Yesterday these naked puts expired worthless in a taxable account:
12/28/2011 STO 7 SLV Dec 30 2011 25 Puts@.12 68.66
This was a 2 day trade on $2900 in margin maintenance. Time decay was a great
ally here. They expired worthless and we earned 2.36% or 430.7%
annual. I felt that precious metals had bottomed at the time I entered this trade.
Saturday, December 31, 2011
Friday, December 30, 2011
Profitable Trade: AT&T (T) Puts
Today in a taxable account I closed the following transaction:
11/21/2011 STO 2 Jan 21 2012 T 27.5 Puts @.9 168.47
12/30/2011 BTC 2 Jan 21 2012 T 27.5 Puts @.05 -10.03
In this trade we made $158.44 in 39 days. I closed it because we were down to our last nickel of profits and reached the point where we weren't charged commissions for closing. These puts were covered so our covered return was 2.98% or 27.89% annual. The margin maintenance requirement was $1059.61. If one were to calculate return on margin (ROM) the return jumps to 14.95% or 139.9% annual.
11/21/2011 STO 2 Jan 21 2012 T 27.5 Puts @.9 168.47
12/30/2011 BTC 2 Jan 21 2012 T 27.5 Puts @.05 -10.03
In this trade we made $158.44 in 39 days. I closed it because we were down to our last nickel of profits and reached the point where we weren't charged commissions for closing. These puts were covered so our covered return was 2.98% or 27.89% annual. The margin maintenance requirement was $1059.61. If one were to calculate return on margin (ROM) the return jumps to 14.95% or 139.9% annual.
New Trade: GDX Naked Puts
Today with GDX trading at ~51.70 I entered into the following transaction in a taxable account:
12/30/2011 STO 3 GDX Jan 21 2012 48 Puts @.5 137.71
I feel that precious metals just hit a bottom and will be moving back up. In any event GDX, a precious metals miners ETF, has shown great support at 50 for quite some time. Writing these at 48 give even more buffer than that. This trade expires in 22 days. The margin maintenance requirement is 2323.97. If these puts expire worthless the return on margin (ROM) is 5.92% or 98.2%.
12/30/2011 STO 3 GDX Jan 21 2012 48 Puts @.5 137.71
I feel that precious metals just hit a bottom and will be moving back up. In any event GDX, a precious metals miners ETF, has shown great support at 50 for quite some time. Writing these at 48 give even more buffer than that. This trade expires in 22 days. The margin maintenance requirement is 2323.97. If these puts expire worthless the return on margin (ROM) is 5.92% or 98.2%.
Precious Metals and other thoughts
Well it looks like precious metals bottom was yesterday morning. The GDX, GLD and SLV are all on the rise this morning. I assume that fear of a metals crash shook the herd out yesterday. In the face of this crash we were entering positions. With the MF Global situation and the weakness in the Euro it took more resolve than usual to go against the herd.
I understand and appreciate the simplicity and lack of stress that the dividend growth investor exists in! That being said, I believe I've learned methods that enhance the returns of the dividend growth strategy and which offer greater downside protection. It should be noted that in some accounts I hold that we are simple dividend growth investors with the usual suspects of Proctor and Gamble, Johnson & Johnson, AT& T, McDonald's, Wal-Mart, Pepsico, etc.
I understand and appreciate the simplicity and lack of stress that the dividend growth investor exists in! That being said, I believe I've learned methods that enhance the returns of the dividend growth strategy and which offer greater downside protection. It should be noted that in some accounts I hold that we are simple dividend growth investors with the usual suspects of Proctor and Gamble, Johnson & Johnson, AT& T, McDonald's, Wal-Mart, Pepsico, etc.
Thursday, December 29, 2011
1000 Hits!
Thank you for visiting our little blog. We just reached the 1000 hit mark which makes this gal purty happy. We look forward to many more posts and hopefully we can engage in some meaningful dialog...so make some comments! Thank you again and Happy New Year! Chester
New Trade: SLV Naked Puts
Yesterday in a taxable account with SLV at ~ 26.30 I entered into the following transaction:
12/28/2011 STO 7 SLV Dec 30 2011 25 Puts@.12 68.66
This is a 2 day trade on $2900 in margin maintenance. Time decay is a great ally here. If they expire worthless it will earn 2.36% or 430.7% annual. If silver continues to collapse I will probably roll this position.
12/28/2011 STO 7 SLV Dec 30 2011 25 Puts@.12 68.66
This is a 2 day trade on $2900 in margin maintenance. Time decay is a great ally here. If they expire worthless it will earn 2.36% or 430.7% annual. If silver continues to collapse I will probably roll this position.
Trade Continuation: SLV Naked Puts
Today with SLV down to ~ 26 I continued the following transaction in a taxable account:
12/22/2011 STO 8 SLV Dec 30 2011 26 Puts @.09 55.94
12/29/2011 BTC 8 SLV Dec 30 2011 26 Puts @.38 -320.05
12/29/2011 STO 8 SLV Jan 21 2012 25 Puts @.7 +553.88
Well silver had a nice little crash party thereby hitting the strike price of my naked puts. I could have exited the trade for a loss but I liked the setup to roll down to the 25's for a net credit of $233.83 (plus I wasn't willing to put my undefeated status on the line..ha). If these expire worthless we will make $289.92 in 30 days on $4000 of margin maintenance. That's a 7.2% return on margin (ROM) or 87.5% annual. Of course we don't have much breathing room on this trade and silver could continue it's weakness. I get the feeling that once we make it past the new year that SLV will find a bid. It's amazing that the dollar is strong but it's better than the alternative...the Euro.
12/22/2011 STO 8 SLV Dec 30 2011 26 Puts @.09 55.94
12/29/2011 BTC 8 SLV Dec 30 2011 26 Puts @.38 -320.05
12/29/2011 STO 8 SLV Jan 21 2012 25 Puts @.7 +553.88
Well silver had a nice little crash party thereby hitting the strike price of my naked puts. I could have exited the trade for a loss but I liked the setup to roll down to the 25's for a net credit of $233.83 (plus I wasn't willing to put my undefeated status on the line..ha). If these expire worthless we will make $289.92 in 30 days on $4000 of margin maintenance. That's a 7.2% return on margin (ROM) or 87.5% annual. Of course we don't have much breathing room on this trade and silver could continue it's weakness. I get the feeling that once we make it past the new year that SLV will find a bid. It's amazing that the dollar is strong but it's better than the alternative...the Euro.
Tuesday, December 27, 2011
Profitable Trade: Conoco-Phillips (COP) Put
Today I closed out the following transaction in a taxable account:
11/25/2011 STO 1 COP Jan 21 2012 60 Put @ 1.30 +119.23
12/27/2011 BTC 1 COP Jan 21 2012 60 Put @ .05 -5.02
We didn't fight for that last nickel and we reached the point where we could close without commissions. We made $114.21 in 31 days. This is a return of 1.9% or 22.37% annual. If one were to calculate return on margin which was $781.84 then we have a return of 14.6% or 171.9% annual. The latter returns are sought to be exploited in the book I recommended called Selling Put Options My Way.
We continue to close positions when fear is at a minimum and we await the fear to return, loaded up with cash, so we can enter new positions.
11/25/2011 STO 1 COP Jan 21 2012 60 Put @ 1.30 +119.23
12/27/2011 BTC 1 COP Jan 21 2012 60 Put @ .05 -5.02
We didn't fight for that last nickel and we reached the point where we could close without commissions. We made $114.21 in 31 days. This is a return of 1.9% or 22.37% annual. If one were to calculate return on margin which was $781.84 then we have a return of 14.6% or 171.9% annual. The latter returns are sought to be exploited in the book I recommended called Selling Put Options My Way.
We continue to close positions when fear is at a minimum and we await the fear to return, loaded up with cash, so we can enter new positions.
Recommended Book: Selling Put Options My Way
I finished reading Selling Put Options My Way by Jerry Lee. The author has had great success with a simple trading formula. Basically, he uses his margin maintenance to sell puts on solid stocks 20% below there present price. He only sells near month strikes so the stock would have to collapse for him to lose. If one were to follow his criteria it is credible that one could make 2-3% per month. Yes, you read that correctly. There are other criteria and he sets forth exit strategies. I've been doing this a long time so new insights are harder and harder to come by. I did find this book to be interesting and I've stirred it's contents into the soup that is my trading strategy. Happy New Year, Chester
Thursday, December 22, 2011
Profitable Trade: General Electric (GE) Covered Puts
Today I closed out the following transaction in a traditional IRA:
11/22/2011 Sold 3 GE Jan 2012 15 Puts @ .9 +257.71
12/22/2011 BTC 3 GE Jan 2012 15 Puts @.05 -15.04
We made $242.67 in 30 days on these covered puts. This equates to a return of 5.4% or 65.7% annual. We continue to close out transactions on up days and enter new transactions on days when fear is plentiful.
