New Trade: Pepsico (PEP) Naked Puts

On October 22, 2012 I entered into the following transaction:

10/22/12   STO 2 PEP Dec 22 67.5 Puts @.8     $148.46

This is a 59 day trade that uses ~$2600 in margin maintenance. Pepsi had showed a bit of weakness after issuing it's quarterly report. If these puts expire worthless we will earn 5.71% in 59 days or 35.32% annual return on maintenance. If the shares our put to us our yield on cost will be 3.2%.

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...

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.

Profitable Trade: Walgreen's (WAG) Naked Puts

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

02/27/2012    STO 4 WAG Mar 17 2012 32 Puts @.23             78.99
03/06/2012    BTC 4 WAG Mar 17 2012 32 Puts @.3            -133.00
03/06/2012    STO 4 WAG Apr 21 2012 31 Puts @.7             276.94
03/27/2012    BTC 4 WAG Apr 21 2012 31 Puts @.05            -20.04

Walgreen's didn't collapse after losing the Express Scripts deal so these puts lost all their value. I took the opportunity to close the position without a commission. We made $202.89 in 31 days on ~$1700 in margin maintenance. This equates to a return on maintenance of 11.93% or 140.46% annual. The returns are inflated as there was a quarterly report looming and fear from the Express Scripts deal.

New Trade: Pepsico (PEP) Naked Puts

Two days ago in a retiree's taxable account I entered into the following trade:

02/09/2012    STO 3 PEP Apr 21 2012 60 Puts @.54                 149.71

I entered into this trade when PEP had tanked down to 64 after it's quarterly report. As stated in my prior post, it has been my experience that when blue chip Dividend Champions release a quarterly report which disappoints it may tank briefly before rising to it's prior price. These were written well below the tank and if put to us the yield on cost will be 3.46% with a dividend rise expected in June. If these puts expire worthless we will earn 5.34% in 73 days on $2800 of margin maintenance which equates to 26.7% annual. If the stock tanks all the way to 60 or below I am confident we can roll the position for a credit.

New Trade: Pepsico (PEP) Naked Puts

A couple of days ago in a taxable account I entered into the following trade:

02/09/2012    STO 2 PEP Mar 17 2012 62.5 Puts @.7                      128.51

At the time I entered into this transaction PEP had tanked more than two points down to ~64 based upon it's quarterly report. My experience has been that when a blue chip stalwart tanks after a quarterly report it usually is a knee jerk reaction and it will slowly work it's way back. I wrote the puts under where it tanked and if it tanks more I feel that I will be able to roll the position for a credit and wait for the stock to drift back up. If put to me the yield on cost would be 3.3% with a dividend raise expected in the June quarter. If these puts expire worthless we will earn $128.51 in 38 days on margin maintenance of $2400. This equates to a 5.35% return or 51.4% annual.