On October 10, 2012 I continued the following transaction:
08/24/12 STO 5 INTC Oct 20 2012 23 Puts @.35 161.20
10/10/12 BTC 5 INTC Oct 20 2012 23 Puts @1.22 -623.79
10/10/12 STO 5 INTC Nov 17 2012 23 Puts @1.53 761.14
This is how I played the Intel tank on these puts last month. On this trade I have now brought in $298.55 in option premium. If put to me my cost basis is down to $22.40. I anticipate rolling these puts out, rolling out and reducing a contract or rolling down and out. All this will occur prior to option expiration and will only be done for a net credit.
Even though INTC has tanked I am still bringing in regular income and reducing my cost basis in the stock. Unfortunately, my margin maintenance has increased substantially and of this writing it sits at $2800.
I very recently thought Intel had bottomed but now there are rumors that Apple wants to build their own processors and not use Intel anymore. Intel is a huge multinational with a rising dividend so I'm not too worried. I will keep on: rolling, rolling, rolling...
Tuesday, November 6, 2012
Monday, November 5, 2012
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%.
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%.
Friday, November 2, 2012
Trade Continuation: Intel (INTC) Naked Puts
On October 10th I rolled this Intel trade as follows:
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
10/10/12 BTC 5 INTC Oct 20 2012 24 Puts @2.15 -1088.79
10/10/12 STO 5 INTC Nov 17 2012 24 Puts @2.40 1196.13
It's no secret that Intel tanked...and hard. When I entered into this trade Intel was at 25.70 and it tanked to the low 21's.
I rolled these puts out a month for a net credit of $107.34. I have now brought in $278.51 in option premium. This lowers my cost basis in INTC to $23.44. As of this writing that puts me down ~.96/share. Not bad for a complete tank job! Put selling is a very valuable trading tool.
Absent unforeseen circumstances, I will roll these puts again in a couple of weeks, dropping my cost basis once more. I can roll out at the same strike with 5 contracts, roll out at the same strike lowering to 4 contracts or roll out and down. I will only do so for a net credit.
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
10/10/12 BTC 5 INTC Oct 20 2012 24 Puts @2.15 -1088.79
10/10/12 STO 5 INTC Nov 17 2012 24 Puts @2.40 1196.13
It's no secret that Intel tanked...and hard. When I entered into this trade Intel was at 25.70 and it tanked to the low 21's.
I rolled these puts out a month for a net credit of $107.34. I have now brought in $278.51 in option premium. This lowers my cost basis in INTC to $23.44. As of this writing that puts me down ~.96/share. Not bad for a complete tank job! Put selling is a very valuable trading tool.
Absent unforeseen circumstances, I will roll these puts again in a couple of weeks, dropping my cost basis once more. I can roll out at the same strike with 5 contracts, roll out at the same strike lowering to 4 contracts or roll out and down. I will only do so for a net credit.
Thursday, November 1, 2012
Profitable Trade: Conoco Phillips (COP) Naked Puts
I know it's been awhile since I posted. I've been busy at work, play and with family. In any event I closed the following transaction for a profit:
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
10/02/12 BTC 3 COP Oct 20 50 Puts @.04 -12.06
In this trade I made $89.67 in 26 days on ~$1500 in margin maintenance. This equates to a return on maintenance of 5.98% or 83.95% annual. I closed the trade for a profit without paying a commission.
I've got other trades to report and I'll try to post once a day for a while and get back in the swing of things.
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
10/02/12 BTC 3 COP Oct 20 50 Puts @.04 -12.06
In this trade I made $89.67 in 26 days on ~$1500 in margin maintenance. This equates to a return on maintenance of 5.98% or 83.95% annual. I closed the trade for a profit without paying a commission.
I've got other trades to report and I'll try to post once a day for a while and get back in the swing of things.
Tuesday, September 18, 2012
Random Thoughts
1) I believe U.S. housing has bottomed. Inventory is down. Foreclosures are down. The number of failing banks is decreasing. Mortgage interest rates are still at record lows. The government is all in. Real estate is a hard asset unlike funny money paper currency. Builder stocks are up. Home improvement stocks are up. Financials have stabilized and are rising. Relevant stocks on my watchlist are Lowe's, Bank of America, Caterpillar and Freeport-McMoran Copper and Gold. Copper is used a lot in building.
2) There remains great out of the money put selling opportunities on Intel. At the 22 strike or below the price is buoyed by a 4% (and rising) dividend. Can sentiment get much lower?
3) After the Fed, the initial frenzy of precious metals buying has occurred. I will be looking to enter positions in GDX, FCX, GLD, SLV or GDXJ on the dips. Silver Wheaton (SLW) will probably be added to my watchlist as well. FCX makes it on two lists...
4) I really want to trade GE and Bank of America. I think both are on the rise. A couple of down market days and I'll probably pull the trigger. The start today looks to be in the red so I'll be keeping my eyes open.
5) I like Waste Management (WM). As municipalities overspend they are able to provide less resources. We aren't going to stop/slow down on our trash emission anytime soon. WM has a 4% dividend that is rising. I'm waiting for some weakness, preferably down to the 33 range before writing some out of the money puts.
6) Unrest in the Middle East brings war back into play. Beaten down defense stocks could be a good bet. I watch General Dynamics and Lockheed Martin. Lockheed pays a hefty dividend.
7) Fullyinformed.com is an amazing blog and an amazing resource. This woman really understands money and trading. She never ceases to impress me. She is a great teacher as well.
8) Have a great day. Laugh a lot and don't let the negative emotions of others diminish your joy!
2) There remains great out of the money put selling opportunities on Intel. At the 22 strike or below the price is buoyed by a 4% (and rising) dividend. Can sentiment get much lower?
3) After the Fed, the initial frenzy of precious metals buying has occurred. I will be looking to enter positions in GDX, FCX, GLD, SLV or GDXJ on the dips. Silver Wheaton (SLW) will probably be added to my watchlist as well. FCX makes it on two lists...
4) I really want to trade GE and Bank of America. I think both are on the rise. A couple of down market days and I'll probably pull the trigger. The start today looks to be in the red so I'll be keeping my eyes open.