11/22/2011 Sold 3 GE Jan 2012 15 Puts @ .9 +257.71
12/22/2011 BTC 3 GE Jan 2012 15 Puts @.05 -15.04
We made $242.67 in 30 days on these covered puts. This equates to a return of 5.4% or 65.7% annual. We continue to close out transactions on up days and enter new transactions on days when fear is plentiful.
Profitable Trade: Exxon Mobil (XOM) Covered Call
Today I took profits in XOM in a traditional IRA. The transaction looks like this:
12/12/2011 BTC 1 XOM Dec 17 @ 4.6 -470.76
12/12/2011 STO 1 XOM Jan 21 2012 @ 5.6 +549.22
12/22/2011 BTC 1 XOM Jan 21 2012 @ 9.35 -945.76
12/22/2011 Sold 100 XOM @ 84.19 +8408.94
We made $452.64 on this transaction in 13 weeks. Our average out of pocket in this trade was ~$7200. This equates to ~6.3% return or 25.14% annual.
With the run up in the price we pretty much drained all the time decay out of this trade. By closing out early we have more powder in the keg for the next downturn.
09/30/2011 13:44:08 Bought 100 XOM @ 74.3982 -7,449.81
09/30/2011 13:44:50 Sold 1 XOM Oct 7 2011 75.0
Call @ 1.19 108.23
10/07/2011 10:15:56 Bought 1 XOM Oct 7 2011 75.0
Call @ 0.05 -5.02
10/07/2011 10:16:25 Sold 1 XOM Oct 14 2011 75.0
Call @ 0.76 65.23
10/13/2011 09:59:16 Bought 1 XOM Oct 14 2011 75.0
Call @ 1.62 -172.76
10/13/2011 09:59:48 Sold 1 XOM Nov 19 2011 75.0
Call @ 3.35 324.23
11/11/2011 15:11:53 Bought 1 XOM Nov 19 2011 75.0
Call @ 4.6 -470.76
11/11/2011 15:12:58 Sold 1 XOM Dec 17 2011 75.0
Call @ 5.45 534.22
12/09/2011 Dividend +47.00
12/12/2011 BTC 1 XOM Dec 17 @ 4.6 -470.76
12/12/2011 STO 1 XOM Jan 21 2012 @ 5.6 +549.22
12/22/2011 BTC 1 XOM Jan 21 2012 @ 9.35 -945.76
12/22/2011 Sold 100 XOM @ 84.19 +8408.94
We made $452.64 on this transaction in 13 weeks. Our average out of pocket in this trade was ~$7200. This equates to ~6.3% return or 25.14% annual.
With the run up in the price we pretty much drained all the time decay out of this trade. By closing out early we have more powder in the keg for the next downturn.
New Trade: Silver ETF (SLV) Naked Puts
Today in a taxable account I entered the following short term transaction:
12/22/2011 STO 8 SLV Dec 30 2011 26 Puts @.09 55.94
This is an 8 day trade in SLV. SLV would have to drop 8.2% in 8 days for these to be in the money. If these expire worthless we will earn 2.24% on our maintenance requirement of $2496 which equates to 102.2% annual. We are bullish precious metals and are of the belief that SLV has support at present levels of 28 and change.
12/22/2011 STO 8 SLV Dec 30 2011 26 Puts @.09 55.94
This is an 8 day trade in SLV. SLV would have to drop 8.2% in 8 days for these to be in the money. If these expire worthless we will earn 2.24% on our maintenance requirement of $2496 which equates to 102.2% annual. We are bullish precious metals and are of the belief that SLV has support at present levels of 28 and change.
Tuesday, December 20, 2011
Profitable Trade: General Electric (GE) Puts
Today I closed out the following investment in a taxable account:
11/17/2011 STO 3 GE Jan 21 14 Puts @.49 134.75
12/20/2011 BTC 3 GE Jan 21 14 Puts @.05 -15.04
I closed this trade as I got down to the .05 mark where I'm not charged commissions to exit the trade. In addition I wanted to free up funds for another transaction. We made $119.71 in this transaction. This is a return of 2.94% in 33 days which equates to 32.51% annual. If one were to calculate return on margin (ROM) the returns are impressive. This investment had a low maintenance requirement of $533.24. The ROM is 22.45% or 248.31% annual. I can live with that :)
11/17/2011 STO 3 GE Jan 21 14 Puts @.49 134.75
12/20/2011 BTC 3 GE Jan 21 14 Puts @.05 -15.04
I closed this trade as I got down to the .05 mark where I'm not charged commissions to exit the trade. In addition I wanted to free up funds for another transaction. We made $119.71 in this transaction. This is a return of 2.94% in 33 days which equates to 32.51% annual. If one were to calculate return on margin (ROM) the returns are impressive. This investment had a low maintenance requirement of $533.24. The ROM is 22.45% or 248.31% annual. I can live with that :)
Monday, December 19, 2011
New Trade: Silver (SLV) Covered Call
Today I entered into the following transaction in a Roth IRA:
12/19/2011 Bought 100 SLV @ 28.389 -2848.85
12/19/2011 STO 1 SLV Jan 21 2012 29 Call@1.12 +101.27
Silver has been slaughtered as of late and it is trading at the bottom of it's trading range. Our out of pocket is $27.47 which is at or below the bottom of SLV's trading range for the last year. We are bullish on precious metals and look at the recent downturn as a buying opportunity. If we get called away we will make $133 in 33 days which equates to 4.84% or 53.53% annual.
12/19/2011 Bought 100 SLV @ 28.389 -2848.85
12/19/2011 STO 1 SLV Jan 21 2012 29 Call@1.12 +101.27
Silver has been slaughtered as of late and it is trading at the bottom of it's trading range. Our out of pocket is $27.47 which is at or below the bottom of SLV's trading range for the last year. We are bullish on precious metals and look at the recent downturn as a buying opportunity. If we get called away we will make $133 in 33 days which equates to 4.84% or 53.53% annual.
Trade Continuation: GDX Covered Call
Today I continued a GDX Gold Miner's ETF investment in a traditional IRA as follows:
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
12/19/2011 10:15:55 Sold 1 GDX Feb 18 2012 56.0 Call @ 1.5 139.23
With this transaction our amount out of pocket is down to $52.20/share. That's good because the ETF has dropped to 52 and change. We are bullish the precious metals and believe that the recent downturn provides a buying opportunity. In fact we have some GDX puts that we wrote at the 52 strike.
It should be noted that before we entered into this trade we actually collected $489.25 in put money which we are not reflecting in these calculations. In any event, if we get called away in February we will make $380 which equates to 6.9% or ~21.1% annual. If we don't get called away then we'll write new calls, with a good hard look being given to the 56 strike again.
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
12/19/2011 10:15:55 Sold 1 GDX Feb 18 2012 56.0 Call @ 1.5 139.23
With this transaction our amount out of pocket is down to $52.20/share. That's good because the ETF has dropped to 52 and change. We are bullish the precious metals and believe that the recent downturn provides a buying opportunity. In fact we have some GDX puts that we wrote at the 52 strike.
It should be noted that before we entered into this trade we actually collected $489.25 in put money which we are not reflecting in these calculations. In any event, if we get called away in February we will make $380 which equates to 6.9% or ~21.1% annual. If we don't get called away then we'll write new calls, with a good hard look being given to the 56 strike again.
Trade Continuation AT&T (T) Covered Call
Today in a traditional IRA I continued the following transaction:
06/27/2011 Bought 200 T @ 30.889 -6187.79
06/27/2011 STO 2 Aug 20 2011 31 Calls @.53 +94.50
08/01/2011 Dividend +86.00
08/03/2011 BTC 2 Aug 20 2011 31 Calls@.05 -10.00
08/03/2011 STO 2 Jan 21 2012 31 Calls@.66 +120.50
11/01/2011 Dividend +86.00
11/22/2011 BTC 2 Jan 21 2012 31 Calls@.05 -10.00
12/02/2011 STO 2 Dec 17 2011 29 Calls@.38 +64.47
12/19/2011 STO 2 Feb 18 2012 29 Calls@.59 +106.47
With this latest transaction we have lowered our out of pocket to $5649.85 or $28.24/share. AT&T goes ex-dividend on January 6 with their raised dividend of .44/share. We might get called out but I doubt it since our expiration date is 6 weeks later.
