This morning in a taxable account I entered into the following trade:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
If these puts expire worthless we will earn a 15.5% return on margin maintenance of $1835.11 in 89 days. This equates to 63.56% annual. GDX is at it's support level of $50/share. These puts are written 10% below that. When there is a strong market without fear these shares have suffered. This trade is based upon the belief that: 1) the market is toppy; 2) precious metals are still in a bull market due to fundamentals and, therefore, buying on the dips is warranted; and 3) support levels have held up well. In the event I'm wrong, I have an exit strategy in place as GDX is a strong candidate to roll down and out for a net credit.
I'm amused that we seem to do very similar trades, though I tend to go for longer term, further out of the money strike prices that I then tend to hold more of the way to option expiry.
ReplyDeleteToday I opened the following naked GDX position:
3/27/2012 STO 65 GDX Jan 2013 40 Puts@1.78
Nice results
Deletenot to mention you're selling a lot more contracts than me :)
ReplyDeleteI'm intrigued. Please keep in touch.
Otoh, I can't claim to be 32/32 on my trades :-)
ReplyDeleteI stumbled across your blog when for some reason I was contemplating my PEP options.
On 3/1/12 I wrote:
STO 90 PEP 13JAN19 P 57.50 / PepsiCo Inc. @ 2.53
which I am still short....
I'll drop in to commiserate when the market tanks this summer :-)
I think I'm 32/32 for being a day early or a day late to a much better trade. Well, can't beat myself up too badly it usually works out in the end (if you delete my FMD and WAMU covered calls, for a lesson on living life without using stops).
ReplyDeleteAnon, what's your take on the miner action lately? Chester
ReplyDelete