5) I like Waste Management (WM). As municipalities overspend they are able to provide less resources. We aren't going to stop/slow down on our trash emission anytime soon. WM has a 4% dividend that is rising. I'm waiting for some weakness, preferably down to the 33 range before writing some out of the money puts.
6) Unrest in the Middle East brings war back into play. Beaten down defense stocks could be a good bet. I watch General Dynamics and Lockheed Martin. Lockheed pays a hefty dividend.
7) Fullyinformed.com is an amazing blog and an amazing resource. This woman really understands money and trading. She never ceases to impress me. She is a great teacher as well.
8) Have a great day. Laugh a lot and don't let the negative emotions of others diminish your joy!
Sunday, September 16, 2012
New Trade: Southern Company (SO) Naked Puts
On Friday when SO dipped below 45 to ~44.70 I entered into the following transaction:
09/14/12 STO 3 SO Nov 17 43 2012 Puts @.5 137.69
With Bernanke's latest moves the "risk on" trades are in vogue. That provides weakness/opportunity in the "risk off" trades, i.e., utilities, telecom and healthcare. Southern Company is my favorite utility stock and it has a rising dividend. I have been patiently waiting for the stock to drop below 45 so I could write some out of the money puts.
SO currently has a yield of 4.35%. If put to us our yield on cost will be 4.61% with another dividend rise announcement expected in April 2013. I feel that the yield will buoy the price of the stock.
This is a 64 day trade with an initial maintenance requirement of $2218. If these puts expire worthless we will earn 6.2% return on maintenance or 35.36% annual. If the stock price drops I anticipate volatility will rise and we will be able to roll down and/or out for a net credit. As such, an exit strategy is in place.
This trade illustrates the remarkable returns that naked put selling can generate. I mean this is a utility stock for goodness sake :)
09/14/12 STO 3 SO Nov 17 43 2012 Puts @.5 137.69
With Bernanke's latest moves the "risk on" trades are in vogue. That provides weakness/opportunity in the "risk off" trades, i.e., utilities, telecom and healthcare. Southern Company is my favorite utility stock and it has a rising dividend. I have been patiently waiting for the stock to drop below 45 so I could write some out of the money puts.
SO currently has a yield of 4.35%. If put to us our yield on cost will be 4.61% with another dividend rise announcement expected in April 2013. I feel that the yield will buoy the price of the stock.
This is a 64 day trade with an initial maintenance requirement of $2218. If these puts expire worthless we will earn 6.2% return on maintenance or 35.36% annual. If the stock price drops I anticipate volatility will rise and we will be able to roll down and/or out for a net credit. As such, an exit strategy is in place.
This trade illustrates the remarkable returns that naked put selling can generate. I mean this is a utility stock for goodness sake :)
Friday, September 14, 2012
Profitable Trade: Caterpillar (CAT) Naked Puts
Today I closed the following transaction for a profit:
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
09/14/12 BTC 2 CAT Sep 22 2012 77.5 Puts @.01 -2.04
I was able to close this trade for a penny and without commissions so I did. When I originally sold the puts CAT was down to $82.20. Ten days later it was over $93/share. Due to the steady rise in the stock, margin maintenance averaged down to ~$1700. As such, we earned $100.42 in 10 days on $1700 in margin maintenance. This equates to a 5.9% return on maintenance or 215% annual.
That's another thing I love about put selling. If the price of the stock skyrockets, you can close out your trade early. Each day the stock rises the amount of margin maintenance needed decreases thereby freeing capital for other trades. I remember when I exclusively traded covered calls that it would not be beneficial if the stock rose too much or too quickly. Buying back the calls when volatility was in an uptrend was not very profitable.
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
09/14/12 BTC 2 CAT Sep 22 2012 77.5 Puts @.01 -2.04
I was able to close this trade for a penny and without commissions so I did. When I originally sold the puts CAT was down to $82.20. Ten days later it was over $93/share. Due to the steady rise in the stock, margin maintenance averaged down to ~$1700. As such, we earned $100.42 in 10 days on $1700 in margin maintenance. This equates to a 5.9% return on maintenance or 215% annual.
That's another thing I love about put selling. If the price of the stock skyrockets, you can close out your trade early. Each day the stock rises the amount of margin maintenance needed decreases thereby freeing capital for other trades. I remember when I exclusively traded covered calls that it would not be beneficial if the stock rose too much or too quickly. Buying back the calls when volatility was in an uptrend was not very profitable.
Random Thoughts
1) Helicopter Ben is fueling the risk on trade. Time to get out of bonds and into equities, especially hard assets like precious metals and oil stocks. I will be looking to sell out of the money puts on the dips. The only issue is: will there be dips as these dollar denominated commodities race higher.
2) The banks are safe with Ben at the helm. I wish I would have pulled the trigger on Bank of America a few days ago when it was below 8. It's probably still not too late to drink the punch.
3) For those of us who sell puts on weakness and fear this may be a challenging time. We'll need to balance patience and swinging at the fat pitch vs. standing at the station and missing the train. I'm glad I entered into my recent Caterpillar, Conoco Phillips, Phillip Morris and Intel trades so I've got some skin in the game.
4) Intel seems to have found support at 23. Writing puts at the 20, 21 and 22 strikes looks like a profitable set up to me.
5) Facebook seems to have found support at the 19/20 level. There are still some pretty nice put selling premiums to be had at the lower strikes.
6) If you've got the capital, heavyweight AAPL has some nice premiums for out of the money put selling. The volume is so great that there are many option rolling opportunities should the trade go against you.
7) Perhaps weakness will be found in the risk off, high dividend securities, i.e., telecom, utilities and health care. Wherever it is we'll be watching :)
8) Have a great day and a great weekend!
2) The banks are safe with Ben at the helm. I wish I would have pulled the trigger on Bank of America a few days ago when it was below 8. It's probably still not too late to drink the punch.
3) For those of us who sell puts on weakness and fear this may be a challenging time. We'll need to balance patience and swinging at the fat pitch vs. standing at the station and missing the train. I'm glad I entered into my recent Caterpillar, Conoco Phillips, Phillip Morris and Intel trades so I've got some skin in the game.
