Friday, June 8, 2012

Trade Continuation: GDX Naked Puts

Yesterday I continued the following transaction:

03/19/2012   STO 3 GDX Jun 16 2012 45 Puts@.99   284.71
06/07/2012   BTC 3 GDX Jun 16 2012 45 Puts@.68  -216.28
06/07/2012   STO 3 GDX Jul 21 2012 42 Puts@.99    284.71

I took the opportunity with the recent strength in GDX to roll out and down 3 strikes for a net credit of $68.43. We have now collected $353.14 in option premium. If put to us at the new strike our cost basis will be $40.82. Not bad considering GDX was trading at 50 at the time we entered into this trade.

If these puts expire worthless we will earn $353.14 in 4 months on an average of ~$2300 in margin maintenance. This equates to a 15.35% return on maintenance or ~46% annual.

3 comments:

  1. what do you mean when refering to naked puts? Is not really clear for me.

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  2. Hi, a naked put in my book is a put to purchase stock that I haven't set aside the cash for. I personally ramp up returns by using margin maintenance (at no cost) to control more stock then I have cash for. Since I haven't set aside the cash the put is naked.

    Take care, Chester

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