1) I believe U.S. housing has bottomed. Inventory is down. Foreclosures are down. The number of failing banks is decreasing. Mortgage interest rates are still at record lows. The government is all in. Real estate is a hard asset unlike funny money paper currency. Builder stocks are up. Home improvement stocks are up. Financials have stabilized and are rising. Relevant stocks on my watchlist are Lowe's, Bank of America, Caterpillar and Freeport-McMoran Copper and Gold. Copper is used a lot in building.
2) There remains great out of the money put selling opportunities on Intel. At the 22 strike or below the price is buoyed by a 4% (and rising) dividend. Can sentiment get much lower?
3) After the Fed, the initial frenzy of precious metals buying has occurred. I will be looking to enter positions in GDX, FCX, GLD, SLV or GDXJ on the dips. Silver Wheaton (SLW) will probably be added to my watchlist as well. FCX makes it on two lists...
4) I really want to trade GE and Bank of America. I think both are on the rise. A couple of down market days and I'll probably pull the trigger. The start today looks to be in the red so I'll be keeping my eyes open.
5) I like Waste Management (WM). As municipalities overspend they are able to provide less resources. We aren't going to stop/slow down on our trash emission anytime soon. WM has a 4% dividend that is rising. I'm waiting for some weakness, preferably down to the 33 range before writing some out of the money puts.
6) Unrest in the Middle East brings war back into play. Beaten down defense stocks could be a good bet. I watch General Dynamics and Lockheed Martin. Lockheed pays a hefty dividend.
7) Fullyinformed.com is an amazing blog and an amazing resource. This woman really understands money and trading. She never ceases to impress me. She is a great teacher as well.
8) Have a great day. Laugh a lot and don't let the negative emotions of others diminish your joy!
Tuesday, September 18, 2012
Sunday, September 16, 2012
New Trade: Southern Company (SO) Naked Puts
On Friday when SO dipped below 45 to ~44.70 I entered into the following transaction:
09/14/12 STO 3 SO Nov 17 43 2012 Puts @.5 137.69
With Bernanke's latest moves the "risk on" trades are in vogue. That provides weakness/opportunity in the "risk off" trades, i.e., utilities, telecom and healthcare. Southern Company is my favorite utility stock and it has a rising dividend. I have been patiently waiting for the stock to drop below 45 so I could write some out of the money puts.
SO currently has a yield of 4.35%. If put to us our yield on cost will be 4.61% with another dividend rise announcement expected in April 2013. I feel that the yield will buoy the price of the stock.
This is a 64 day trade with an initial maintenance requirement of $2218. If these puts expire worthless we will earn 6.2% return on maintenance or 35.36% annual. If the stock price drops I anticipate volatility will rise and we will be able to roll down and/or out for a net credit. As such, an exit strategy is in place.
This trade illustrates the remarkable returns that naked put selling can generate. I mean this is a utility stock for goodness sake :)
09/14/12 STO 3 SO Nov 17 43 2012 Puts @.5 137.69
With Bernanke's latest moves the "risk on" trades are in vogue. That provides weakness/opportunity in the "risk off" trades, i.e., utilities, telecom and healthcare. Southern Company is my favorite utility stock and it has a rising dividend. I have been patiently waiting for the stock to drop below 45 so I could write some out of the money puts.
SO currently has a yield of 4.35%. If put to us our yield on cost will be 4.61% with another dividend rise announcement expected in April 2013. I feel that the yield will buoy the price of the stock.
This is a 64 day trade with an initial maintenance requirement of $2218. If these puts expire worthless we will earn 6.2% return on maintenance or 35.36% annual. If the stock price drops I anticipate volatility will rise and we will be able to roll down and/or out for a net credit. As such, an exit strategy is in place.
This trade illustrates the remarkable returns that naked put selling can generate. I mean this is a utility stock for goodness sake :)
Friday, September 14, 2012
Profitable Trade: Caterpillar (CAT) Naked Puts
Today I closed the following transaction for a profit:
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
09/14/12 BTC 2 CAT Sep 22 2012 77.5 Puts @.01 -2.04
I was able to close this trade for a penny and without commissions so I did. When I originally sold the puts CAT was down to $82.20. Ten days later it was over $93/share. Due to the steady rise in the stock, margin maintenance averaged down to ~$1700. As such, we earned $100.42 in 10 days on $1700 in margin maintenance. This equates to a 5.9% return on maintenance or 215% annual.
That's another thing I love about put selling. If the price of the stock skyrockets, you can close out your trade early. Each day the stock rises the amount of margin maintenance needed decreases thereby freeing capital for other trades. I remember when I exclusively traded covered calls that it would not be beneficial if the stock rose too much or too quickly. Buying back the calls when volatility was in an uptrend was not very profitable.