We are recovering nicely in this trade after arguably paying too much for the stock to start. I wasn't religiously following the charts and only entering an investment at the bottom of the trade cycle when I entered this trade. Nevertheless if we collect the dividend our amount out of pocket will drop to $5561.85 or $27.81/share.
If we get called away in February and don't roll the position our profit will be $218.15 which equates to 3.5% or 5.3% annual. This is not great but it is still a profit on a stock that dropped in price from the time we bought it. I like the stock at cheaper entry points and have written some out of the money puts at the 27.5 strike price in other accounts.
06/27/2011 Bought 200 T @ 30.889 -6187.79
06/27/2011 STO 2 Aug 20 2011 31 Calls @.53 +94.50
08/01/2011 Dividend +86.00
08/03/2011 BTC 2 Aug 20 2011 31 Calls@.05 -10.00
08/03/2011 STO 2 Jan 21 2012 31 Calls@.66 +120.50
11/01/2011 Dividend +86.00
11/22/2011 BTC 2 Jan 21 2012 31 Calls@.05 -10.00
12/02/2011 STO 2 Dec 17 2011 29 Calls@.38 +64.47
12/19/2011 STO 2 Feb 18 2012 29 Calls@.59 +106.47
With this latest transaction we have lowered our out of pocket to $5649.85 or $28.24/share. AT&T goes ex-dividend on January 6 with their raised dividend of .44/share. We might get called out but I doubt it since our expiration date is 6 weeks later.
We are recovering nicely in this trade after arguably paying too much for the stock to start. I wasn't religiously following the charts and only entering an investment at the bottom of the trade cycle when I entered this trade. Nevertheless if we collect the dividend our amount out of pocket will drop to $5561.85 or $27.81/share.
If we get called away in February and don't roll the position our profit will be $218.15 which equates to 3.5% or 5.3% annual. This is not great but it is still a profit on a stock that dropped in price from the time we bought it. I like the stock at cheaper entry points and have written some out of the money puts at the 27.5 strike price in other accounts.
AT&T Raises Dividend by only 1 cent...again
From Dow Jones: AT&T Inc.'s (T) board raised the telecommunications heavyweight's quarterly dividend a penny a share, or 2.3%, marking the 28th straight year of increases.
AT&T increased the dividend to 44 cents a share, with the increase costing roughly $59.3 million each payout. The company had $10.76 billion in cash and cash equivalents on its balance sheet at the end of the third quarter.
Chairman and Chief Executive Randall Stephenson said the company's financial discipline throughout the economic downturn has allowed it to pay down debt, invest to support more customer usage and generate strong cash flows.
"We know millions of our owners are individuals and they count on their AT&T dividend each quarter," he said.
Many companies have bolstered dividends lately, some to put accumulated cash to work, others to appeal to investors wearied by market volatility.
AT&T most recently reported higher third-quarter earnings driven by better-than-expected growth in wireless subscriptions.
AT&T shares were down 6 cents at $28.73 in recent trading.
Saturday, December 17, 2011
Profitable Trade - Coca-Cola (KO) Puts
Today our KO puts expired worthless. The transaction was as follows:
Sold 2 KO Dec 17 2011 62.5 Puts@.71 +130.47
We earned 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.
Sold 2 KO Dec 17 2011 62.5 Puts@.71 +130.47
We earned 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.
Profitable Trade - Microsoft (MSFT) Puts
Today our Microsoft puts expired worthless. Our transaction was as follows:
STO 4 MSFT Dec 17 2011 24 Puts@.38 +138.95
Our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.
STO 4 MSFT Dec 17 2011 24 Puts@.38 +138.95
Our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.
Trade Continuation - Microsoft (MSFT) Covered Call
Today I continued a MSFT investment in a traditional IRA as follows:
11/01/2011 13:29:58 Bought 200 MSFT @ 26.029 -5,215.79
11/01/2011 13:31:11 Sold 2 MSFT Nov 4 2011 26.0
Call @ 0.36 60.47
11/04/2011 14:52:03 Bought 2 MSFT Nov 04 2011
26.0 Call @ 0.25 -61.52
11/04/2011 14:52:44 Sold 2 MSFT Dec 17 2011 26.0
Call @ 0.88 164.45
12/08/2011 Dividend 40.00
12/16/2011 BTC 2 MSFT Dec 17 2011 26 Calls @ .05 -10.03
12/16/2011 STO 2 MSFT Jan 21 2011 26 Calls @.67 112.47
This roll lowered our amount invested to $4899.53 or $24.50/share. We are successfully collecting monthly income in addition to the dividend. If we get called away we will make ~280.00 after commissions. This equates to a return of ~5.4% on our initial investment or 25.54% annual.
Monday, December 12, 2011
Trade Continuation: Exxon Mobil (XOM) Covered Call
Today with the DOW down 218 points to 11965 and XOM at ~79.60 I continued the following transaction:
09/30/2011 13:44:08 Bought 100 XOM @ 74.3982 -7,449.81
09/30/2011 13:44:50 Sold 1 XOM Oct 7 2011 75.0
Call @ 1.19 108.23
10/07/2011 10:15:56 Bought 1 XOM Oct 7 2011 75.0
Call @ 0.05 -5.02
10/07/2011 10:16:25 Sold 1 XOM Oct 14 2011 75.0
Call @ 0.76 65.23
10/13/2011 09:59:16 Bought 1 XOM Oct 14 2011 75.0
Call @ 1.62 -172.76
10/13/2011 09:59:48 Sold 1 XOM Nov 19 2011 75.0
Call @ 3.35 324.23
11/11/2011 15:11:53 Bought 1 XOM Nov 19 2011 75.0
Call @ 4.6 -470.76
11/11/2011 15:12:58 Sold 1 XOM Dec 17 2011 75.0
Call @ 5.45 534.22
12/09/2011 Dividend +47.00
12/12/2011 BTC 1 XOM Dec 17 @ 4.6 -470.76
12/12/2011 STO 1 XOM Jan 21 2012 @ 5.6 +549.22
We wrung out all the time decay on this one so I rolled the deep in the money call for a net credit of $78.46. This lowers our amount invested to $7010.54 or $70.10/share. We have been able to roll in the money calls on a monthly basis for a nice double dividend. These series of transactions illustrate the enhanced income strategy we have come to know and love.
General Electric (GE) Raises Dividend..Again
General Electric announced that they are raising their dividend by .02 to .17/quarter. GE has been aggressively raising their dividend since they've got their feet firmly planted on the ground again. The yield is now well over 3%. We were happy to see this as we have several GE income investments open at this time.
Sold GDX Puts
Today with the DOW down 168 points to just over 12000 and GDX, the gold miners ETF, down to~ $55.50 I entered into the following transaction in a taxable account:
STO 2 GDX Jan 21 2012 52 Puts @ 1.47 +282.45
GDX has bounced off $52.50 for a year now. We are bullish precious metals and will be happy to own GDX at 50 and change. This might not be the absolute bottom but I anticipate that GDX, like the South, will rise again.
If the puts expire worthless this is a 2.7% return for 40 days or 24.7% annual. For those that give merit to return on margin (ROM) the return is a whopping 21.26% or 194% annual.
STO 2 GDX Jan 21 2012 52 Puts @ 1.47 +282.45
GDX has bounced off $52.50 for a year now. We are bullish precious metals and will be happy to own GDX at 50 and change. This might not be the absolute bottom but I anticipate that GDX, like the South, will rise again.
If the puts expire worthless this is a 2.7% return for 40 days or 24.7% annual. For those that give merit to return on margin (ROM) the return is a whopping 21.26% or 194% annual.
Thursday, December 8, 2011
Swing Low Sweet Sentiment
We've got cash at the ready. We just need the herd to swing the pendulum back toward fear. Downright Damien Omen, Exorcist panic and horror would be this gal's preference. Trade the Psychology, Ride the Lightning...ha.
World economies are in the position of relying on government to set things right. May I have some examples of when that has ultimately worked in the past? Politicians are short sighted. Short sightedness put the world economies in the situation we're in. A doctor with broken arms flapping in the wind can't perform surgery on the gasping patient.