4) Intel seems to have found support at 23. Writing puts at the 20, 21 and 22 strikes looks like a profitable set up to me.
5) Facebook seems to have found support at the 19/20 level. There are still some pretty nice put selling premiums to be had at the lower strikes.
6) If you've got the capital, heavyweight AAPL has some nice premiums for out of the money put selling. The volume is so great that there are many option rolling opportunities should the trade go against you.
7) Perhaps weakness will be found in the risk off, high dividend securities, i.e., telecom, utilities and health care. Wherever it is we'll be watching :)
8) Have a great day and a great weekend!
Wednesday, September 12, 2012
New Trade: Phillip Morris (PM) Naked Puts
Today with Phillip Morris showing weakness and trading down below $87/share I entered into the following transaction:
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
Tuesday, September 11, 2012
Random Thoughts
1) It looks like Intel will be testing my ability to profitably roll options. I've sold the October 22's, 23's and 24's. Intel is at ~23.35 as of this writing. I am determined to eventually win this battle. :) Step 1 is to drain most if not all of the time value out of these trades. There are 39 more days to go. Fortunately I have plenty of unused margin available so I will not be pressured by a margin call. For those not yet trading Intel I ask the question: Can sentiment for this issue be much lower than it is now? I have found that temporary bearish sentiment for blue chips provide great opportunities to write out of the money puts. Intel's yield at present price: 3.85%.
Note: a) I refuse to be a weak hand and get flushed out of this trade; b) I don't stop loss out of trades that go against me. I take advantage of the increased volatility to roll out and down for a net credit; c) I'm comfortable doing this because I only invest in quality issues that I would be happy to hold long term.
2) Central bank easing around the globe is alive and well. I'm looking for pullbacks in precious metals to enter trades in GDX, GLD, SLV, GDXJ or FCX.
3) I would trade either Microsoft or Intel but not both for now. They are temporarily kissing cousins due to the perception that their short term futures are tied to the success or failure of Microsoft 8.
4) Where is the next bit of fear going to come from? Right now the markets seem to be propped up by governmental and central bank intervention. I think that we will have to wait for fear on a stock by stock basis.
5) I'm watching Coca-Cola closely as it has been showing weakness as of late. Is there a bluer blue chip out there?
6) What are you trading? Please share here if you feel so inclined. I would love to hear your thought processes in placing the trades. Also, please feel free to comment on my trades/thoughts. Community is a wonderful thing.
7) Have a great day! Enjoy every minute!
Note: a) I refuse to be a weak hand and get flushed out of this trade; b) I don't stop loss out of trades that go against me. I take advantage of the increased volatility to roll out and down for a net credit; c) I'm comfortable doing this because I only invest in quality issues that I would be happy to hold long term.
2) Central bank easing around the globe is alive and well. I'm looking for pullbacks in precious metals to enter trades in GDX, GLD, SLV, GDXJ or FCX.
3) I would trade either Microsoft or Intel but not both for now. They are temporarily kissing cousins due to the perception that their short term futures are tied to the success or failure of Microsoft 8.
4) Where is the next bit of fear going to come from? Right now the markets seem to be propped up by governmental and central bank intervention. I think that we will have to wait for fear on a stock by stock basis.
5) I'm watching Coca-Cola closely as it has been showing weakness as of late. Is there a bluer blue chip out there?
6) What are you trading? Please share here if you feel so inclined. I would love to hear your thought processes in placing the trades. Also, please feel free to comment on my trades/thoughts. Community is a wonderful thing.
7) Have a great day! Enjoy every minute!
Monday, September 10, 2012
Profitable Trade: McDonald's (MCD) Naked Puts
Today I closed the following transaction for a profit:
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
09/10/12 BTC 2 MCD Sep 22 2012 85 Puts @.05 -10.04
This was a 28 day trade that used ~$2800 average maintenance. We earned $122.46 which equates to a 4.37% return on maintenance or 56.96% annual.
McDonald's dip in price was short lived. I took advantage of a brief bit of fear and now McDonald's is back on the rise. I will look to enter another position if I see further weakness. In fact I might write the 87.5's.
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
09/10/12 BTC 2 MCD Sep 22 2012 85 Puts @.05 -10.04
This was a 28 day trade that used ~$2800 average maintenance. We earned $122.46 which equates to a 4.37% return on maintenance or 56.96% annual.
McDonald's dip in price was short lived. I took advantage of a brief bit of fear and now McDonald's is back on the rise. I will look to enter another position if I see further weakness. In fact I might write the 87.5's.
Saturday, September 8, 2012
Profitable Trade: GDX Naked Puts
Yesterday I took advantage of the strength in GDX (precious metal miners ETF) and closed the transaction, without a commission 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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
09/07/2012 BTC 2 GDX Sep 22 2012 42 Put @.04 -8.04
This wild ride has come to an end with a profit in tow. We earned $504.36 in 5 1/2 months. Due to the rise in the stock price our average maintenance was lowered to ~2100 in average margin maintenance. This equates to a 24% return or 52% annual.
We rode this trade through a serious decline, a bottom and then a rise. I stuck to my guns and always sought to roll out and/or down for a net credit. In July I was able to roll down and out for a net credit and lower the number of contracts I had in play thereby lowering the amount of capital committed to the trade. Amazingly I got paid to do this.
This trade is my poster child for the power of rolling options. A five and a half month hold is longer than usual for me but at the end it was an educational, challenging and most importantly, a profitable trade.
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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
09/07/2012 BTC 2 GDX Sep 22 2012 42 Put @.04 -8.04
This wild ride has come to an end with a profit in tow. We earned $504.36 in 5 1/2 months. Due to the rise in the stock price our average maintenance was lowered to ~2100 in average margin maintenance. This equates to a 24% return or 52% annual.
We rode this trade through a serious decline, a bottom and then a rise. I stuck to my guns and always sought to roll out and/or down for a net credit. In July I was able to roll down and out for a net credit and lower the number of contracts I had in play thereby lowering the amount of capital committed to the trade. Amazingly I got paid to do this.
This trade is my poster child for the power of rolling options. A five and a half month hold is longer than usual for me but at the end it was an educational, challenging and most importantly, a profitable trade.