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
09/14/12 BTC 2 CAT Sep 22 2012 77.5 Puts @.01 -2.04
I was able to close this trade for a penny and without commissions so I did. When I originally sold the puts CAT was down to $82.20. Ten days later it was over $93/share. Due to the steady rise in the stock, margin maintenance averaged down to ~$1700. As such, we earned $100.42 in 10 days on $1700 in margin maintenance. This equates to a 5.9% return on maintenance or 215% annual.
That's another thing I love about put selling. If the price of the stock skyrockets, you can close out your trade early. Each day the stock rises the amount of margin maintenance needed decreases thereby freeing capital for other trades. I remember when I exclusively traded covered calls that it would not be beneficial if the stock rose too much or too quickly. Buying back the calls when volatility was in an uptrend was not very profitable.
Random Thoughts
1) Helicopter Ben is fueling the risk on trade. Time to get out of bonds and into equities, especially hard assets like precious metals and oil stocks. I will be looking to sell out of the money puts on the dips. The only issue is: will there be dips as these dollar denominated commodities race higher.
2) The banks are safe with Ben at the helm. I wish I would have pulled the trigger on Bank of America a few days ago when it was below 8. It's probably still not too late to drink the punch.
3) For those of us who sell puts on weakness and fear this may be a challenging time. We'll need to balance patience and swinging at the fat pitch vs. standing at the station and missing the train. I'm glad I entered into my recent Caterpillar, Conoco Phillips, Phillip Morris and Intel trades so I've got some skin in the game.
4) Intel seems to have found support at 23. Writing puts at the 20, 21 and 22 strikes looks like a profitable set up to me.
5) Facebook seems to have found support at the 19/20 level. There are still some pretty nice put selling premiums to be had at the lower strikes.
6) If you've got the capital, heavyweight AAPL has some nice premiums for out of the money put selling. The volume is so great that there are many option rolling opportunities should the trade go against you.
7) Perhaps weakness will be found in the risk off, high dividend securities, i.e., telecom, utilities and health care. Wherever it is we'll be watching :)
8) Have a great day and a great weekend!
2) The banks are safe with Ben at the helm. I wish I would have pulled the trigger on Bank of America a few days ago when it was below 8. It's probably still not too late to drink the punch.
3) For those of us who sell puts on weakness and fear this may be a challenging time. We'll need to balance patience and swinging at the fat pitch vs. standing at the station and missing the train. I'm glad I entered into my recent Caterpillar, Conoco Phillips, Phillip Morris and Intel trades so I've got some skin in the game.
4) Intel seems to have found support at 23. Writing puts at the 20, 21 and 22 strikes looks like a profitable set up to me.
5) Facebook seems to have found support at the 19/20 level. There are still some pretty nice put selling premiums to be had at the lower strikes.
6) If you've got the capital, heavyweight AAPL has some nice premiums for out of the money put selling. The volume is so great that there are many option rolling opportunities should the trade go against you.
7) Perhaps weakness will be found in the risk off, high dividend securities, i.e., telecom, utilities and health care. Wherever it is we'll be watching :)
8) Have a great day and a great weekend!
Wednesday, September 12, 2012
New Trade: Phillip Morris (PM) Naked Puts
Today with Phillip Morris showing weakness and trading down below $87/share I entered into the following transaction:
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
Tuesday, September 11, 2012
Random Thoughts
1) It looks like Intel will be testing my ability to profitably roll options. I've sold the October 22's, 23's and 24's. Intel is at ~23.35 as of this writing. I am determined to eventually win this battle. :) Step 1 is to drain most if not all of the time value out of these trades. There are 39 more days to go. Fortunately I have plenty of unused margin available so I will not be pressured by a margin call. For those not yet trading Intel I ask the question: Can sentiment for this issue be much lower than it is now? I have found that temporary bearish sentiment for blue chips provide great opportunities to write out of the money puts. Intel's yield at present price: 3.85%.
Note: a) I refuse to be a weak hand and get flushed out of this trade; b) I don't stop loss out of trades that go against me. I take advantage of the increased volatility to roll out and down for a net credit; c) I'm comfortable doing this because I only invest in quality issues that I would be happy to hold long term.
2) Central bank easing around the globe is alive and well. I'm looking for pullbacks in precious metals to enter trades in GDX, GLD, SLV, GDXJ or FCX.
3) I would trade either Microsoft or Intel but not both for now. They are temporarily kissing cousins due to the perception that their short term futures are tied to the success or failure of Microsoft 8.
4) Where is the next bit of fear going to come from? Right now the markets seem to be propped up by governmental and central bank intervention. I think that we will have to wait for fear on a stock by stock basis.
5) I'm watching Coca-Cola closely as it has been showing weakness as of late. Is there a bluer blue chip out there?