When the market heads back south I will be at the ready to sell naked and covered puts below the support levels of Dividend Champions. I will be rolling my existing covered call positions to keep the premiums and dividends pouring in. I love my Double D's! (that's double dividends fellas..). I also love to trade precious metals ETF's with options. I believe we are in the midst of a long term secular bull in precious metals. If you'll search under GDX, GLD and SLV on this blog you'll find several examples of "have your cake and eat it" trades.
On covered calls we will look closely at in the money and at the money strikes first. I'm a believer that we now live in a world where we are witnessing the end of growth. I'll give up capital appreciation for boring double digit income returns.
As for now, I'm licking my lips...and waiting...
World economies are in the position of relying on government to set things right. May I have some examples of when that has ultimately worked in the past? Politicians are short sighted. Short sightedness put the world economies in the situation we're in. A doctor with broken arms flapping in the wind can't perform surgery on the gasping patient.
When the market heads back south I will be at the ready to sell naked and covered puts below the support levels of Dividend Champions. I will be rolling my existing covered call positions to keep the premiums and dividends pouring in. I love my Double D's! (that's double dividends fellas..). I also love to trade precious metals ETF's with options. I believe we are in the midst of a long term secular bull in precious metals. If you'll search under GDX, GLD and SLV on this blog you'll find several examples of "have your cake and eat it" trades.
On covered calls we will look closely at in the money and at the money strikes first. I'm a believer that we now live in a world where we are witnessing the end of growth. I'll give up capital appreciation for boring double digit income returns.
As for now, I'm licking my lips...and waiting...
Tuesday, December 6, 2011
Teetering?
Well we had a nice little rally. It feels long in the tooth now. I've taken profit and moved several income positions to cash so I can have powder in the keg when the media starts screaming that the economic world is about to collapse...again.
I recently posted an article called Trading a Bipolar Market which I believe sets forth a good way to profit in volatile markets such as this. Swim against the school of fish, stampede against the herd. Buy low, sell high...yada yada. Easier said then done...that is until you calculate your returns. Happy Hunting!
I recently posted an article called Trading a Bipolar Market which I believe sets forth a good way to profit in volatile markets such as this. Swim against the school of fish, stampede against the herd. Buy low, sell high...yada yada. Easier said then done...that is until you calculate your returns. Happy Hunting!
Monday, December 5, 2011
Profitable Trade (SO) Southern Company
I recently closed out the following position in Southern Company in a traditional IRA account. I closed this position as it was basically dead money with most of the time decay drained from the transaction. This series of trades illustrates how using my enhanced income or double dividend strategy one can achieve double dividend returns, even on utility stocks.
- 7/19/11 Bought 100 SO @ 39.94 -4003.98
- 7/19/11 STO 1 Jan 21 2012 40 @ 1.22 +111.25
- 9/6/11 Dividend +47.25
- 11/30/11 BTC 1 Jan 21 2012 40 @ 4.10 -420.76
- 11/30/11 Sold 100 SO @ 43.82 +4372.10
- 12/6/11 Dividend +47.25
Wednesday, November 30, 2011
Profitable Trade: Altria Group (MO) Covered Call....Again
Back to back I closed two Altria Group trades I had going in two different accounts. This one is in a traditional IRA. The DOW was up huge...over 360. This follows my trend of closing out transactions on big up days and opening income transactions on big down days. The investment went as follows:
09/01/2011 10:28:40 Bought 200 MO @ 27.2695 -5,463.89
09/01/2011 10:30:16 Sold 2 MO Oct 22 2011 27.0
Call @ 0.8 148.50
10/11/2011 03:58:13 QUALIFIED DIVIDEND (MO) 82.00
10/18/2011 13:42:00 Bought 2 MO Oct 22 2011 27.0
Call @ 0.67 -145.52
10/18/2011 13:42:54 Sold 2 MO Nov 19 2011 27.0
Call @ 1.05 198.47
11/11/2011 15:39:19 Bought 2 MO Nov 19 2011 27.0
Call @ 0.87 -185.53
11/11/2011 15:40:38 Sold 2 MO Jan 21 2012 27.0
Call @ 1.28 244.47
11/30/2011 BTC 2 MO Jan 21 27 Calls @ 1.67 -345.53
11/30/2011 Sold 200 MO @ 28.47 +5684.26
In this trade we made $217.23 in 3 months. This equates to ~4.1% return or 16.3% annual. This is another bread and butter enhanced income transaction on a great dividend company. In addition, by closing these transactions we increase our cash position to use when sentiment flip flops back toward fear.
11/30/2011 BTC 2 MO Jan 21 27 Calls @ 1.67 -345.53
11/30/2011 Sold 200 MO @ 28.47 +5684.26
In this trade we made $217.23 in 3 months. This equates to ~4.1% return or 16.3% annual. This is another bread and butter enhanced income transaction on a great dividend company. In addition, by closing these transactions we increase our cash position to use when sentiment flip flops back toward fear.
Profitable Trade: Altria Group (MO) Covered Call
- 9/6/11 Bought 200 MO @ 26.57 -5323.63
- 9/6/11 STO 2 MO Oct 22 27's @ .54 +96.50
- 10/11 Dividend +82.00
- 10/21 BTC 2 MO Oct 22 27's @.50 -111.52
- 10/21 STO 2 MO Nov 19 27's @.95 +178.47
- 11/17 BTC 2 MO Nov 19 27's @.72 -155.52
- 11/17 STO 2 MO Jan 21 27's @1.15 +218.47
- 11/30 BTC 2 MO Jan 21 27's @1.64 -339.56
- 11/30 Sold 200 MO @ 28.41 +5672.26
Trading a Bipolar Market
Today the futures are up big, building on Monday's momentum. Last week the world economy was headed toward sure collapse. China is in a bubble...no wait....China's government is taking action to support banks. The end of the Euro...no wait...world bankers are getting together to support the whole world economy. Back and forth it goes...
So what's a gal to do in this mad, mad, man's world? Read the charts baby, that's what. I'm selling out of the money puts at or below a stocks lows during the last year. I'm only entering new income positions when the bipolar meter is set to doom, gloom, dog and cats living together.
With such high volatility there are above average premiums to be collected out there. Even deep in the money covered calls are providing double digit annual returns. Lovin' it! Yumsicle!...*clears throat*...where was I? Oh yeah..
And all this money to be made on widow and orphan blue chip Dividend Champions. If one wants to get a little racy they can trade the precious metals etf's like GLD, SLV and GDX. They don't pay dividends but the option premiums are juicy and this gal loves long term secular bulls.
Be greedy when others are fearful. Be fearful when others are greedy. Buy low, sell high. Only invest in those stocks that you are happy to own for the long haul. Only roll options for a credit. Don't stand under a tree holding a golf club when it's lightning. And finally: What's sexier then a hot babe who can trade the average guy under the table? :)
So what's a gal to do in this mad, mad, man's world? Read the charts baby, that's what. I'm selling out of the money puts at or below a stocks lows during the last year. I'm only entering new income positions when the bipolar meter is set to doom, gloom, dog and cats living together.
With such high volatility there are above average premiums to be collected out there. Even deep in the money covered calls are providing double digit annual returns. Lovin' it! Yumsicle!...*clears throat*...where was I? Oh yeah..
And all this money to be made on widow and orphan blue chip Dividend Champions. If one wants to get a little racy they can trade the precious metals etf's like GLD, SLV and GDX. They don't pay dividends but the option premiums are juicy and this gal loves long term secular bulls.
Be greedy when others are fearful. Be fearful when others are greedy. Buy low, sell high. Only invest in those stocks that you are happy to own for the long haul. Only roll options for a credit. Don't stand under a tree holding a golf club when it's lightning. And finally: What's sexier then a hot babe who can trade the average guy under the table? :)
Monday, November 28, 2011
Bear Trap?
Well the world isn't coming to an end so futures are pointing to a higher open. Is this a short term market bottom? Should we use the upswing to close out positions for a profit and move to cash? I get the feeling that once again when doom, gloom and fear are the news of the day that it's time to open new income positions. It ain't easy swimming against the current but it is probably the most profitable. Be greedy when others are fearful, be fearful when others are greedy says Mr. Buffett.