Thursday, September 6, 2012
New Trade: Intel (INTC) Naked Puts
Yesterday with Intel trading down to ~$24.40 I entered into the following transaction:
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
Random Thoughts
1) It looks like Europe is joining the hocus pocus of their central bank buying their own bonds. This should buoy markets for a while although it probably only kicks the can down the road.
2) Precious metals seem to be back in bull mode. Buying (put selling) the dips might be hard because there might not be many dips for a while. Some well placed out of the money puts in your favorite precious metals stocks and/or ETF's seem to be nice setups for profitability. On a side note it looks like GDX is rising today so I may be able to close out my long and winding GDX trade for a profit and without paying a commission. My GDX trades have proven, once again, that I've made the most money when the trade goes against me. Strange but true. The answer lies in increased volatility and corresponding higher premiums. It pays to trade high volume stocks/ETF's in that regard.
3) I tripled down on Intel. The low P/E, large cash position, high and rising dividend, high volume and high volatility seem to make it a great candidate for out of the money put writing right now. I will post later today about the 22's I sold yesterday. If put to me the yield will be well over 4%. Unless I'm missing something that is a great buoy for the strike price.
4) Do you have a watchlist set up of the stocks you like to trade? How large is this watchlist? If you have a select group of stocks that you like to trade it is easy to recognize when one drops into or below it's normal trading range. While some would call that a bearish signal I call it a great opportunity to write out of the money puts well below it's normal trading range. If the stock drops more than you expect it may be easy to roll down and out for a net credit because it's volatility will have increased thereby providing increased premiums.
5) Writing puts on rising dividend stocks can be very profitable. It is good to research historic yields. If you write out of the money puts that if put to you would yield higher than it has historically, you have probability and reversion to the mean on your side.Time has taught me to never underestimate the power of reversion to the mean. Writing out of the money puts before an anticipated dividend rise is an additional strategy I like to implement. If you Google "Dividend Champions", that site has info on when the next dividend rise is expected to happen.
6) I'm keeping an eye on Walgreen's. Same store sales are down and there is still fall out from the Express Scripts debacle. If out of the money puts start making sense at the 30 strike I might just have to climb aboard. WAG at 30 yields 3.66%. That sounds like a price buoy to me.
7) Bank of America is up big today. I didn't pull the trigger and sell the 7 puts when it dropped below 8. That will not happen again as the Fed appears to be a great insurance policy and housing seems to have bottomed.
8) I have seen an increase in comments to my posts. This is most welcome as my friends and family do not have the knowledge nor the interest in speaking of the things I post about. There eyes glaze over as if I'm trying to sell them insurance. :) In many ways trading is a loners pursuit. In my perfect world our discourse will grow and we will build community right here on this li'l ol' blog. Please feel free to share your trades/thoughts. Have a great day!
2) Precious metals seem to be back in bull mode. Buying (put selling) the dips might be hard because there might not be many dips for a while. Some well placed out of the money puts in your favorite precious metals stocks and/or ETF's seem to be nice setups for profitability. On a side note it looks like GDX is rising today so I may be able to close out my long and winding GDX trade for a profit and without paying a commission. My GDX trades have proven, once again, that I've made the most money when the trade goes against me. Strange but true. The answer lies in increased volatility and corresponding higher premiums. It pays to trade high volume stocks/ETF's in that regard.
3) I tripled down on Intel. The low P/E, large cash position, high and rising dividend, high volume and high volatility seem to make it a great candidate for out of the money put writing right now. I will post later today about the 22's I sold yesterday. If put to me the yield will be well over 4%. Unless I'm missing something that is a great buoy for the strike price.
4) Do you have a watchlist set up of the stocks you like to trade? How large is this watchlist? If you have a select group of stocks that you like to trade it is easy to recognize when one drops into or below it's normal trading range. While some would call that a bearish signal I call it a great opportunity to write out of the money puts well below it's normal trading range. If the stock drops more than you expect it may be easy to roll down and out for a net credit because it's volatility will have increased thereby providing increased premiums.
5) Writing puts on rising dividend stocks can be very profitable. It is good to research historic yields. If you write out of the money puts that if put to you would yield higher than it has historically, you have probability and reversion to the mean on your side.Time has taught me to never underestimate the power of reversion to the mean. Writing out of the money puts before an anticipated dividend rise is an additional strategy I like to implement. If you Google "Dividend Champions", that site has info on when the next dividend rise is expected to happen.
6) I'm keeping an eye on Walgreen's. Same store sales are down and there is still fall out from the Express Scripts debacle. If out of the money puts start making sense at the 30 strike I might just have to climb aboard. WAG at 30 yields 3.66%. That sounds like a price buoy to me.
7) Bank of America is up big today. I didn't pull the trigger and sell the 7 puts when it dropped below 8. That will not happen again as the Fed appears to be a great insurance policy and housing seems to have bottomed.
8) I have seen an increase in comments to my posts. This is most welcome as my friends and family do not have the knowledge nor the interest in speaking of the things I post about. There eyes glaze over as if I'm trying to sell them insurance. :) In many ways trading is a loners pursuit. In my perfect world our discourse will grow and we will build community right here on this li'l ol' blog. Please feel free to share your trades/thoughts. Have a great day!
Wednesday, September 5, 2012
New Trade: ConocoPhillips (COP) Naked Puts
Today when the Dow was down less than 1% and COP had sunk to ~54.80 I entered into the following transaction:
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
Tuesday, September 4, 2012
New Trade: Caterpillar (CAT) Naked Puts
Today with the Dow down 90 points and CAT down to $82.20 I entered into the following transaction:
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
Friday, August 31, 2012
Random Thoughts
1) Helicopter Ben owns the day. In my opinion the printing presses are running full bore regardless of what he says. That is how the U.S. and other countries pay their out of control debt.
2) It looks like precious metals and their miners have bottomed and have returned to their long term secular bull market. Out of the money put selling on GLD, SLV and GDX are probably pretty safe trades. If they do fall after initiating trades there are plenty of opportunities to roll down and out for a net credit. I'd probably throw Freeport-McMoran in that boat as well although there is some China risk as mentioned below.
