Thursday, January 12, 2012

Profitable Trade: SLV Naked Puts

 Yesterday in a taxable account I closed the following transaction:

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
01/11/2012    BTC 8 SLV Jan 21 2012 25 Puts @.04                    -32.10

This trade netted $257.67 in 19 days on ~ $2200 in margin. That is a return on margin of 11.71% or 224.95%. It also allowed me to exceed my goal of making 2 - 3% a month by writing naked puts on margin in this little account. I didn't milk the last $32 of the trade so I could possibly take advantage of the new weekly options that come out today. If one can enter into weekly option trade on Thursday or Friday, studies have shown that over the weekend there is ~ 30% drop due to time decay.

I should note that with the money I've made in this account through recent trades I am able to add to my holdings in my core dividend growth portfolio. Every time I earn $1000 I add to my holdings. Today I added 14 shares of Conoco-Phillips at 71.62. The yield is 3.67% and they are set to raise the dividend next time around. I like the idea of the company splitting and spinning off shares my way. I look at this as another little boat set to sail that will compound over time and bring me passive income.

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