Friday, November 25, 2011
Sold Conoco Phillips (COP) Put
Today with the market up a smidgen and COP trading at ~66.95 I entered into the following transaction in a taxable account:
STO 1 COP Jan 21 2012 60 Put @ 1.30 +119.23
Conoco Phillips has a rising dividend and is a stock I'm interested in holding long term. It is a Buffett favorite. In reading the charts, like a psychic reads tea leaves...ha, it is revealed to me that every time COP has hit 60 in the last year it immediately found support and jumped up like a prairie dog sittin' on a cactus. If assigned to us we'll take COP at ~ 59 which will at that price yield 4.5%. In addition, COP will probably raise it's dividend next quarter. If the put expires worthless we will earn 2% in 57 days which equates to 12.8% annual. If one were to believe in return on margin (ROM) the return on a $781.84 margin requirement is 15.2% or 98% annual.
All the puts I've sold lately are at the very bottom of the last year's trading range. At this point in my trading experience that's about the best I can do. If these stocks fall below the strike prices, we can: 1) accept the stocks and collect dividends and write calls; or 2) roll them out for a credit. Either way they won't have heard the last from this gal! ha!
STO 1 COP Jan 21 2012 60 Put @ 1.30 +119.23
Conoco Phillips has a rising dividend and is a stock I'm interested in holding long term. It is a Buffett favorite. In reading the charts, like a psychic reads tea leaves...ha, it is revealed to me that every time COP has hit 60 in the last year it immediately found support and jumped up like a prairie dog sittin' on a cactus. If assigned to us we'll take COP at ~ 59 which will at that price yield 4.5%. In addition, COP will probably raise it's dividend next quarter. If the put expires worthless we will earn 2% in 57 days which equates to 12.8% annual. If one were to believe in return on margin (ROM) the return on a $781.84 margin requirement is 15.2% or 98% annual.
All the puts I've sold lately are at the very bottom of the last year's trading range. At this point in my trading experience that's about the best I can do. If these stocks fall below the strike prices, we can: 1) accept the stocks and collect dividends and write calls; or 2) roll them out for a credit. Either way they won't have heard the last from this gal! ha!
Thursday, November 24, 2011
Futures Pointing Down....Again
Are we oversold or headed toward a crash? Europe, unemployment, credit crisis, foreign wars, printing money, 1% v 99%, polarized and incompetent politicians. It would seem to paint a very gloomy picture; one that is ripe for a crash. Or not? Maybe this is a contrarian, bear trap.
There will probably be light trading tomorrow. Will Santa show up this year and rally the markets? Hmmm...interesting times.
In times like these I see the attractiveness of being a simple dividend growth investor. In my accounts where that is the plan I really couldn't care less if the market crashes or not. Lower prices mean more shares bought at reinvestment time. Ahhh....but that's boring...ha :) Happy Holidays
There will probably be light trading tomorrow. Will Santa show up this year and rally the markets? Hmmm...interesting times.
In times like these I see the attractiveness of being a simple dividend growth investor. In my accounts where that is the plan I really couldn't care less if the market crashes or not. Lower prices mean more shares bought at reinvestment time. Ahhh....but that's boring...ha :) Happy Holidays
Wednesday, November 23, 2011
Rising Dividend Gold Stocks
This article is an interesting read for us who like precious metal stocks and rising dividends. I wasn't aware that the two intersected. Newmont Mining and Goldcorp are two gold stalwarts with rising dividends. Happy Thanksgiving.
Tuesday, November 22, 2011
Monthly Dividend Stocks
Here is a great article on some monthly dividend stocks. The author likes an issue called Baytex. I'll have to do a little due diligence on that. Also mentioned is one of this gal's favorites Realty Income (O). Who doesn't like monthly dividends?
Sold General Electric (GE) Puts
Today with the Dow down 50 to ~11500 and GE down to 15.02 I entered into the following transaction in a traditional IRA:
Sold 3 GE Jan 2012 15 Puts @ .9 +257.71
These puts are cash secured. If they expire worthless they return 5.7% which equates to 34.67% annually. If these are put to me (and I don't decide to roll them) then we are happy to own GE at 14 and change. Yield on cost at that point will be ~4.2%. GE has shown great support at the 14 level.
I've been pretty active over the last couple of days. The fear and uncertainty in the markets seem to have created attractive income opportunities. Buy low, sell high. Get greedy when the masses are fearful, get fearful when the masses are greedy. Happy Holidays.
Sold 3 GE Jan 2012 15 Puts @ .9 +257.71
These puts are cash secured. If they expire worthless they return 5.7% which equates to 34.67% annually. If these are put to me (and I don't decide to roll them) then we are happy to own GE at 14 and change. Yield on cost at that point will be ~4.2%. GE has shown great support at the 14 level.
I've been pretty active over the last couple of days. The fear and uncertainty in the markets seem to have created attractive income opportunities. Buy low, sell high. Get greedy when the masses are fearful, get fearful when the masses are greedy. Happy Holidays.
Trade Continuation: Realty Income (O) Covered Calls
Here is the transaction to date:
Realty Income in this gal's opinion is easy pickings for double digit returns. When one juices the monthly dividend with out of the money covered calls, the out of pocket drops monthly. I don't recommend Realty Income in taxable accounts because the dividends are taxed as regular income. For a tax free account, however, O is very yummy.
- 07/15/11 Bought 200 O @33.7846 -6766.91
- 07/15/11 Sold 2 O Dec 17 2011 35 Calls@.7 +128.50
- 08/15/11 Dividend +28.98
- 09/15/11 Dividend +28.98
- 10/17/11 Dividend +29.04
- 11/15/11 Dividend +29.04
- 11/22/11 Bought 2 O Dec 17 2011 35 Calls@.05 -10.03
- 11/22/11 Sold 2 O Mar 17 2012 35 Calls@.8 +148.47
Realty Income in this gal's opinion is easy pickings for double digit returns. When one juices the monthly dividend with out of the money covered calls, the out of pocket drops monthly. I don't recommend Realty Income in taxable accounts because the dividends are taxed as regular income. For a tax free account, however, O is very yummy.
Sold Microsoft (MSFT) Puts
Today in a taxable account and during amateur hour (ha!) I entered into the following transaction:
STO 4 MSFT Dec 17 2011 24 Puts@.38 +138.95
Microsoft is a cash cow and is now steadily raising it's dividend. It is also extremely heavily traded and, therefore, very liquid. It is a holding we are happy to own long term. If put to us we will have a cost basis after commissions of ~23.70/share. There has been strong support for MSFT at this level. At $23.70 our yield on cost is ~3.4%.
If the puts expire worthless our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.
I've entered into several transactions during this time of fear and uncertainty. I'll probably chill for a little while and see how things play out. My feeling is that we are oversold, however, as seems to be the norm these days a crash is always a possibility.
STO 4 MSFT Dec 17 2011 24 Puts@.38 +138.95
Microsoft is a cash cow and is now steadily raising it's dividend. It is also extremely heavily traded and, therefore, very liquid. It is a holding we are happy to own long term. If put to us we will have a cost basis after commissions of ~23.70/share. There has been strong support for MSFT at this level. At $23.70 our yield on cost is ~3.4%.
If the puts expire worthless our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.
I've entered into several transactions during this time of fear and uncertainty. I'll probably chill for a little while and see how things play out. My feeling is that we are oversold, however, as seems to be the norm these days a crash is always a possibility.
Monday, November 21, 2011
Sold Coca Cola (KO) Puts
With the DOW down ~300 to ~11500 and Coca-Cola down to ~65.58 I entered into the following transaction in a taxable account:
Sold 2 KO Dec 17 2011 62.5 Puts@.71 +130.47
We'd be happy to own KO at ~62. Our yield on cost will exceed 3%. In addition, KO is set to raise the dividend next quarter. If the puts expire worthless we will earn 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return if the puts expire worthless, with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.
Sold 2 KO Dec 17 2011 62.5 Puts@.71 +130.47
We'd be happy to own KO at ~62. Our yield on cost will exceed 3%. In addition, KO is set to raise the dividend next quarter. If the puts expire worthless we will earn 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return if the puts expire worthless, with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.
Sold AT&T (T) Puts
Today with the DOW down 293 to 11503 and T down to 28.22 I entered into the following transaction in a taxable account.
STO 2 T Jan 21 27.5 Puts @.9 +168.45
I like to enter my income investments on down days. Check. For the recent past AT&T has found solid support at the 27 levels. If put to me our cost basis will be ~26.76 after commissions. At that price our dividend yield on cost is 6.4%. In addition, AT&T will probably announce a dividend increase in December with an ex-dividend date before our puts expire. Therefore, I expect our yield on cost to increase.