3) Intel has taken a bit of a beating. I think writing out of the money puts at the 22 or 23 strike is swinging at the fat pitch. I'm in already and probably should have shown more patience but I am a believer in this stock. With their rising dividend, aggressive share buybacks and huge cash reserves there is a lot to like about Intel.
4) Is China's bubble ready to burst? If so, this could drag the markets down. Basic materials stocks could take a hit with it. Steel stocks have already started to fall. Keep an eye on Nucor. It is a rising dividend stock and if it plunges it might be a fat pitch to swing at.
5) Facebook is taking a nose dive again. For the risk on folks there are probably some great put selling opportunities at the 15 or 16 level. The odds are in your favor but I won't be joining you as it's not a stock I want to own long term.
6) Out of the money put selling on Dividend Champions that are at the bottom of their trading range is a fine way to make money in the market.
7) Did I mention swing at the fat pitch? Patience and a plan are paramount.
Have a great day.
2) It looks like precious metals and their miners have bottomed and have returned to their long term secular bull market. Out of the money put selling on GLD, SLV and GDX are probably pretty safe trades. If they do fall after initiating trades there are plenty of opportunities to roll down and out for a net credit. I'd probably throw Freeport-McMoran in that boat as well although there is some China risk as mentioned below.
3) Intel has taken a bit of a beating. I think writing out of the money puts at the 22 or 23 strike is swinging at the fat pitch. I'm in already and probably should have shown more patience but I am a believer in this stock. With their rising dividend, aggressive share buybacks and huge cash reserves there is a lot to like about Intel.
4) Is China's bubble ready to burst? If so, this could drag the markets down. Basic materials stocks could take a hit with it. Steel stocks have already started to fall. Keep an eye on Nucor. It is a rising dividend stock and if it plunges it might be a fat pitch to swing at.
5) Facebook is taking a nose dive again. For the risk on folks there are probably some great put selling opportunities at the 15 or 16 level. The odds are in your favor but I won't be joining you as it's not a stock I want to own long term.
6) Out of the money put selling on Dividend Champions that are at the bottom of their trading range is a fine way to make money in the market.
7) Did I mention swing at the fat pitch? Patience and a plan are paramount.
Have a great day.
Wednesday, August 29, 2012
Year to Date Results/Thoughts
Right now I'm sitting on a 15.7% year to date gain in my main investment account. This puts me about on par for my goal of 2% a month. While I've been very patient in entering trades I've also been lucky that there have not been major declines in the market.
Major declines in the market are a double edged sword. First and most obviously a dropping tide sinks all boats. On the flip side, however, market drops increase volatility and therefore, increase option premiums. This enhances the opportunity to roll down and out for a net credit. If you've followed my recent GDX rolls you've seen that one can profitably navigate a drop in price. Ironically, I've made my largest gains on stocks that dropped below support levels.
I trade a lot on margin so the risk of a market drop is always on my mind. I typically don't use more than 50% of my margin because I've found that the remaining 50% is usually enough cushion to avoid margin calls. For those of us who have experienced the margin call I think we can agree that margin calls make for upset stomachs and fear induced selling. Fear in trading, as in most life events, is one's own worst enemy.
I've been a student of the market since ~1987. I've learned that patience and a plan are key. It seems the longer I've been in the game the less I trade. While waiting for the fat pitch to swing at is not the most exciting route alas I believe it is the most profitable.
More trades may get me more readers but I'm not looking to monetize this site. I blog because I've found it helps to keep me grounded and patient. I also hope that readers will interact via comments as these trading thoughts that go through my head are not shared by friends and family. As such, your comments are greatly appreciated.
Have a great day.
Major declines in the market are a double edged sword. First and most obviously a dropping tide sinks all boats. On the flip side, however, market drops increase volatility and therefore, increase option premiums. This enhances the opportunity to roll down and out for a net credit. If you've followed my recent GDX rolls you've seen that one can profitably navigate a drop in price. Ironically, I've made my largest gains on stocks that dropped below support levels.
I trade a lot on margin so the risk of a market drop is always on my mind. I typically don't use more than 50% of my margin because I've found that the remaining 50% is usually enough cushion to avoid margin calls. For those of us who have experienced the margin call I think we can agree that margin calls make for upset stomachs and fear induced selling. Fear in trading, as in most life events, is one's own worst enemy.
I've been a student of the market since ~1987. I've learned that patience and a plan are key. It seems the longer I've been in the game the less I trade. While waiting for the fat pitch to swing at is not the most exciting route alas I believe it is the most profitable.
More trades may get me more readers but I'm not looking to monetize this site. I blog because I've found it helps to keep me grounded and patient. I also hope that readers will interact via comments as these trading thoughts that go through my head are not shared by friends and family. As such, your comments are greatly appreciated.
Have a great day.
Tuesday, August 28, 2012
Random Thoughts
1) I'm looking closely at put selling opportunities in Bank of America. The returns for writing the 7's a few months out or the 8's near month are really nice. It seems housing has bottomed and the Fed will not let these major banks fail. Looking back several years from now Bank of America will probably seem like a joke trading at 8.
2) Freeport-McMoran has had a nice little run up above 35. If I can sell near month 32's for greater than .30 I will be hard pressed not to pull the trigger. Short term dollar strength may send this opportunity my way.
3) Pundits seem to think that a correction is in order. I see the increase in volatility and volume so they may be right. As such, we need to balance opportunity seeking with swinging at the fat pitch.
4) Everyone is talking about Apple. I recently read that businesses are still running on the PC platform. I can't help but root for Intel and Microsoft. Reversion to the mean suggests that Apple should give up some ground to other players. Whether that's Google, Amazon, Intel, Microsoft or someone else I can't say. But Apple is feeling like a bubble to me.
5) If the dollar rises short term I will be looking for attractive entry points in commodity stocks or ETF's. As always SLV, GLD, FCX and GDX are my precious metals favorites. In oil I like Conoco-Phillips, Chevron and Exxon-Mobil. Other good traders are XLE and OIH in the ETF realm.
6) While I wait I have 4 out of the money positions percolating and taking advantage of time decay. With the long weekend coming I'm hoping the passing of time will continue to be my friend.
