Today with the markets in the red and Walgreen's trading down at $30.80 I entered into the following transaction:
STO 3 WAG Jul 21 2012 28 Puts @.41 $110.75
The margin maintenance is ~$1,000 for this 52 day trade. This equates to ~11% return on margin in 52 days or 77.21% annual if they expire worthless.
WAG has had great support at the 31 level and these puts are a full 10% below that. If put to us the yield on cost will be 3.25% which is way above historical highs for this Dividend Champion.
Report Card Since Inception
Wednesday, May 30, 2012
Tuesday, May 29, 2012
Patience me boy...patience
It looks like we're heading to a higher open so I doubt I will enter into any new positions today. The stocks I am looking at right now are Sysco, Intel, Microsoft, Southern Company, Proctor & Gamble, Lowe's and Johnson & Johnson. Rising dividends for all. I also have one eye on Exxon Mobil.
I am waiting for some fear and/or panic selling to kick in. I would be looking at the June strike but I will be on vacation during that expiration and frankly I don't want the concern. As such, I'm looking at the July and August strikes.
With the recent pullback, out of the money puts with adequate premiums have become more in line with support levels. One or more large days in the red ought to provide more than enough "Oh my God" type opportunities. Swing at the fat pitch. Patience me boy....patience.
Re my GDX trades: If I can roll down and out my GDX June 45's to July 43's and get a net credit of greater than $100 I will probably take it. If I do, I feel I'm in the driver's seat for these to end up as profitable trades. BTW past experience made it clear not to bail on GDX when it was tanking as I felt they were flushing out the weak hands. In addition there were so many strikes to roll out to there were multiple continuation strategies. Finally, the fundamentals are/have been in place for rising precious metals.
I am waiting for some fear and/or panic selling to kick in. I would be looking at the June strike but I will be on vacation during that expiration and frankly I don't want the concern. As such, I'm looking at the July and August strikes.
With the recent pullback, out of the money puts with adequate premiums have become more in line with support levels. One or more large days in the red ought to provide more than enough "Oh my God" type opportunities. Swing at the fat pitch. Patience me boy....patience.
Re my GDX trades: If I can roll down and out my GDX June 45's to July 43's and get a net credit of greater than $100 I will probably take it. If I do, I feel I'm in the driver's seat for these to end up as profitable trades. BTW past experience made it clear not to bail on GDX when it was tanking as I felt they were flushing out the weak hands. In addition there were so many strikes to roll out to there were multiple continuation strategies. Finally, the fundamentals are/have been in place for rising precious metals.
Monday, May 21, 2012
Opportunity Alert: Lowe's (LOW)
I see that Lowe's is getting hammered due to it's latest quarterly report. Don't catch a falling knife today, however, watch when it seems to have bottomed and write short term out of the money naked puts. I see that the July 22's are really juicy, for example. Lowe's is set to raise it's dividend next quarter and they have been increasing at a greater than 10% rate so this should buoy the stock.
5/29 note: this would've been a goodie...
5/29 note: this would've been a goodie...
Monday, May 14, 2012
Trade Continuation: GDX Naked Puts
Well this one has been a wild ride. :) GDX is trading at ~41.50/share at the time of this writing. I continued the transaction as follows:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
We rolled out for a net credit of $144.44. We have now brought in $378.65 in option premium. Our cost basis @ the 45 put strike is now $43.73. I considered rolling out and down for a net credit to the September 43 puts but I didn't want to commit to that much time.
There are plenty of strikes to roll out and down to if need be. Whatever we do it will only be for a net credit. Are we near the bottom? If not we will deal with it after all the time value has been drained from this continuation trade. The maintenance on this trade has increased to ~$3500.
We might want to roll down and out for a credit while lowering the number of contracts to 2 when the opportunity presents itself.
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
We rolled out for a net credit of $144.44. We have now brought in $378.65 in option premium. Our cost basis @ the 45 put strike is now $43.73. I considered rolling out and down for a net credit to the September 43 puts but I didn't want to commit to that much time.
There are plenty of strikes to roll out and down to if need be. Whatever we do it will only be for a net credit. Are we near the bottom? If not we will deal with it after all the time value has been drained from this continuation trade. The maintenance on this trade has increased to ~$3500.
We might want to roll down and out for a credit while lowering the number of contracts to 2 when the opportunity presents itself.
Tuesday, May 1, 2012
I'm smelling opportunity in PG *sniff*
Proctor & Gamble is slowly sinking following an unexciting quarterly report. Today it is at 63 and change. There are the usual pundits out there calling for big trouble. My take? Like we just saw with Pepsico, one quarterly report does not a blue chip make. Like Pepsico I think that once PG consolidates and finds a bottom a great put selling opportunity will be in place. With the recent dividend rise PG's yield above 3.5% should buoy the stock. I'm waiting for the consolidation and then I'm looking at the 60's or if worthwhile the 57.5's. Strong support is at the 57.5 level. For you thrill seekers the 62.5's might be interesting. You can always roll down and out for a credit if you don't go out too far on the strike date.