If these puts expire worthless our return is 3.1% which is 18.54% annual. For those who figure return on margin (ROM) the return on the margin requirement of $1059.61 is 15.9% or 95.14% annual.
AT&T is a stock we are interested in holding long term. If put to us (and we don't decide to roll the position) we will look forward to collecting the dividends and writing calls to lower our amount invested and increase our yield on cost.
STO 2 T Jan 21 27.5 Puts @.9 +168.45
I like to enter my income investments on down days. Check. For the recent past AT&T has found solid support at the 27 levels. If put to me our cost basis will be ~26.76 after commissions. At that price our dividend yield on cost is 6.4%. In addition, AT&T will probably announce a dividend increase in December with an ex-dividend date before our puts expire. Therefore, I expect our yield on cost to increase.
If these puts expire worthless our return is 3.1% which is 18.54% annual. For those who figure return on margin (ROM) the return on the margin requirement of $1059.61 is 15.9% or 95.14% annual.
AT&T is a stock we are interested in holding long term. If put to us (and we don't decide to roll the position) we will look forward to collecting the dividends and writing calls to lower our amount invested and increase our yield on cost.
Thursday, November 17, 2011
New Trade: Sold General Electric (GE) Puts
This afternoon with GE down to $15.60 and the DOW down 170 points to 11736.21 I entered into the following transaction:
11/17/11 Sold 3 GE Jan 21 14 Puts@.49 +134.75
I'm happy to own GE at 14. In fact, if put to me my cost basis will be ~13.75 after commissions. The dividend yield on $13.75 is 4.4%. GE's dividend is back on the rise. If the puts expire worthless this is a 3.2% return in 5 weeks which equates to ~32% annual. The maintenance requirement to begin with is only $533.24 and for those that calculate return on margin (ROM) the return is a ridiculous 25.27% or ~250% annual. In the recent past GE only fell to 14 once and then bounced right back up so I'll be surprised if the shares are put to me.
I have to admit it is nice to only pay one commission to enter into this trade as opposed to paying twice to enter a covered call investment.
11/17/11 Sold 3 GE Jan 21 14 Puts@.49 +134.75
I'm happy to own GE at 14. In fact, if put to me my cost basis will be ~13.75 after commissions. The dividend yield on $13.75 is 4.4%. GE's dividend is back on the rise. If the puts expire worthless this is a 3.2% return in 5 weeks which equates to ~32% annual. The maintenance requirement to begin with is only $533.24 and for those that calculate return on margin (ROM) the return is a ridiculous 25.27% or ~250% annual. In the recent past GE only fell to 14 once and then bounced right back up so I'll be surprised if the shares are put to me.
I have to admit it is nice to only pay one commission to enter into this trade as opposed to paying twice to enter a covered call investment.
Trade Continuation: Altria Group (MO) Covered Call
Today in a taxable account with MO at 27.65 and the DOW down 16 I continued the following transaction:
With these transactions I have the amount invested down to $5015.23 or $25.07/share. Altria goes ex-dividend December 23rd. If we don't get called out we will receive an additional $82 and we will lower our amount invested to $4933.23 or $24.66/share. I'm happy if we do get called out as that will make $364 in 15 weeks or ~6.9% which equates to ~23.9% annually. That's a nice return for such a conservative investment. I'm just as happy not getting called out, collecting the dividend and writing new calls sometime in the future.
Altria Group is a great stock for enhanced income, double dividend investment strategies. I would wait to enter a new position, however, until the stock is in the bottom one quarter to one third of it's trading cycle.
- 9/6/11 Bought 200 MO @ 26.57 -5323.63
- 9/6/11 STO 2 MO Oct 22 27's @ .54 +96.50
- 10/11 Dividend +82.00
- 10/21 BTC 2 MO Oct 22 27's @.50 -111.52
- 10/21 STO 2 MO Nov 19 27's @.95 +178.47
- 11/17 BTC 2 MO Nov 19 27's @.72 -155.52
- 11/17 STO 2 MO Jan 21 27's @1.15 +218.47
With these transactions I have the amount invested down to $5015.23 or $25.07/share. Altria goes ex-dividend December 23rd. If we don't get called out we will receive an additional $82 and we will lower our amount invested to $4933.23 or $24.66/share. I'm happy if we do get called out as that will make $364 in 15 weeks or ~6.9% which equates to ~23.9% annually. That's a nice return for such a conservative investment. I'm just as happy not getting called out, collecting the dividend and writing new calls sometime in the future.
Altria Group is a great stock for enhanced income, double dividend investment strategies. I would wait to enter a new position, however, until the stock is in the bottom one quarter to one third of it's trading cycle.
Tuesday, November 15, 2011
Profitable Trade: Lowe's (LOW) Covered Call
Today I closed out the following transaction in a Roth IRA:
08/02/2011 11:10:55 Bought 200 LOW @ 20.8495 -4,179.89
08/02/2011 11:11:26 Sold 2 LOW Oct 22 2011 21.0
Call @ 1.06 200.50
10/18/2011 13:32:43 Bought 2 LOW Oct 22 2011 21.0
Call @ 0.48 -107.52
10/18/2011 13:34:02 Sold 2 LOW Nov 19 2011 21.0
Call @ 1.03 194.47
11/02/2011 03:09:46 QUALIFIED DIVIDEND (LOW) 28.00
11/15/2011 13:10:14 Bought 2 LOW Nov 19 2011 21.0
Call @ 2.15 -441.52
11/15/2011 13:11:31 Sold 200 LOW @ 23.1218 4,614.28
We made $308.32 on this investment in Lowe's a Dividend Champion. This is a profit of 7.74% on our initial investment which equates to 26.57% annual. I closed the position rather than letting it get assigned because it cost about the same in commissions and I've got access to the proceeds 4 days sooner. This is a meat and potatoes enhanced income transaction.
Monday, November 14, 2011
Paying $$ to Chase Stock Appreciation
Management is key to successful enhanced income investing. One of the issues that arises is what to do when a stock rises above your strike price?
I'm going to tell you something I wish someone would have told me: Don't pay money to chase appreciation. In fact, if you've read some of the trade continuations I've done lately you will see that I've gotten paid to participate in an issues appreciation. If I can't get paid to capture appreciation I will look to get paid to roll out the next expiration or two at the same strike price. This will bring in income and lower the amount I have invested. If the stock has appreciated so much that neither of these are viable I'll either let the shares be assigned or I'll close the position myself.
In other words, I'll only sell an option for a credit. If that can't be done in a way that's worthwhile then that's when I sell a stock. It should be noted that I only invest in stocks I would want to hold long term, i.e., Dividend Champions, Aristocrats or Contenders, all with rising dividends or precious metal ETFs which I believe are in a long term secular bull market.
I'm going to tell you something I wish someone would have told me: Don't pay money to chase appreciation. In fact, if you've read some of the trade continuations I've done lately you will see that I've gotten paid to participate in an issues appreciation. If I can't get paid to capture appreciation I will look to get paid to roll out the next expiration or two at the same strike price. This will bring in income and lower the amount I have invested. If the stock has appreciated so much that neither of these are viable I'll either let the shares be assigned or I'll close the position myself.
In other words, I'll only sell an option for a credit. If that can't be done in a way that's worthwhile then that's when I sell a stock. It should be noted that I only invest in stocks I would want to hold long term, i.e., Dividend Champions, Aristocrats or Contenders, all with rising dividends or precious metal ETFs which I believe are in a long term secular bull market.
Trade Continuation: Intel (INTC) Covered Call
Today with the DOW down ~31 and INTC at 24.75 I entered into the following transaction in a Roth IRA:
Bought 2 INTC Nov 19 2011 24 Calls @ .89 -189.52
Sold 2 INTC Jan 21 2012 24 Calls @ 1.70 +328.47
I rolled these in the money calls for a net credit of $138.95. In addition we will receive a $42 dividend on December 1st. This lowers our cost basis/amount invested to $22.67/share. Our assigned gain after commissions is $246 or 5.2% which equates to ~24.7% annually. At $22.67 our yield on cost is 3.7%. Intel is a company that I am interested in holding for the long term and this investment has me sleeping like a baby at night.
Bought 2 INTC Nov 19 2011 24 Calls @ .89 -189.52
Sold 2 INTC Jan 21 2012 24 Calls @ 1.70 +328.47
I rolled these in the money calls for a net credit of $138.95. In addition we will receive a $42 dividend on December 1st. This lowers our cost basis/amount invested to $22.67/share. Our assigned gain after commissions is $246 or 5.2% which equates to ~24.7% annually. At $22.67 our yield on cost is 3.7%. Intel is a company that I am interested in holding for the long term and this investment has me sleeping like a baby at night.