7) I think I'm beginning to like to write puts even farther out of the money because the maintenance requirement is so low. With less maintenance comes potentially higher returns with less risk and more downside protection. My last couple of profitable trades with Lowe's and Freeport-McMoran evidence that.
8) Rules 1 & 2: Don't lose money.So far so good. Managing tough trades is an art as much as a science. Rolling options is challenging, fun and as of late, profitable.
9) Have a great day. Please feel free to share your thoughts. I'm hungry for discourse. Most people have no clue about trading and if they do they probably don't make money at it. I know I lost money for a while then broke even for a while before I started to do as well as I do today. Knock on wood!! Reversion to the mean is always lurking.
P.S. I've got an eye on Coca-Cola, Caterpillar and Phillip Morris and am hoping that recent weakness will continue as they are all great companies with rising dividends.
2) Freeport-McMoran has had a nice little run up above 35. If I can sell near month 32's for greater than .30 I will be hard pressed not to pull the trigger. Short term dollar strength may send this opportunity my way.
3) Pundits seem to think that a correction is in order. I see the increase in volatility and volume so they may be right. As such, we need to balance opportunity seeking with swinging at the fat pitch.
4) Everyone is talking about Apple. I recently read that businesses are still running on the PC platform. I can't help but root for Intel and Microsoft. Reversion to the mean suggests that Apple should give up some ground to other players. Whether that's Google, Amazon, Intel, Microsoft or someone else I can't say. But Apple is feeling like a bubble to me.
5) If the dollar rises short term I will be looking for attractive entry points in commodity stocks or ETF's. As always SLV, GLD, FCX and GDX are my precious metals favorites. In oil I like Conoco-Phillips, Chevron and Exxon-Mobil. Other good traders are XLE and OIH in the ETF realm.
6) While I wait I have 4 out of the money positions percolating and taking advantage of time decay. With the long weekend coming I'm hoping the passing of time will continue to be my friend.
7) I think I'm beginning to like to write puts even farther out of the money because the maintenance requirement is so low. With less maintenance comes potentially higher returns with less risk and more downside protection. My last couple of profitable trades with Lowe's and Freeport-McMoran evidence that.
8) Rules 1 & 2: Don't lose money.So far so good. Managing tough trades is an art as much as a science. Rolling options is challenging, fun and as of late, profitable.
9) Have a great day. Please feel free to share your thoughts. I'm hungry for discourse. Most people have no clue about trading and if they do they probably don't make money at it. I know I lost money for a while then broke even for a while before I started to do as well as I do today. Knock on wood!! Reversion to the mean is always lurking.
P.S. I've got an eye on Coca-Cola, Caterpillar and Phillip Morris and am hoping that recent weakness will continue as they are all great companies with rising dividends.
Monday, August 27, 2012
Trading/Investment Opportunity with Intel
It seems I'm not the only one who likes the opportunity the weakness in Intel is presenting.
Check this article out. And this one. And this one. And one more for good measure.
Bill Cara is back in as well according to his recent Week in Review. Teddi Knight is in big at Fullyinformed.com. Even though I generally ignore the noise of "hot tips", when Bill and Teddi speak, I listen.
Please do your own due diligence and have a great day.
Check this article out. And this one. And this one. And one more for good measure.
Bill Cara is back in as well according to his recent Week in Review. Teddi Knight is in big at Fullyinformed.com. Even though I generally ignore the noise of "hot tips", when Bill and Teddi speak, I listen.
Please do your own due diligence and have a great day.
New Trade: Intel (INTC) Naked Puts
On Friday before the close with Intel trading at ~24.85 I entered into the following transaction:
08/24/12 STO 5 INTC Oct 20 2012 23 Puts @.35 161.20
This is essentially a one strike down, double down of my trade of a few days ago. I was able to take advantage of weakness/fear in Intel due to the Buffett hangover and weak results from Hewlett-Packard and Dell. If put to us our yield on cost will be right under 4% and we're just one roll away from a yield on cost above 4%. I feel pretty good that a 4% yield will buoy the stock price. In addition, we have strong support at the 25 price level.
This is a 57 day which uses ~$1800 in margin maintenance. If the puts expire worthless we will earn ~8.95% or 57.3% annual return on maintenance. If the stock drops I feel confident we can roll out and/or down for a net credit. As such, an exit strategy is in place.
08/24/12 STO 5 INTC Oct 20 2012 23 Puts @.35 161.20
This is essentially a one strike down, double down of my trade of a few days ago. I was able to take advantage of weakness/fear in Intel due to the Buffett hangover and weak results from Hewlett-Packard and Dell. If put to us our yield on cost will be right under 4% and we're just one roll away from a yield on cost above 4%. I feel pretty good that a 4% yield will buoy the stock price. In addition, we have strong support at the 25 price level.
This is a 57 day which uses ~$1800 in margin maintenance. If the puts expire worthless we will earn ~8.95% or 57.3% annual return on maintenance. If the stock drops I feel confident we can roll out and/or down for a net credit. As such, an exit strategy is in place.
Saturday, August 25, 2012
Top 100 Options Trading Blogs?
Commodity HQ listed this list of option trading blogs. It's hard to give it much respect though if FullyInformed.com is not in the top 100. Teddi Knight's blog is hands down the greatest options blog I've ever read. In any event, the list is definitely worth exploring.
Thursday, August 23, 2012
Random Thoughts
1) I might have been a bit early to pull the trigger on the Intel trade but I wanted to put some money to work and take advantage of time decay in case this is a real short term bull market. If it drops more I might sell some additional puts at either a nearer month or a lower strike. Does anyone really think that Intel will sport a 4% dividend. 23 or so gets us there. I say that's a buoy.
2) Facebook near month 16's might be a nice put selling trade. But I probably won't touch it because it's not a stock I want to own long term.
3) Where is our next bit of market fear going to come from? Right now it looks like it will come from a normal correction. My guns are locked and loaded.
4) Amazon has a ridiculously high P/E ratio and not very impressive earnings growth. It's not my style but some long term out of the money put buys may pay off nicely.