On a side note the recent bribery allegations make Wal-Mart another interesting blue chip dividend stock to watch.
On a side note the recent bribery allegations make Wal-Mart another interesting blue chip dividend stock to watch.
Saturday, April 28, 2012
Put Selling over Covered Calls because...
1) Single commission;
2) If the stock shoots up in value, the value of the puts decline. Then close out. With covered calls if the stock shoots up so does the premium. This scenario is much trickier to close out for a profit.
3) If the stock declines a lot it sucks for both but it really sucks for covered calls as you bought at that price. Rolling options is much trickier on a covered call than a put when the stock declines. The out of the money put seller has a buffer of the out of the money strike plus the premium received before she gets hurt. In addition, it is much easier to roll down and out for a credit.
4) Leverage in a margin account is more powerful with puts. In fact there is no cost for using margin when selling puts.
5) Even though you don't collect dividends the premiums are higher on puts to reflect that.
Note: potential trades on my radar include PG, WMT and JNJ due to their recent weakness. A couple of strikes down from the present price, a couple or three months out oughta do ya. If they decline further it's easy to roll down and out for a credit.
2) If the stock shoots up in value, the value of the puts decline. Then close out. With covered calls if the stock shoots up so does the premium. This scenario is much trickier to close out for a profit.
3) If the stock declines a lot it sucks for both but it really sucks for covered calls as you bought at that price. Rolling options is much trickier on a covered call than a put when the stock declines. The out of the money put seller has a buffer of the out of the money strike plus the premium received before she gets hurt. In addition, it is much easier to roll down and out for a credit.
4) Leverage in a margin account is more powerful with puts. In fact there is no cost for using margin when selling puts.
5) Even though you don't collect dividends the premiums are higher on puts to reflect that.
Note: potential trades on my radar include PG, WMT and JNJ due to their recent weakness. A couple of strikes down from the present price, a couple or three months out oughta do ya. If they decline further it's easy to roll down and out for a credit.
Friday, April 27, 2012
Profitable Trade: SLV Naked Puts
Today the following puts expired worthless:
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
Margin maintenance on the trade was $1745. In three days we earned 3.08% return on maintenance or 374% annual.
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
Margin maintenance on the trade was $1745. In three days we earned 3.08% return on maintenance or 374% annual.
Wednesday, April 25, 2012
New Trade: SLV Naked Puts
Today I entered into the following short term trade:
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
Saturday, April 21, 2012
Profitable Trade: SLV Naked Puts
Yesterday the following naked puts expired worthless:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver stayed range bound so these puts expired worthless. We earned 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual. We'll look to put that margin maintenance to work soon. I like the opportunities provided by the recent weakness in JNJ. I'm looking at the 60 puts a few months out.
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver stayed range bound so these puts expired worthless. We earned 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual. We'll look to put that margin maintenance to work soon. I like the opportunities provided by the recent weakness in JNJ. I'm looking at the 60 puts a few months out.
Friday, April 20, 2012
Trade Continuation: GDX Naked Puts
Today on options expiration Friday I continued the following transaction:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
GDX has trended downward and was at ~46.40 when I continued this transaction. After draining every drop of time value I rolled out one month and down two strikes for a net credit. Margin maintenance on this trade is ~$2800. If these puts expire worthless we will earn $234.21 in 61 days which is an 8.36% return on maintenance or 50% annual. At the close GDX dropped down to 46.10. The precious metals miners have not been able to get much of a bid. Sentiment is very low and most of the weak hands have had to have been scared away. In the event GDX continues its downward descent I will look to roll out and down again for a net credit. If put to us our cost basis will be $44.21 so we still have some breathing room in this trade. We will have time decay over the weekend and I won't look to roll down and out until I've wrung every drop of time value out of this trade.
Note: when these puts went into the money, margin maintenance increased to ~$3200 which will lower the returns
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
GDX has trended downward and was at ~46.40 when I continued this transaction. After draining every drop of time value I rolled out one month and down two strikes for a net credit. Margin maintenance on this trade is ~$2800. If these puts expire worthless we will earn $234.21 in 61 days which is an 8.36% return on maintenance or 50% annual. At the close GDX dropped down to 46.10. The precious metals miners have not been able to get much of a bid. Sentiment is very low and most of the weak hands have had to have been scared away. In the event GDX continues its downward descent I will look to roll out and down again for a net credit. If put to us our cost basis will be $44.21 so we still have some breathing room in this trade. We will have time decay over the weekend and I won't look to roll down and out until I've wrung every drop of time value out of this trade.