6) What are you trading? Please share here if you feel so inclined. I would love to hear your thought processes in placing the trades. Also, please feel free to comment on my trades/thoughts. Community is a wonderful thing.
7) Have a great day! Enjoy every minute!
Note: a) I refuse to be a weak hand and get flushed out of this trade; b) I don't stop loss out of trades that go against me. I take advantage of the increased volatility to roll out and down for a net credit; c) I'm comfortable doing this because I only invest in quality issues that I would be happy to hold long term.
2) Central bank easing around the globe is alive and well. I'm looking for pullbacks in precious metals to enter trades in GDX, GLD, SLV, GDXJ or FCX.
3) I would trade either Microsoft or Intel but not both for now. They are temporarily kissing cousins due to the perception that their short term futures are tied to the success or failure of Microsoft 8.
4) Where is the next bit of fear going to come from? Right now the markets seem to be propped up by governmental and central bank intervention. I think that we will have to wait for fear on a stock by stock basis.
5) I'm watching Coca-Cola closely as it has been showing weakness as of late. Is there a bluer blue chip out there?
6) What are you trading? Please share here if you feel so inclined. I would love to hear your thought processes in placing the trades. Also, please feel free to comment on my trades/thoughts. Community is a wonderful thing.
7) Have a great day! Enjoy every minute!
Monday, September 10, 2012
Profitable Trade: McDonald's (MCD) Naked Puts
Today I closed the following transaction for a profit:
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
09/10/12 BTC 2 MCD Sep 22 2012 85 Puts @.05 -10.04
This was a 28 day trade that used ~$2800 average maintenance. We earned $122.46 which equates to a 4.37% return on maintenance or 56.96% annual.
McDonald's dip in price was short lived. I took advantage of a brief bit of fear and now McDonald's is back on the rise. I will look to enter another position if I see further weakness. In fact I might write the 87.5's.
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
09/10/12 BTC 2 MCD Sep 22 2012 85 Puts @.05 -10.04
This was a 28 day trade that used ~$2800 average maintenance. We earned $122.46 which equates to a 4.37% return on maintenance or 56.96% annual.
McDonald's dip in price was short lived. I took advantage of a brief bit of fear and now McDonald's is back on the rise. I will look to enter another position if I see further weakness. In fact I might write the 87.5's.
Saturday, September 8, 2012
Profitable Trade: GDX Naked Puts
Yesterday I took advantage of the strength in GDX (precious metal miners ETF) and closed the transaction, without a commission as follows:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
09/07/2012 BTC 2 GDX Sep 22 2012 42 Put @.04 -8.04
This wild ride has come to an end with a profit in tow. We earned $504.36 in 5 1/2 months. Due to the rise in the stock price our average maintenance was lowered to ~2100 in average margin maintenance. This equates to a 24% return or 52% annual.
We rode this trade through a serious decline, a bottom and then a rise. I stuck to my guns and always sought to roll out and/or down for a net credit. In July I was able to roll down and out for a net credit and lower the number of contracts I had in play thereby lowering the amount of capital committed to the trade. Amazingly I got paid to do this.
This trade is my poster child for the power of rolling options. A five and a half month hold is longer than usual for me but at the end it was an educational, challenging and most importantly, a profitable trade.
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
09/07/2012 BTC 2 GDX Sep 22 2012 42 Put @.04 -8.04
This wild ride has come to an end with a profit in tow. We earned $504.36 in 5 1/2 months. Due to the rise in the stock price our average maintenance was lowered to ~2100 in average margin maintenance. This equates to a 24% return or 52% annual.
We rode this trade through a serious decline, a bottom and then a rise. I stuck to my guns and always sought to roll out and/or down for a net credit. In July I was able to roll down and out for a net credit and lower the number of contracts I had in play thereby lowering the amount of capital committed to the trade. Amazingly I got paid to do this.
This trade is my poster child for the power of rolling options. A five and a half month hold is longer than usual for me but at the end it was an educational, challenging and most importantly, a profitable trade.
Thursday, September 6, 2012
New Trade: Intel (INTC) Naked Puts
Yesterday with Intel trading down to ~$24.40 I entered into the following transaction:
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
Random Thoughts
1) It looks like Europe is joining the hocus pocus of their central bank buying their own bonds. This should buoy markets for a while although it probably only kicks the can down the road.
2) Precious metals seem to be back in bull mode. Buying (put selling) the dips might be hard because there might not be many dips for a while. Some well placed out of the money puts in your favorite precious metals stocks and/or ETF's seem to be nice setups for profitability. On a side note it looks like GDX is rising today so I may be able to close out my long and winding GDX trade for a profit and without paying a commission. My GDX trades have proven, once again, that I've made the most money when the trade goes against me. Strange but true. The answer lies in increased volatility and corresponding higher premiums. It pays to trade high volume stocks/ETF's in that regard.