5) For the first time in years I have put a financial stock on my watch list. I added Bank of America last night. Central banks support the majors. They're kissing cousins who control the printing presses and are good at "financial engineering." The put selling returns are very high.
6) Have a great day. I'm off to get a little exercise.
Chester
2) Facebook near month 16's might be a nice put selling trade. But I probably won't touch it because it's not a stock I want to own long term.
3) Where is our next bit of market fear going to come from? Right now it looks like it will come from a normal correction. My guns are locked and loaded.
4) Amazon has a ridiculously high P/E ratio and not very impressive earnings growth. It's not my style but some long term out of the money put buys may pay off nicely.
5) For the first time in years I have put a financial stock on my watch list. I added Bank of America last night. Central banks support the majors. They're kissing cousins who control the printing presses and are good at "financial engineering." The put selling returns are very high.
6) Have a great day. I'm off to get a little exercise.
Chester
Wednesday, August 22, 2012
New Trade: Intel (INTC) Naked Puts
This afternoon with the market down ~80 points and Intel down to ~$25.70 I entered into the following transaction:
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
Buffett just sold his stake in Intel. Bill Cara just sold his stake. Fear and uncertainty is setting in for Intel. I took this opportunity to write puts a point below the 25 support level.
This is a 59 day trade which will initially take $1700 in margin maintenance. If the puts expire worthless, return on maintenance will be 10% in 59 days or 61.86% annual. If put to us our yield on cost will be 3.8%. That yield should buoy the stock absent unforeseen market conditions. In the event the stock tanks we will look to roll down and out for a net credit. As such, an exit strategy is in place.
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
Buffett just sold his stake in Intel. Bill Cara just sold his stake. Fear and uncertainty is setting in for Intel. I took this opportunity to write puts a point below the 25 support level.
This is a 59 day trade which will initially take $1700 in margin maintenance. If the puts expire worthless, return on maintenance will be 10% in 59 days or 61.86% annual. If put to us our yield on cost will be 3.8%. That yield should buoy the stock absent unforeseen market conditions. In the event the stock tanks we will look to roll down and out for a net credit. As such, an exit strategy is in place.
Tuesday, August 21, 2012
Bull Market? Low Volatility...
Are we in a bull market (within a secular bear)? Fear of the Euro has died down, for now, and the market is drifting sideways/up. With lower volatility comes lower premiums.
Precious metals and commodity stocks are on the rise. Is it time to get on the train or will the prices drop back down? I like to sell puts on weakness, not strength...can an old dog learn new tricks?
Blue chip dividend stocks only look good for trades 60 days out. The September strike has premiums that are too low in my opinion. But 60 days is a long time for there to be no event that brings the market down....and a correction is due since we're overbought, right?
To trade or not to trade, that is the question. Thoughts include: Swing at the fat pitch vs. don't miss the train. It's hard not to enter at least one trade a week when I've got more powder in the keg then I've had in a while...Stocks just seem so darn expensive.
Do you all have any thoughts to share??
Precious metals and commodity stocks are on the rise. Is it time to get on the train or will the prices drop back down? I like to sell puts on weakness, not strength...can an old dog learn new tricks?
Blue chip dividend stocks only look good for trades 60 days out. The September strike has premiums that are too low in my opinion. But 60 days is a long time for there to be no event that brings the market down....and a correction is due since we're overbought, right?
To trade or not to trade, that is the question. Thoughts include: Swing at the fat pitch vs. don't miss the train. It's hard not to enter at least one trade a week when I've got more powder in the keg then I've had in a while...Stocks just seem so darn expensive.
Do you all have any thoughts to share??
Sunday, August 19, 2012
Profitable Trade: Freeport-McMoran (FCX) Naked Puts
On Friday the following puts expired worthless:
7/24/12 STO 3 FCX Aug 18 2012 30 Puts @.45 $122.75
At the time I entered into this trade FCX was trading at $32.50/share. This was a 25 day trade with ~$1200 in average margin maintenance. Margin maintenance was reduced from the initial amount of $1600 due to the rise of the underlying stock.
Our return on maintenance was 10.22% or 149% annual. The returns are inflated because this is a volatile security. It is a great stock to trade in my opinion as it has fairly concrete support levels, a great rising dividend, high liquidity and high volatility. This will definitely be one I trade again. I would like to see the stock drop back a bit first, preferably to 32 and change.
7/24/12 STO 3 FCX Aug 18 2012 30 Puts @.45 $122.75
At the time I entered into this trade FCX was trading at $32.50/share. This was a 25 day trade with ~$1200 in average margin maintenance. Margin maintenance was reduced from the initial amount of $1600 due to the rise of the underlying stock.
Our return on maintenance was 10.22% or 149% annual. The returns are inflated because this is a volatile security. It is a great stock to trade in my opinion as it has fairly concrete support levels, a great rising dividend, high liquidity and high volatility. This will definitely be one I trade again. I would like to see the stock drop back a bit first, preferably to 32 and change.
Saturday, August 18, 2012
Profitable Trade: Lowe's (LOW) Naked Puts
Yesterday the following puts expired worthless:
7/16/12 STO 4 LOW Aug 18 '12 24 Puts @.34 $122.97
At the time of this trade LOW was down ~3% to $25.90. It ended up in the high 27's. This was a 33 day trade with average margin maintenance of ~$1400. Our return on maintenance was 8.78% or 97.1% annual. I will look to trade Lowe's again should the price drop as it has a lot of daily moves but not much of a monthly one. This is perfect for put selling.
7/16/12 STO 4 LOW Aug 18 '12 24 Puts @.34 $122.97
At the time of this trade LOW was down ~3% to $25.90. It ended up in the high 27's. This was a 33 day trade with average margin maintenance of ~$1400. Our return on maintenance was 8.78% or 97.1% annual. I will look to trade Lowe's again should the price drop as it has a lot of daily moves but not much of a monthly one. This is perfect for put selling.
Thursday, August 16, 2012
Opportunity today with Facebook?
I'm not going to pull the trigger because I don't want to own the stock, however, there looks to be some very interesting opportunities in selling short term out of the money puts. I almost sold next week's 18's but if it drops and goes in the money I'd be kicking myself for breaking my rule of only trading what I want to own. Good luck!
