Profitable Trade: SLV Naked Puts

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.

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.

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%.

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.

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.

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.

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.

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

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.

Profitable Trade: Exxon Mobil (XOM) Covered Call

Today I took profits in XOM in a traditional IRA. The transaction looks like this:

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.

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 :)

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.

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.

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.

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.

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.

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.

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.

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.

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...

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!

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.

1. 7/19/11           Bought 100 SO @ 39.94                                                 -4003.98
2. 7/19/11           STO 1 Jan 21 2012 40 @ 1.22                                          +111.25
3. 9/6/11             Dividend                                                                          +47.25
4. 11/30/11         BTC 1 Jan 21 2012 40 @ 4.10                                           -420.76
5. 11/30/11         Sold 100 SO @ 43.82                                                      +4372.10
6. 12/6/11           Dividend                                                                           +47.25

We earned $153.11 on our initial investment of $3892.73 in ~14 weeks. This is a return of 3.9% or 14.6% annual. We have been selling when others are taking on risk and entering new positions when others are fearfully selling.