3) I tripled down on Intel. The low P/E, large cash position, high and rising dividend, high volume and high volatility seem to make it a great candidate for out of the money put writing right now. I will post later today about the 22's I sold yesterday. If put to me the yield will be well over 4%. Unless I'm missing something that is a great buoy for the strike price.
4) Do you have a watchlist set up of the stocks you like to trade? How large is this watchlist? If you have a select group of stocks that you like to trade it is easy to recognize when one drops into or below it's normal trading range. While some would call that a bearish signal I call it a great opportunity to write out of the money puts well below it's normal trading range. If the stock drops more than you expect it may be easy to roll down and out for a net credit because it's volatility will have increased thereby providing increased premiums.
5) Writing puts on rising dividend stocks can be very profitable. It is good to research historic yields. If you write out of the money puts that if put to you would yield higher than it has historically, you have probability and reversion to the mean on your side.Time has taught me to never underestimate the power of reversion to the mean. Writing out of the money puts before an anticipated dividend rise is an additional strategy I like to implement. If you Google "Dividend Champions", that site has info on when the next dividend rise is expected to happen.
6) I'm keeping an eye on Walgreen's. Same store sales are down and there is still fall out from the Express Scripts debacle. If out of the money puts start making sense at the 30 strike I might just have to climb aboard. WAG at 30 yields 3.66%. That sounds like a price buoy to me.
7) Bank of America is up big today. I didn't pull the trigger and sell the 7 puts when it dropped below 8. That will not happen again as the Fed appears to be a great insurance policy and housing seems to have bottomed.
8) I have seen an increase in comments to my posts. This is most welcome as my friends and family do not have the knowledge nor the interest in speaking of the things I post about. There eyes glaze over as if I'm trying to sell them insurance. :) In many ways trading is a loners pursuit. In my perfect world our discourse will grow and we will build community right here on this li'l ol' blog. Please feel free to share your trades/thoughts. Have a great day!
2) Precious metals seem to be back in bull mode. Buying (put selling) the dips might be hard because there might not be many dips for a while. Some well placed out of the money puts in your favorite precious metals stocks and/or ETF's seem to be nice setups for profitability. On a side note it looks like GDX is rising today so I may be able to close out my long and winding GDX trade for a profit and without paying a commission. My GDX trades have proven, once again, that I've made the most money when the trade goes against me. Strange but true. The answer lies in increased volatility and corresponding higher premiums. It pays to trade high volume stocks/ETF's in that regard.
3) I tripled down on Intel. The low P/E, large cash position, high and rising dividend, high volume and high volatility seem to make it a great candidate for out of the money put writing right now. I will post later today about the 22's I sold yesterday. If put to me the yield will be well over 4%. Unless I'm missing something that is a great buoy for the strike price.
4) Do you have a watchlist set up of the stocks you like to trade? How large is this watchlist? If you have a select group of stocks that you like to trade it is easy to recognize when one drops into or below it's normal trading range. While some would call that a bearish signal I call it a great opportunity to write out of the money puts well below it's normal trading range. If the stock drops more than you expect it may be easy to roll down and out for a net credit because it's volatility will have increased thereby providing increased premiums.
5) Writing puts on rising dividend stocks can be very profitable. It is good to research historic yields. If you write out of the money puts that if put to you would yield higher than it has historically, you have probability and reversion to the mean on your side.Time has taught me to never underestimate the power of reversion to the mean. Writing out of the money puts before an anticipated dividend rise is an additional strategy I like to implement. If you Google "Dividend Champions", that site has info on when the next dividend rise is expected to happen.
6) I'm keeping an eye on Walgreen's. Same store sales are down and there is still fall out from the Express Scripts debacle. If out of the money puts start making sense at the 30 strike I might just have to climb aboard. WAG at 30 yields 3.66%. That sounds like a price buoy to me.
7) Bank of America is up big today. I didn't pull the trigger and sell the 7 puts when it dropped below 8. That will not happen again as the Fed appears to be a great insurance policy and housing seems to have bottomed.
8) I have seen an increase in comments to my posts. This is most welcome as my friends and family do not have the knowledge nor the interest in speaking of the things I post about. There eyes glaze over as if I'm trying to sell them insurance. :) In many ways trading is a loners pursuit. In my perfect world our discourse will grow and we will build community right here on this li'l ol' blog. Please feel free to share your trades/thoughts. Have a great day!
Wednesday, September 5, 2012
New Trade: ConocoPhillips (COP) Naked Puts
Today when the Dow was down less than 1% and COP had sunk to ~54.80 I entered into the following transaction:
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
Tuesday, September 4, 2012
New Trade: Caterpillar (CAT) Naked Puts
Today with the Dow down 90 points and CAT down to $82.20 I entered into the following transaction:
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
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