The End of Fear?

For sure the answer is no...but for now there doesn't seem like there's much fear out there. The risk on trades are happening. Folks are moving money out of bonds and into stocks. We've got money to spend but are patiently waiting for a correction or at least a healthy dose of fear. I'd like to write out of the money puts on Proctor & Gamble and Johnson & Johnson as they will be announcing dividend hikes soon. I also think Pepsico has stabilized and will begin rising to get it's PE more in line with Coca-Cola.

There's a chance the market will keep rising but I definitely won't enter into any trades until we have a day in the red. In the meantime patience is a virtue.

FYI other stocks I'm looking to trade are Altria, AT&T, Chevron, General Dynamics and Microsoft.

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.

Profitable Trade - Microsoft (MSFT) Puts

Today our Microsoft puts expired worthless. Our transaction was as follows:

STO 4 MSFT Dec 17 2011 24 Puts@.38               +138.95

Our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.

Trade Continuation - Microsoft (MSFT) Covered Call

Today I continued a MSFT investment in a traditional IRA 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

This roll lowered our amount invested to $4899.53 or $24.50/share. We are successfully collecting monthly income in addition to the dividend. If we get called away we will make ~280.00 after commissions. This equates to a return of ~5.4% on our initial investment or 25.54% annual.

Sold Microsoft (MSFT) Puts

Today in a taxable account and during amateur hour (ha!) I entered into the following transaction:

STO 4 MSFT Dec 17 2011 24 Puts@.38               +138.95

Microsoft is a cash cow and is now steadily raising it's dividend. It is also extremely heavily traded and, therefore, very liquid. It is a holding we are happy to own long term. If put to us we will have a cost basis after commissions of ~23.70/share. There has been strong support for MSFT at this level. At $23.70 our yield on cost is ~3.4%.

If the puts expire worthless our return is 1.45% for 25 days which equates to 21.17% annual. If one were to calculate return on margin (ROM) our return on a margin requirement of $1744.91 is 8% which equates to 115% annual.

I've entered into several transactions during this time of fear and uncertainty. I'll probably chill for a little while and see how things play out. My feeling is that we are oversold, however, as seems to be the norm these days a crash is always a possibility.

Good Article on Microsoft (MSFT) and Intel (INTC)

In the course of my reading today I came across an article I'd like to share. Microsoft and Intel are both raising their dividends at healthy clips, are very heavily traded and have great fundamentals. This makes them ideal enhanced income investments assuming one initiates their position when the stock is trading near the bottom of their trading channel. It's interesting to me that some high flyers during the dot com boom are now strong conservative income plays. Look for this gal to trade these issues when the opportunity arises. In fact I initiated a Microsoft investment earlier this afternoon.