Trade Continuation: GLD Covered Call
This morning with the DOW down ~35 and GLD trading at ~173 I entered into the following transaction in a Roth IRA account:
Bought 2 GLD Nov 19 2011 165 Calls @8.2 -1651.53
Sold 2 GLD Dec 17 2001 166 Calls @ 9.5 +1888.44
This transaction brought in a net credit of $236.91 while allowing us to participate in another dollar of appreciation. This is the have your cake and eat it scenario which the volatility in precious metals has allowed us to enjoy. Due to the multiple calls sold against this position our cost basis is down to $146.73.
Bought 2 GLD Nov 19 2011 165 Calls @8.2 -1651.53
Sold 2 GLD Dec 17 2001 166 Calls @ 9.5 +1888.44
This transaction brought in a net credit of $236.91 while allowing us to participate in another dollar of appreciation. This is the have your cake and eat it scenario which the volatility in precious metals has allowed us to enjoy. Due to the multiple calls sold against this position our cost basis is down to $146.73.
Sunday, November 13, 2011
Futures are up on Italy news
I have to admit it feels a little strange to root for a down market as that scenario sets up the best income investments. I like to buy when others are fearfully selling and sell when others are greedily buying. In other words, I won't enter a new income position when the market is overbought as better opportunities present themselves when the market is oversold.
From a macro view I have to question the herds exuberance. There is going to be new Italian leadership. Since when has any government effectively solved economic problems? Insofar as new leadership I always think The Who had it right with their line: Meet the new boss, Same as the old boss.
We live in a time of great debt, money printing, currency debasement and in my view the end of economic growth. Bottom line: the sheet is going to hit the fan and when it does I want to have lots of cash and what investments I do have are going to be on Dividend Champions and precious metals. Even then I plan to write calls in the money and sell puts out of the money so that when things drop I have a lowered cost basis and increased yields.
In the meantime it looks like this gal will just have to be patient and wait for the herd's exuberance and economic reality to realign. In other words, be afraid...be very afraid.
From a macro view I have to question the herds exuberance. There is going to be new Italian leadership. Since when has any government effectively solved economic problems? Insofar as new leadership I always think The Who had it right with their line: Meet the new boss, Same as the old boss.
We live in a time of great debt, money printing, currency debasement and in my view the end of economic growth. Bottom line: the sheet is going to hit the fan and when it does I want to have lots of cash and what investments I do have are going to be on Dividend Champions and precious metals. Even then I plan to write calls in the money and sell puts out of the money so that when things drop I have a lowered cost basis and increased yields.
In the meantime it looks like this gal will just have to be patient and wait for the herd's exuberance and economic reality to realign. In other words, be afraid...be very afraid.
Friday, November 11, 2011
Trade Continuation: Altria Group (MO) Covered Call
In a Roth IRA with the DOW up 230 and MO at 27.80 I continued this investment as follows:
09/01/2011 10:28:40 Bought 200 MO @ 27.2695 -5,463.89
09/01/2011 10:30:16 Sold 2 MO Oct 22 2011 27.0
Call @ 0.8 148.50
10/11/2011 03:58:13 QUALIFIED DIVIDEND (MO) 82.00
10/18/2011 13:42:00 Bought 2 MO Oct 22 2011 27.0
Call @ 0.67 -145.52
10/18/2011 13:42:54 Sold 2 MO Nov 19 2011 27.0
Call @ 1.05 198.47
11/11/2011 15:39:19 Bought 2 MO Nov 19 2011 27.0
Call @ 0.87 -185.53
11/11/2011 15:40:38 Sold 2 MO Jan 21 2012 27.0
Call @ 1.28 244.47
Our cost basis/downside protection is $25.60/share. In addition we are set up to collect another $82 dividend which will lower our amount invested to $25.21. If we get assigned it will probably happen the 3rd week of December so the option buyer can collect the dividend. The called return will earn ~$260 or 4.8% which equates to ~22.69% annually. If the shares drop below 27 we will collect another $82 dividend and we'll write a fresh call. Our yield on cost is 6.4%. The assigned return on this high yield Dividend Champion is yummy especially on such a conservative in the money investment.
Trade Continuation: Exxon Mobil (XOM) Covered Call
Today with the DOW up 250 points and XOM at 79.40 I continued the following transaction:
09/30/2011 13:44:08 Bought 100 XOM @ 74.3982 -7,449.81
09/30/2011 13:44:50 Sold 1 XOM Oct 7 2011 75.0
Call @ 1.19 108.23
10/07/2011 10:15:56 Bought 1 XOM Oct 7 2011 75.0
Call @ 0.05 -5.02
10/07/2011 10:16:25 Sold 1 XOM Oct 14 2011 75.0
Call @ 0.76 65.23
10/13/2011 09:59:16 Bought 1 XOM Oct 14 2011 75.0
Call @ 1.62 -172.76
10/13/2011 09:59:48 Sold 1 XOM Nov 19 2011 75.0
Call @ 3.35 324.23
11/11/2011 15:11:53 Bought 1 XOM Nov 19 2011 75.0
Call @ 4.6 -470.76
11/11/2011 15:12:58 Sold 1 XOM Dec 17 2011 75.0
Call @ 5.45 534.22
In addition to these amounts we will be receiving a $47 dividend on December 9th. As such our out of pocket investment is down to $70.89/share. At $70.89 our yield on cost is up to 2.65%. If we get called away on December 17th we will make ~$401 or 5.4% which equates to 25.6% annual. That ain't bad for a deep in the money call written on a rock solid Dividend Champion.
Interesting note: One of the complaints about covered calls is that it limits one's upside. In this instance I would be up $100 more if I hadn't written any calls. I like it better the way I am, however, because I've get less capital invested and, as such, have much more downside protection. In addition, I don't fancy myself a stock picker but I do feel confident in my ability to trade a great stock through the collection of option premium to put myself in situation where I can't lose money. The top three rules of investing? 1) Don't lose money; 2 & 3) See rule number 1. ~ Warren Buffett
Interesting note: One of the complaints about covered calls is that it limits one's upside. In this instance I would be up $100 more if I hadn't written any calls. I like it better the way I am, however, because I've get less capital invested and, as such, have much more downside protection. In addition, I don't fancy myself a stock picker but I do feel confident in my ability to trade a great stock through the collection of option premium to put myself in situation where I can't lose money. The top three rules of investing? 1) Don't lose money; 2 & 3) See rule number 1. ~ Warren Buffett
Great Strategy Article
This article from our friends at Double Dividend stocks does a really nice job of setting forth my main investment strategies. Double digit returns on stocks that are fit for orphans and widows? Count this gal in!
Thursday, November 10, 2011
Trade continuation: GDX covered call
Today I rolled my GDX investment in a Roth IRA. The entire transaction is as follows:
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
Today with GDX taking a breather and down to ~60.20 at the time of this transaction, I was able to roll out the deep in the money 56 calls for a net credit of $93.46. My cost basis/downside protection is lowered to $53.59. If I get assigned I'll make ~$241 or 4.3% which is annualized to ~26%. Not bad for a very conservative deep in the money investment.
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
Today with GDX taking a breather and down to ~60.20 at the time of this transaction, I was able to roll out the deep in the money 56 calls for a net credit of $93.46. My cost basis/downside protection is lowered to $53.59. If I get assigned I'll make ~$241 or 4.3% which is annualized to ~26%. Not bad for a very conservative deep in the money investment.
Trade continuation: GLD covered call
I rolled GLD calls in a taxable account as follows:
11/10/2011 09:41:06 Bought 4 GLD Nov 19 2011 162.0 Call @ 10.3 -4,133.04
11/10/2011 09:42:52 Sold 4 GLD Dec 17 2011 163.0 Call @ 11.2 + 4,466.87
These calls are deep in the money. I got to have my cake and eat it too. I was able to roll up another dollar in strike price and get paid $333.83 for doing so. At some point if GLD takes off too much I can see this yumminess coming to an end. It's pretty amazing that I can roll when this deep in the money and the extreme downside protection helps this gal sleep like a baby at night.
