New Trade: Walgreen's (WAG) Naked Puts

Today with the markets in the red and Walgreen's trading down at $30.80 I entered into the following transaction:

5/30/12   STO  3 WAG Jul 21 2012 28 Puts @.41   $110.75

The margin maintenance is ~$1,000 for this 52 day trade. This equates to ~11% return on margin in 52 days or 77.21% annual if they expire worthless.

WAG has had great support at the 31 level and these puts are a full 10% below that. If put to us the yield on cost will be 3.25% which is way above historical highs for this Dividend Champion.

Patience me boy...patience

It looks like we're heading to a higher open so I doubt I will enter into any new positions today. The stocks I am looking at right now are Sysco, Intel, Microsoft, Southern Company, Proctor & Gamble, Lowe's and Johnson & Johnson. Rising dividends for all.  I also have one eye on Exxon Mobil.

I am waiting for some fear and/or panic selling to kick in. I would be looking at the June strike but I will be on vacation during that expiration and frankly I don't want the concern. As such, I'm looking at the July and August strikes.

With the recent pullback, out of the money puts with adequate premiums have become more in line with support levels. One or more large days in the red ought to provide more than enough "Oh my God" type opportunities. Swing at the fat pitch. Patience me boy....patience.

Re my GDX trades: If I can roll down and out my GDX June 45's to July 43's and get a net credit of greater than $100 I will probably take it. If I do, I feel I'm in the driver's seat for these to end up as profitable trades. BTW past experience made it clear not to bail on GDX when it was tanking as I felt they were flushing out the weak hands. In addition there were so many strikes to roll out to there were multiple continuation strategies. Finally, the fundamentals are/have been in place for rising precious metals.

Opportunity Alert: Lowe's (LOW)

I see that Lowe's is getting hammered due to it's latest quarterly report. Don't catch a falling knife today, however, watch when it seems to have bottomed and write short term out of the money naked puts. I see that the July 22's are really juicy, for example. Lowe's is set to raise it's dividend next quarter and they have been increasing at a greater than 10% rate so this should buoy the stock.

5/29 note: this would've been a goodie...

Trade Continuation: GDX Naked Puts

Well this one has been a wild ride. :) GDX is trading at ~41.50/share at the time of this writing. I continued the transaction 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

We rolled out for a net credit of $144.44. We have now brought in $378.65 in option premium. Our cost basis @ the 45 put strike is now $43.73. I considered rolling out and down for a net credit to the September 43 puts but I didn't want to commit to that much time.

There are plenty of strikes to roll out and down to if need be. Whatever we do it will only be for a net credit. Are we near the bottom? If not we will deal with it after all the time value has been drained from this continuation trade. The maintenance on this trade has increased to ~$3500.

We might want to roll down and out for a credit while lowering the number of contracts to 2 when the opportunity presents itself.

I'm smelling opportunity in PG *sniff*

Proctor & Gamble is slowly sinking following an unexciting quarterly report. Today it is at 63 and change. There are the usual pundits out there calling for big trouble. My take? Like we just saw with Pepsico, one quarterly report does not a blue chip make. Like Pepsico I think that once PG consolidates and finds a bottom a great put selling opportunity will be in place. With the recent dividend rise PG's yield above 3.5% should buoy the stock. I'm waiting for the consolidation and then I'm looking at the 60's or if worthwhile the 57.5's. Strong support is at the 57.5 level. For you thrill seekers the 62.5's might be interesting. You can always roll down and out for a credit if you don't go out too far on the strike date.

On a side note the recent bribery allegations make Wal-Mart another interesting blue chip dividend stock to watch.