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.

Profitable Trade: Altria Group (MO) Covered Call

1. 9/6/11  Bought 200 MO @ 26.57                                               -5323.63
2. 9/6/11  STO 2 MO Oct 22 27's @ .54                                            +96.50
3. 10/11   Dividend                                                                           +82.00
4. 10/21  BTC 2 MO Oct 22 27's @.50                                             -111.52
5. 10/21  STO 2 MO Nov 19 27's @.95                                           +178.47
6. 11/17  BTC 2 MO Nov 19 27's @.72                                            -155.52
7. 11/17  STO 2 MO Jan 21 27's @1.15                                           +218.47
8. 11/30  BTC 2 MO Jan 21 27's @1.64                                           -339.56
9. 11/30 Sold 200 MO @ 28.41                                                      +5672.26

Today with the market in the throes of irrational exuberance..ha..I closed out this position in a taxable account. It was basically dead money at this point. We made $318.70 in ~11 weeks which is a profit of 6.1% which equates to ~28.8% annually. Not bad for a widow and orphan, blue chip, high and rising dividend stock. This is a bread and butter enhanced income, double dividend transaction.

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? :)

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.

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!

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

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.

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.

Trade Continuation: Realty Income (O) Covered Calls

Here is the transaction to date:

• 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

Our roll out today lowers the amount out of pocket on this investment to $6383.93. This equates to $31.91/share. Realty Income is "The Monthly Dividend Company." It has a rising dividend for many years now. Our yield on cost is up to ~5.5%. If these calls expire worthless we will collect 4 more dividends totalling at least $116.16 (assuming no increase). That will lower our amount out of pocket to $6267.77 or $31.33/share.

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.

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 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.

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.

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:

1. 9/6/11  Bought 200 MO @ 26.57                                               -5323.63
2. 9/6/11  STO 2 MO Oct 22 27's @ .54                                            +96.50
3. 10/11   Dividend                                                                           +82.00
4. 10/21  BTC 2 MO Oct 22 27's @.50                                             -111.52
5. 10/21  STO 2 MO Nov 19 27's @.95                                           +178.47
6. 11/17  BTC 2 MO Nov 19 27's @.72                                            -155.52
7. 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.

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.

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.

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.

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.

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.

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

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!

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.

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.  

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.

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.

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.

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.

What to do with my MSFT trade?

Here is my initial trade:

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.

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.

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! :)