Note: when these puts went into the money, margin maintenance increased to ~$3200 which will lower the returns
Tuesday, April 17, 2012
New Trade: Sold SLV Naked Puts
Yesterday I entered into the following transaction:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
Thursday, April 12, 2012
Thoughts on GDX Trade...
I've always wanted online authors to reveal their thought patterns when a trade seemingly goes against them. Alas, there head is usually in the sand. I'm bucking the trend with this post.
Well GDX has fallen below support and seems to be consolidating at ~46. I sold the April 47 puts @.53 in one account. There is still some time decay to be had and I'm going to gobble it all up before deciding what to do next. Next Friday at expiry I'm looking to roll out and down to the May 45's but only if I can get a worthwhile credit. Otherwise I will roll out and down to the May 46's or July 44's.
Either way I expect a floor to be in place soon. The Fed saying they aren't going to engage in quantative easing for a while is hogwash IMO. Our debt is rising as I type. In any event there are many more strikes that I can roll out and down for a credit. My undefeated streak ain't ending on the gold miners! :)
Any thoughts?
Well GDX has fallen below support and seems to be consolidating at ~46. I sold the April 47 puts @.53 in one account. There is still some time decay to be had and I'm going to gobble it all up before deciding what to do next. Next Friday at expiry I'm looking to roll out and down to the May 45's but only if I can get a worthwhile credit. Otherwise I will roll out and down to the May 46's or July 44's.
Either way I expect a floor to be in place soon. The Fed saying they aren't going to engage in quantative easing for a while is hogwash IMO. Our debt is rising as I type. In any event there are many more strikes that I can roll out and down for a credit. My undefeated streak ain't ending on the gold miners! :)
Any thoughts?
Monday, April 2, 2012
Profitable Trade: Walgreen's (WAG) Naked Puts
Today I closed the following transaction for a profit:
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
04/02/2012 BTC 3 WAG Apr 21 2012 31 Puts @.05 -15.04
We made $151.67 in 33 days on ~$1400 in margin maintenance. This equates to a return on maintenance of 10.83% or 119.78% annual. These returns are inflated because there was an upcoming quarterly report and fear of fallout from the Express Scripts deal.
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
04/02/2012 BTC 3 WAG Apr 21 2012 31 Puts @.05 -15.04
We made $151.67 in 33 days on ~$1400 in margin maintenance. This equates to a return on maintenance of 10.83% or 119.78% annual. These returns are inflated because there was an upcoming quarterly report and fear of fallout from the Express Scripts deal.
My Favorite Blog...hands down
My favorite blog is Fully Informed. This author, Teddi Knight, is brilliant and experienced. I've been investing for over 20 years but she has been trading for 42 years. When I see she has a new post I giddily click on it and voraciously devour it. Well, maybe not with so much drama but you get the point. :)
Most blogs I read in all honesty don't enlighten me and it seems that some generate articles just to attract potential marketing dollars to their site.
To each his own but I have to say: Fully Informed rocks!
Honorable Mention: I also read Bill Cara's Week in Review every week. Bill has been trading for 50 years or so. Cara's blog can be found here.
Happy Trading
Most blogs I read in all honesty don't enlighten me and it seems that some generate articles just to attract potential marketing dollars to their site.
To each his own but I have to say: Fully Informed rocks!
Honorable Mention: I also read Bill Cara's Week in Review every week. Bill has been trading for 50 years or so. Cara's blog can be found here.
Happy Trading
Friday, March 30, 2012
New Trade: Proctor & Gamble (PG) Naked Puts
Yesterday in a taxable account I entered into the following transaction:
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
Proctor & Gamble is a tried and true Dividend Champion. It was showing a bit of weakness yesterday trading at 66 and change so I pulled the trigger on this little trade. PG is set to raise it's dividend next quarter so the share price should be supported a bit by the increase in yield. As of now the yield is 3.1%. If put to us our yield on cost, with the raise, will exceed 3.6% which is well above the historical average. The maintenance requirement on this trade is ~$2000. If these puts expire worthless we will earn $164.47 in 114 days on $2000 of margin maintenance. This equates to an 8.2% return or 26.25% annual. At this price we should be able to roll out and down for a net credit so we have an exit strategy in place.
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
Proctor & Gamble is a tried and true Dividend Champion. It was showing a bit of weakness yesterday trading at 66 and change so I pulled the trigger on this little trade. PG is set to raise it's dividend next quarter so the share price should be supported a bit by the increase in yield. As of now the yield is 3.1%. If put to us our yield on cost, with the raise, will exceed 3.6% which is well above the historical average. The maintenance requirement on this trade is ~$2000. If these puts expire worthless we will earn $164.47 in 114 days on $2000 of margin maintenance. This equates to an 8.2% return or 26.25% annual. At this price we should be able to roll out and down for a net credit so we have an exit strategy in place.
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