Today with the market up a smidgen and COP trading at ~66.95 I entered into the following transaction in a taxable account:
STO 1 COP Jan 21 2012 60 Put @ 1.30 +119.23
Conoco Phillips has a rising dividend and is a stock I'm interested in holding long term. It is a Buffett favorite. In reading the charts, like a psychic reads tea leaves...ha, it is revealed to me that every time COP has hit 60 in the last year it immediately found support and jumped up like a prairie dog sittin' on a cactus. If assigned to us we'll take COP at ~ 59 which will at that price yield 4.5%. In addition, COP will probably raise it's dividend next quarter. If the put expires worthless we will earn 2% in 57 days which equates to 12.8% annual. If one were to believe in return on margin (ROM) the return on a $781.84 margin requirement is 15.2% or 98% annual.
All the puts I've sold lately are at the very bottom of the last year's trading range. At this point in my trading experience that's about the best I can do. If these stocks fall below the strike prices, we can: 1) accept the stocks and collect dividends and write calls; or 2) roll them out for a credit. Either way they won't have heard the last from this gal! ha!
Chester, I found your blog today and added to my reading list over on Rescue My IRA - thanks for including me in your list too.
ReplyDeleteIt is great to find an investing community working on the same concepts I've started trying to learn.
I'm looking forward to your future posts.
JTCRescue
:)
ReplyDeleteChester,
ReplyDeletelike your blog. I too also sell puts while owning dividend paying stocks. I've been following the same trades - COP, T, GE. I'll be selling puts to open, especially if the market goes lower this coming week.
keep posting your trades. very helpful.
Skip K
Skip, I think you're smart not to have pulled the trigger yet...I'm already thinking ahead to my next move if these go in the money. Thank you for commenting. Chester :)
ReplyDeletein the spirit of reciprocity, I'll share my two latest trades. baxter and walgreens (div champion). they're both near or at 52 week lows.
ReplyDeleteSkip K
Interesting Skip..I was looking at WAG too a few days back when it hit the low...I don't really follow Baxter...Good luck there
ReplyDelete