Monday, January 30, 2012

Trade Continuation: Conoco-Phillips (COP) Covered Calls

Today in a traditional IRA I continued the following transaction:

01/13/2012    Bought 200 COP @ 70.29                               -14,067.97
01/13/2012    STO 2 COP Jan 21 2012 70 Calls @.99                   186.47
01/20/2012    BTC 2 COP Jan 21 2012 70 Calls @.77                  -165.52
01/20/2012    STO 2 COP Jan 27 2012 70 Calls @1.35                +258.45
01/30/2012    STO 2 COP Feb 18 2012 70 Calls @.58                 +104.47

Our January calls expired worthless so I wrote new calls. Due to a family emergency it will be hard to trade weekly options so I wrote these 19 days out. This lowers our out of pocket to $13684.10 or $68.42/share. COP goes ex-dividend on Feb. 17 so if the stock price rises above 70 I may roll the position to make sure I collect the dividend. The dividend will most likely rise this quarter.

Profitable Trade: SLV Naked Puts

The following SLV naked puts expired worthless in a taxable account:

01/19/2012    STO 6 SLV Jan 27 2012 28 Puts @.15        75.46

In this 8 day trade the puts expired worthless This trade earned a 2.94% return on margin maintenance of $2568.00 which equates to 134.1% annual.

Tuesday, January 24, 2012

Recent Trade Thoughts

I usually enter into new investments when the market is down and investors are fearful. For the last couple of weeks those times have been rare. I'm a patient person and I've learned to let the market come to me. There are some traders who I respect greatly, i.e., Bill Cara, who are bullish on the markets.

So why did I enter some trades when the market has been bullish? I didn't want to have the train leave the station with me standing on the platform. In any event, I only entered into some conservative out of the money put plays on stocks I would love to own. These were Coca-Cola, Proctor & Gamble and Johnson & Johnson. If put to me the yield on cost would be well above average. In addition, some of these are set to raise their dividends. I also entered into a covered call transaction on Conoco-Phillips. I like this one as they are going to spin off shares and are set to raise the dividend. It also diversifies us into oil and gas.

I've also been trading the precious metals which bottomed a couple of weeks ago. Now that they are back in their bullish trend I'm losing a bit of interest going forward. I'm looking for dips preferably large ones where folks are talking about precious metals cratering.

I think that GOOG may be providing a good opportunity for out of the money put writing, especially 30 or 40 points below where it's trading right now. I probably won't participate, however, as it violates my rule of only trading something I really want to own.

Other than these trades I think it's time to wait for a correction. Obvious opportunities should appear. I've got a ton of cash and margin to work with. With my recent trades I just took a little nibble in case we are off to new highs.

Monday, January 23, 2012

New Trade: Proctor and Gamble (PG) Naked Puts

Today in a taxable account with PG down below 65 due to some analyst downgrades I entered into the following transaction:

01/23/2012   STO 4 PG Mar 17 2012 60 Puts @ .29             153.36

Proctor & Gamble doesn't really need much of an introduction. It is a Dividend Champion, Dividend Aristocrat, blue chip, widow and orphan holding. It will be raising it's dividend next time around. If these get put to us our yield on cost would be over 3.5%, before the dividend increase. PG has shown great support at the 60 level. If the price sinks we have the option of taking the shares, writing covered calls and collecting dividends or rolling the position. We like both of these alternatives. If these puts expire worthless we will earn 3.64% in 54 days on a margin maintenance requirement of $4209.60. This includes commission costs and equates to 24.6% annual.

Profitable Trade: Intel (INTC) Covered Calls

 In a traditional IRA we were assigned our Intel covered calls. This trade went down as follows:

11/02/2011   Bought 200 INTC @ 23.8875                                                  -4,787.49
11/02/2011   STO 2 INTC Nov 19 2011 24.0 Call @ 0.42                                     72.47
11/14/2011   BTC 2 INTC Nov 19 2011 24 Calls @ .89                                     -189.52
11/14/2011   STO 2 INTC Jan 21 2012 24 Calls @ 1.70                                   +328.47
12/01/2011   Dividend                                                                                  +42.00
01/21/2012   Sold 200 INTC @ 24                                                                +4779.91

In this trade we made $245.84 in 81 days on an average of ~$4600 invested. This equates to a return of 5.3% or 23.88% annual. As always we include our commissions paid in the calculations. We allowed ourselves to get assigned because we didn't see any attractive opportunities to roll for a credit. I only roll options for a credit, no exceptions. We really like INTC and will probably write out of the money covered puts in this account to buy it back at a price of our choosing. Of course we will be paid for our efforts.

