYSE: FDX) and United Parcel (NYSE: UPS) are good barometers for the overall economy. When business slows down or speeds up they feel it immediately as the package count shrinks and rises.

Both stocks have lost ground the past two days with the overall market and possibly because of the slowly rising oil prices now back up to $60 a barrel.

Today's news was entirely about financial stocks. There is no denying it. We ran a full summary bank by bank showing the needs or lack thereof that Uncle Sam was going to require. But because those have all been read about over and over, today's closing bell piece revolves around some of the other winners that are outside of financial stocks. You would have never thought that 8.9% unemployment could look so good. Here are the unofficial closing bell levels:

Dow 8,574.81 +164.96 (1.96%)
S&P 500 929.21 +21.82 (2.40%)
Nasdaq 1,739.00 +22.76 (1.33%)

Top Analyst Upgrades
Top Analyst Downgrades

No one can deny the horror that was General Motors' (NYSE: GM) first quarter financial results . . . even if it did beat estimates. The automaker reported its eighth consecutive quarterly loss today -- this time in the amount of $6 billion. It also burned $10.2 billion in cash, its sales plunged 40% and it lost market share pretty much everywhere.

On that note, it's not surprising the guardians of the Dow Jones Industrial Average, The Wall Street Journal editors, despite trying to keep to a minimum any changes in the component stocks, are finally considering removing the lowest priced stock on the index.

John Prestbo, the editor and executive director of Dow Jones Indexes, said in an interview with Bloomberg Wednesday: "There are two choices for GM: bankruptcy or increased government ownership. Definitely the trend is in the direction that would force us to remove it."

TheStreet.com's Jim Cramer says it's hard not to capitulate when your clients demand irrationality.

When I was weighted short and we would have these seemingly endless days of rallying, it was the mornings that would get me. The mark-ups of the futures, the refusal of Asia or Europe to go down, the "tone." It was relentless.

Then I would get to the office and, after a long period in which all I heard were downgrades, I would be greeted by upgrades, where I would always scream, "Now? Now they upgrade Intel (NASDAQ: INTC) (Cramer's Take)?" Or, "He's putting Research In Motion (NASDAQ: RIMM) (Cramer's Take) on the list now, after this run?" Or, "Wells Fargo (NYSE: WFC) (Cramer's Take) goes from hold to buy? After it ran up 4 points? What is he thinking?"

Here are some highlights from this past week's earnings coverage from BloggingStocks:

• Amazon.com Inc. (NASDAQ: AMZN) reported strong Q1 results easily beat expectations.
• Bank of America Corp. (NYSE: BAC) posted better-than-expected Q1 earnings, helped by home refinancing.
• Caterpillar Inc. (NYSE: CAT) reported its first quarterly loss since 1992 and cut its revenue outlook.
• Coca-Cola Co. (NYSE: KO) posted Q1 earnings that were in line with expectations, but shares fell.
• eBay Inc. (NASDAQ: EBAY) posted better-than-expected Q1 earnings despite a decline in sales.

Today was another one of those days that if you did not look up at the closing bell or at the numbers in the last hour of the day where there was no clear feeling of a direction. By 2 O'clock we had switched directions six times today. Weak housing data and more job erosion than expected failed to define any trends. And the US Treasury planning more than $150 billion in auctions next week has failed to make any impression either.

Here are today's unofficial closing bell levels:

Dow 7,957.06 +70.49 (0.89%)
S&P 500 851.92 +8.37 (0.99%)
Nasdaq 1,652.21 +6.09 (0.37%)

Top Analyst Calls

United Parcel Service isn't a 'back up the truck' play, but it is a suitable position for investors who can tolerate moderate risk. Here's why:

One could make a strong case that United Parcel Service, Inc. (NYSE: UPS) deserves to trade at the low end of it valuation, at a p/e of 10 or 12, instead of the current 18, given weak demand, and a likely continued drop in package delivery volume in Q2 and Q3. But the view from here argues institutional investors aren't likely to take that stance.

Over the past few weeks the market has been playing a favorable tune but that does not mean that all bad news and negativity have been wrung out of it. There is plenty of fear and suspicion creating volatility.

In many cases this past quarter I have been doing naked puts, in stocks I would be happy to own anyway. I first mentioned this opportunity about seven week ago in Investor fear puts me 'naked' on Wall Street. The actual option position is a "sell to open" put where you get paid today, to pledge to buy something at a later date. These options are available at different strike prices and monthly intervals depending on the company stock.

FedEx (NYSE: FDX) did not have a great third quarter. According to estimates, the parcel service was supposed to do around $0.46 per share. FedEx delivered $0.31 per share. In the year-ago period, income was $1.26 per share. This is not a good comparison. Also, total revenue declined 14%. Talk about bleak statistics.

FedEx Corporation (NYSE: FDX), the arch enemy of United Parcel Service (NYSE: UPS), is set to report third-quarter earnings this Thursday, March 19. Don't expect to see any growth on the bottom line. In fact, you may count on seeing a big drop. According to the following source, at this time last year, FedEx reported Q3 earnings of $1.26 per share. Analysts expect the delivery service to do about $0.46 per share. Such performance will represent a dive of over 60%.

In reading recent stories that Warren Buffett continues to increase his stake in Burlington Northern Santa Fe (NYSE: BNI) -- now standing at 22.4% -- I started to wonder if some day the name might be changed to "Berkshire" Northern Santa Fe RR?

'My pal Warren' is no doubt looking long term, and for most of the past two years has been up on Berkshire Hathaway's (NYSE: BRK.A) BNI investment. However that is not the case today as his most recent purchase at $75.00 per share (not bought in the open market) is under water; the shares closed at $66.04, down 12%. He is losing even more on his average purchase price.

Right or wrong, I have been buying stocks on dips for the last five months, and the past two weeks I started adding naked puts to the mix on down days.

In short (no pun intended), I am opening an option to sell a stock I do not own. These "naked puts" pay me cash on the first day to accept an obligation to buy a stock in the future at a predetermined price. If the stock is one cent or greater below the strike price, it gets "put to me" and I have to cover the position by buying the shares pledged.

Companies must throw little parties and hand out bonuses when they get on one of the "most admired" lists that several magazines put out. The way that firms get on these lists is often vague and sometimes based on surveys of people who may admire companies for things that having nothing to do with making money, which should help move stock prices up.

The new Barron's "most admired" list is a fine example of why the lists make poor reading for people hoping to make money in the market. The most important factors for getting on this list were strong management and sound business strategy.