11/10/2011 09:41:06 Bought 4 GLD Nov 19 2011 162.0 Call @ 10.3 -4,133.04
11/10/2011 09:42:52 Sold 4 GLD Dec 17 2011 163.0 Call @ 11.2 + 4,466.87
These calls are deep in the money. I got to have my cake and eat it too. I was able to roll up another dollar in strike price and get paid $333.83 for doing so. At some point if GLD takes off too much I can see this yumminess coming to an end. It's pretty amazing that I can roll when this deep in the money and the extreme downside protection helps this gal sleep like a baby at night.
Wednesday, November 9, 2011
New Trade: Altria (MO) Covered Call
With the market down big today I added to my MO position in my retirement account. I bought the stock at 27.30 and sold the Dec 17 2011 27 call for .82. My cost basis taking into account the new short call, my prior purchase, reinvestment of dividends and commissions is $25.28.
Due to economic uncertainty, heavy global debt load and my belief that we are in a secular bear market I have once again chosen to write my call in the money.
Due to economic uncertainty, heavy global debt load and my belief that we are in a secular bear market I have once again chosen to write my call in the money.
Tuesday, November 8, 2011
No Fear Today
The market is acting a bit like a bull market as of late with lower volatility and mostly trending upward. This makes it hard for a gal to swoop in and invest while others are selling. History says that patience will be rewarded especially in a debt ridden world. In the meantime time decay is working in the option sellers favor.
Precious metals seem to be taking a bit of a breather today and with all the money printing, quantitative easing and the like it's hard to be bearish. Many of my precious metal ETF calls are now deep in the money. This makes rolling for a credit a little more challenging.
Precious metals seem to be taking a bit of a breather today and with all the money printing, quantitative easing and the like it's hard to be bearish. Many of my precious metal ETF calls are now deep in the money. This makes rolling for a credit a little more challenging.
Monday, November 7, 2011
Put Selling or Covered Calls?
In this article the author makes some good points as to why put selling is superior to covered calls. I found the double commission one pays on covered calls to be an excellent point.
Friday, November 4, 2011
Trade Continuation: Microsoft (MSFT) Covered Call
This afternoon I continued my recent MSFT trade as follows:
11/01/2011 13:29:58 Bought 200 MSFT @ 26.029 -5,215.79
11/01/2011 13:31:11 Sold 2 MSFT Nov 4 2011 26.0
Call @ 0.36 60.47
11/04/2011 14:52:03 Bought 2 MSFT Nov 04 2011
26.0 Call @ 0.25 -61.52
11/04/2011 14:52:44 Sold 2 MSFT Dec 17 2011 26.0
Call @ 0.88 164.45
I really got my panties in a wad over this little trade. MSFT was ~26.23 at the time I rolled the position. None of my options were very exciting. I decided to set myself up to collect the .20 dividend and lower the amount I had in the position to $5052.39 ($25.26/share) by rolling the call. If and when I collect the dividend I will have $25.06/share invested.
Maybe this position will be the one where I reach my goal of collecting income until I have zero dollars invested out of pocket... :)
Note: We will be receiving the MSFT dividend.
Maybe this position will be the one where I reach my goal of collecting income until I have zero dollars invested out of pocket... :)
Note: We will be receiving the MSFT dividend.
What to do with my MSFT trade?
Here is my initial trade:
It's option expiration today on the weekly. MSFT is trading at ~26.22 as of this writing. If I roll out the 26 a week most of the gain will be eaten by commissions in and out. While weekly options are terrific it should be noted that to roll from one week to the next one must have a substantial number of contracts otherwise commissions may make rolling cost prohibitive.
Two weeks out we'll gain ~.30/share after commissions and if it stays in the money we'll probably get called away early on the 14th so someone else can collect the dividend. There is a .20/share dividend in it for me if I can hold the stock through the 14th.
43 days away at the 26 strike I can collect ~.46/share and probably still collect the dividend for a total of .66/share. It seems to me my options today are to get assigned and make my little bit of dough which is nice on an annualized basis or tie up capital for a month and a half and have more potential gain but less powder in the keg should the market tank.
Note: It looks like the market might break down. That is fine for me as my favorite scenario is that MSFT ends up slightly under 26 and these 2 calls expire worthless. On the other hand if I roll a week I get the great time decay over the weekend. I read a study that showed that ATM or OTM weekly option calls drop ~30% over the weekend due to time decay.
11/01/2011 13:29:58 Bought 200 MSFT @ 26.029 -5,215.79
11/01/2011 13:31:11 Sold 2 MSFT Nov 04 2011 26.0
Call @ 0.36 60.47
It's option expiration today on the weekly. MSFT is trading at ~26.22 as of this writing. If I roll out the 26 a week most of the gain will be eaten by commissions in and out. While weekly options are terrific it should be noted that to roll from one week to the next one must have a substantial number of contracts otherwise commissions may make rolling cost prohibitive.
Two weeks out we'll gain ~.30/share after commissions and if it stays in the money we'll probably get called away early on the 14th so someone else can collect the dividend. There is a .20/share dividend in it for me if I can hold the stock through the 14th.
43 days away at the 26 strike I can collect ~.46/share and probably still collect the dividend for a total of .66/share. It seems to me my options today are to get assigned and make my little bit of dough which is nice on an annualized basis or tie up capital for a month and a half and have more potential gain but less powder in the keg should the market tank.
Note: It looks like the market might break down. That is fine for me as my favorite scenario is that MSFT ends up slightly under 26 and these 2 calls expire worthless. On the other hand if I roll a week I get the great time decay over the weekend. I read a study that showed that ATM or OTM weekly option calls drop ~30% over the weekend due to time decay.
Wednesday, November 2, 2011
New Trade: Intel (INTC) Covered Call
This morning I entered into the following transaction:
11/02/2011 10:27:54 Bought 200 INTC @ 23.8875 -4,787.49
11/02/2011 10:28:23 Sold 2 INTC Nov 19 2011 24.0
Call @ 0.42 72.47
Tomorrow is ex-dividend so unless we get assigned today we will capture the $42 dividend. I love my Double-D's! (double dividends, silly)... The second "dividend" is the short call premium we've collected. Our cost basis/downside protection in this trade is $23.57. Intel has weekly options so there are a variety of ways to manage this trade.
Tuesday, November 1, 2011
Good Article on Microsoft (MSFT) and Intel (INTC)
In the course of my reading today I came across an article I'd like to share. Microsoft and Intel are both raising their dividends at healthy clips, are very heavily traded and have great fundamentals. This makes them ideal enhanced income investments assuming one initiates their position when the stock is trading near the bottom of their trading channel. It's interesting to me that some high flyers during the dot com boom are now strong conservative income plays. Look for this gal to trade these issues when the opportunity arises. In fact I initiated a Microsoft investment earlier this afternoon.
New Trade: Microsoft MSFT Covered Call
This afternoon with the DOW down over 300 points I entered into a Microsoft covered call investment. Microsoft has been raising their dividend for seven straight years. It just raised the dividend to .20/share (3.07% annual yield) and goes ex-dividend November 15. MSFT fulfills my qualification of a stock I would like to hold long term. Here is the transaction:
11/01/2011 13:29:58 Bought 100 MSFT @ 26.029 -5,215.79
11/01/2011 13:31:11 Sold 2 MSFT Nov 04 2011 26.0
Call @ 0.36 60.47
I may take the ~1% return in 3 days on this weekly option, however, another definite possibility depending on how the next couple of days plays out, is that I will roll the trade to the next week or Nov 19 with an eye toward capturing the dividend. Of course, there is also the possibility the call expires worthless. In any event, our cost basis is $25.77.
Feel the Fear?
Things are getting more interesting as the market drops due to Euro fears. Dividend Champions are dropping in price but after their large run up of late they need to pull back even more before I enter into any new income investments. I've been looking at INTC and COP among others but I'm not seeing obvious opportunities. Come to Momma! :)
Monday, October 31, 2011
Long Term Secular Bear? How to Play It?
If you look at the S&P chart for the last 10 years a couple of things stand out. First, 10 years out and we're about where we started. Second, the S&P has been been making lower lows and lower highs. I would not be surprised to see the S&P reach the lowest low before the beginning of the next secular bull market. Historically a bear is finished devouring it's prey when the P/E multiples of stocks are in the low single digits and everyone and her cosmetologist has sworn off stocks forever.
Financials usually lead us out of bear markets and into bull markets. Do you see that happening anytime soon?
This girl thinks the best way to play this market is to write in the money covered calls (or out of the money cash covered puts) on select Dividend Champions or commodity ETFs, picking off short term dividends and option premiums. I think income investors should be patient, build cash reserves and preferably enter positions when the herd is scared.
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