Profitable Trade: Microsoft (MSFT) Covered Calls

In a traditional IRA we got assigned our MSFT calls. The entire transaction was 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
01/21/2012  Sold 200 MSFT @ 26                                                                  5179.91

We made $280.38 in 82 days on an average of ~$5000 invested. This equates to a return of 5.6% or 24.92% annual. We were fairly deep in the money so no rolls made any sense. After doing this for many years I have a rule that I only roll for a credit. I really like Microsoft and will probably write covered puts in this account for income and to possibly buy the stock at a price I want to pay.

Sunday, January 22, 2012

Profitable Trade: SLV Covered Call

Today we were assigned out of our position in SLV in a Roth IRA. The trade was as follows:


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
01/21/2011   Sold 100 SLV @ 29                                                2879.94

We made $132.94 in 33 days. This equates to a 4.84% return or 53.5% annual. There weren't any juicy near month options to roll so we let it get assigned. I'll be hoping to find an opportunity to get this cash back in play soon.

Saturday, January 21, 2012

Profitable Trade: GDX Naked Puts

Yesterday I closed out for a profit in a taxable account the following transaction:

12/12/2011    STO 2 GDX Jan 21 2012 52 Puts @ 1.47                    +282.45
01/20/2012    BTC 2 GDX Jan 21 2012 52 Puts @ .03                          -6.03

We made $276.42 on this investment in 39 days. The average margin maintenance was ~ 4400.00. This equates to a return on margin of 6.3% or 59% annual. As I've stated I thought precious metals bottomed a couple of weeks ago. The massive run up of the dollar is consolidating and toppy.  I'm probably going to be trading GDX and GDXJ (junior precious metal miners) more than GLD and SLV as the latter ETF's are paper rather than physical metal. We've seen with MF Global that paper can vanish into thin air. Many investors have lost faith in the COMEX and some in the know believe that at some point GLD and SLV will default on their obligations. We've seen with credit default swaps, fractional banking and the like that paper assets can vanish in a corrupt dark cloud.

Friday, January 20, 2012

New Trade: GDX Naked Puts

Today with GDX trading at ~52.50 I entered into the following transaction in a taxable account:

01/20/2012    STO 4 GDX Feb 18 2012 GDX 49 Puts @.57                  214.89

If these puts expire worthless we will earn 6.7% in 29 days on a margin maintenance requirement of $3195.88. This equates to 84.3% annual. I was looking at the 48's for .44 but decided to take on a little more risk since this ETF is easy to roll down and out.

Trade Continuation: Conoco Phillips (COP) Covered Calls

Today in a taxable account I continued the following transaction:

01/13/2012    Bought 200 COP @ 70.29                               -14,067.97
01/13/2012    STO 2 COP Jan 21 2012 70 Calls @.99                   186.47
01/20/2012    BTC 2 COP Jan 21 2012 70 Calls @.77                  -165.52
01/20/2012    STO 2 COP Jan 27 2012 70 Calls @1.35                +258.45

We rolled the covered call for a net credit of $92.93. This lowers our out of pocket to $13788.57 or $68.94/share. If we get called away we will make $190.43 in 2 weeks. This equates to a return of 1.4% or 35.9% annual. Before we get exercised we will look to roll the options again with an eye on the weeklys.

Thursday, January 19, 2012

New Trade: Johnson and Johnson (JNJ) Naked Puts

Today in a taxable account with JNJ trading at just under 65 I entered into the following transaction:

01/19/2012    STO  4 JNJ Apr 21 2012 60 Puts @.77        294.89

JNJ is obviously a long term hold. It is a dividend aristocrat, dividend champion, blue chip, widow and orphan core holding. If put to us our yield on cost will be over 3.8% with a dividend increase expected shortly after. We could then write covered calls on the position. If the puts expire worthless we will earn 8.73% in 93 days on margin maintenance of $3377.60 which equates to 34.26% annual. Of course we could choose to roll the position, we'll just have to see how things shake out.

New Trade: SLV Naked Puts

Today in a taxable account with SLV trading at 29.65 I entered into the following transaction:

01/19/2012    STO 6 SLV Jan 27 2012 28 Puts @.15        75.46

The new weekly options on this came out today. I was so busy with other things that I missed out on last week's trade. The dollar seems to be weakening again and the precious metals bottomed a couple of weeks ago. If the trade goes against me I'll either close or roll out and down. If these puts expire worthless it is 2.94% return on margin maintenance of $2568.00 which equates to 134.1% annual.

Friday, January 13, 2012

New Trade: Conoco-Phillips (COP) Covered Call

Today in a traditional IRA I entered into the following transaction:

01/13/2012    Bought 200 COP @ 70.29                               -14,067.97
01/13/2012    STO 2 COP Jan 21 2012 70 Calls @.99                   186.47

Our out of pocket on this transaction is $13881.50 or $69.41/share. There are only 4 market days until options expiry. If this is called away it will provide a return of $100 in 7 days or .007% which equates to 36.4% annual. This is an issue we like long term and there is a good chance we'll roll this position. There will be a spin-off company later in the year as well as a dividend raise in the next quarter.

Thursday, January 12, 2012

Profitable Trade: GDX Naked Puts

Today I closed and took profits in the following transaction in a taxable account:

12/30/2011    STO 3 GDX Jan 21 2012 48 Puts @.5               137.71
01/12/2011    BTC 3 GDX Jan 21 2012 48 Puts @.02               -6.04

We made $131.67 in 12 days on a margin maintenance requirement of ~ $2300. This equates to a return on margin of 5.7% or 173.3% annual. This account is now all cash and we're waiting for the next opportunity. The market is feeling toppy but as we've learned we will let the prices come to us and not chase trades just for the sake of trading.

New Trade: Sold Coca-Cola (KO) Puts

Yesterday I entered into the following transaction in a taxable account:

01/11/2011    STO 4 KO Feb 18 2012 65 Puts @ .51                +190.95

Due to some fungus in orange juice, Coca-Cola was very weak yesterday. I took advantage of the opportunity to enter into a trade on this blue chip, dividend champion stock that needs no introduction. The margin maintenance on this trade is $4400. If they expire worthless we will earn $190.95 in 39 days. This equates to a return on margin of 4.34% or 40.61% annual. There is money in this account to purchase the shares if put to us but we'd probably roll for a net credit before we'd allow that to happen. Buying KO at 64.50 ain't a bad thing though.

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.

Friday, January 6, 2012

Profitable Trade: AT&T Covered Calls

Today in a traditional IRA our shares of AT&T were assigned so that the investor on the other side could capture the dividend. The entire set of transactions looks like this:

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
01/06/2012    Sold 200 T @ 29                                             +5779.89

We made $130.04 in this series of of transactions. This equates to ~ 2.2% or ~4.1% annual. We're fine with this as we probably paid too much to enter the position and it was sitting there as dead money waiting for the dividend. I thought in December when the T-Mobile deal was falling through that the price would stay below 29. Oh well, I'll enter this position again at my price through the selling of puts. In this particular account we are sitting on a ton of cash, waiting for the next downturn to enter new positions.

Even though the profit on this was small, a profit still it was. I guessed wrong a couple of times but still pulled in enough income to pull a profit.

Wednesday, January 4, 2012

Patiently Waiting for Fear

With the market gains lately we've closed out several positions and taken profits. We have much powder in the keg. Years of experience through trial and error has taught me to not enter into positions too early. Don't trade for the sake of trading. How many times did I want to kick myself for not waiting until the inevitable swing down? Moving in cycles the market will inevitably hit a point where stocks one follows sink to OMG levels. If one is patient they can shoot fish in a barrel.

I'm having to be patient. Recently the sell off in precious metals provided an opportunity. They are back on the rise and when I've drained the lion's share of the profits from these trades I will close them out.

Where is the next opportunity going to come from? Not knowing is part of the fun. Is it possible for the market to keep lifting without a downturn? Probably not. In any event, successful trades are the name of the game. Don't lose money. Swing at the fat pitch. Be greedy when others are fearful and fearful when others are greedy. ~ Warren Buffett

Like Buffett we sit on cash and wait for opportunities :)

Monday, January 2, 2012

Apple to offer dividend in 2012?

The answer is yes according to this article. I have been researching Apple a lot lately and am giving serious consideration to trading it. The upsides are obvious. The downsides are the sheer magnitude of the stock price and the fact that it doesn't have a dividend. The latter looks like it might change.

Dogs of the Dow look very tradeable for 2012

The 2012 Dogs of the Dow look like strong candidates for enhanced income strategies. They are these stocks. When one combines their yields with covered calls or out of the money put selling the returns can easily be double digit %'s for the year. With the volatility in the market we would recommend writing in the money or at the money covered calls and out of the money put writing. One should be aware of the ex-dividend date as well as when earnings are to be reported. Try to enter positions that capture the dividend and consider avoiding entering new positions before earnings are released or you may experience a gap down.