Wednesday, August 15, 2012
Looking at....
Today I'm looking at Caterpillar September 80's and Freeport-McMoran September 30's and 31's. I'm also looking to re-up on Lowes as this Dividend Aristocrat has great daily volatility without ever moving much on a monthly basis. I'd like to sell the 24's again. As always I'm looking for a good entry point for Coca-Cola, Exxon-Mobil, Intel, Microsoft and now Aflac. Happy trading.
Tuesday, August 14, 2012
New Trade: McDonald's (MCD) Naked Puts
Yesterday with the market down a bit and MCD trading at 87.90 I entered into the following transaction:
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
McDonald's is a Dividend Aristocrat/Champion/Achiever that really needs no introduction. There has been a bit of weakness in the stock as of late due to July same store sales declining a miniscule percentage. I almost pulled the trigger on the 82.5's a few days ago when MCD was at 86.10 but decided against it because I thought the market and the stock still had room to drop. Opportunity missed.
This trade at the 85's is still pretty good as 85 is a strong support line for MCD. If the stock drops I will roll out and/or down for a net credit. As such, an exit strategy is in place.
If put to us our yield on cost will be ~3.3% and MCD is set to raise it's dividend in November. This dividend rise should buoy the stock. If these puts expire worthless we will earn 4.3% on margin maintenance of $3078.25 in 40 days which equates to 39.23% annual return on maintenance.
I didn't see any fat pitches to swing at so I entered into this one trade to take advantage of time decay in what I see as a fairly safe play.
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
McDonald's is a Dividend Aristocrat/Champion/Achiever that really needs no introduction. There has been a bit of weakness in the stock as of late due to July same store sales declining a miniscule percentage. I almost pulled the trigger on the 82.5's a few days ago when MCD was at 86.10 but decided against it because I thought the market and the stock still had room to drop. Opportunity missed.
This trade at the 85's is still pretty good as 85 is a strong support line for MCD. If the stock drops I will roll out and/or down for a net credit. As such, an exit strategy is in place.
If put to us our yield on cost will be ~3.3% and MCD is set to raise it's dividend in November. This dividend rise should buoy the stock. If these puts expire worthless we will earn 4.3% on margin maintenance of $3078.25 in 40 days which equates to 39.23% annual return on maintenance.
I didn't see any fat pitches to swing at so I entered into this one trade to take advantage of time decay in what I see as a fairly safe play.
Tuesday, August 7, 2012
Waiting like a crocodile...
Ol' Chester is sitting on a bunch of maintenance money but the market keeps creeping up. This little rally looks a bit long in the tooth so I expect to see some down days in the near future. If we can see a string of two to three down days in a row I will look to enter a few put selling trades. I'm keeping an eye on SYY, FCX, LOW, MSFT, INTC, KMB, MCD, CTL, GE and other rising dividend/high dividend stocks. I wanna see some fear!
In the meantime, only my eyes are above the water while the rest of me lies in wait.
In the meantime, only my eyes are above the water while the rest of me lies in wait.
Thursday, July 26, 2012
New Trade: Freeport-McMoran (FCX) Naked Puts
On Tuesday I entered into the following transaction:
7/24/12 STO 3 FCX Aug 18 2012 30 Puts @.45 $122.75
At the time I entered into this trade FCX was trading at $32.50/share. This is a 25 day trade with ~$1600 in margin maintenance. If these puts expire worthless our return on maintenance is 7.67% or 112% annual. The returns are inflated because this is a volatile security. In the event this stock drops I feel confident we will be able to roll out and down for a net credit. As such, an exit strategy is in place.
If put to us at 29.70 or so, FCX will have a yield on cost of 4.2%. Theoretically, that should buoy the stock. FCX has a rising dividend.
7/24/12 STO 3 FCX Aug 18 2012 30 Puts @.45 $122.75
At the time I entered into this trade FCX was trading at $32.50/share. This is a 25 day trade with ~$1600 in margin maintenance. If these puts expire worthless our return on maintenance is 7.67% or 112% annual. The returns are inflated because this is a volatile security. In the event this stock drops I feel confident we will be able to roll out and down for a net credit. As such, an exit strategy is in place.
If put to us at 29.70 or so, FCX will have a yield on cost of 4.2%. Theoretically, that should buoy the stock. FCX has a rising dividend.
Wednesday, July 25, 2012
Trade Continuation: GDX Naked Puts
Last week I continued my GDX investment 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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
In this latest option roll I was able to get paid $38.26 to roll down a strike AND to reduce my exposure to 2 contracts. By reducing the number of contracts we were able to reduce our maintenance requirement from ~$3200 to ~$2100 thereby freeing up money for other trades. In addition, our percentage return on maintenance increases with the reduction in required maintenance.
It had never occurred to me before to reduce the number of contracts as I roll down and out. Props to Teddi Knight at FullyInformed.com for sharing her experience and insight in that regard.
We have now collected $512.40 in option premium on this trade. Our cost basis if put to us is down to $39.44/share. While this ETF has sunk to new lows recently our cost basis is below that.
The September expiration will make this trade 6 months old. If the shares expire worthless we will earn $512.40 on an average of ~$2600 in margin maintenance. This equates to a return on maintenance of ~19.7% or or 39.4% annual.
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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
In this latest option roll I was able to get paid $38.26 to roll down a strike AND to reduce my exposure to 2 contracts. By reducing the number of contracts we were able to reduce our maintenance requirement from ~$3200 to ~$2100 thereby freeing up money for other trades. In addition, our percentage return on maintenance increases with the reduction in required maintenance.
It had never occurred to me before to reduce the number of contracts as I roll down and out. Props to Teddi Knight at FullyInformed.com for sharing her experience and insight in that regard.
We have now collected $512.40 in option premium on this trade. Our cost basis if put to us is down to $39.44/share. While this ETF has sunk to new lows recently our cost basis is below that.
The September expiration will make this trade 6 months old. If the shares expire worthless we will earn $512.40 on an average of ~$2600 in margin maintenance. This equates to a return on maintenance of ~19.7% or or 39.4% annual.
Tuesday, July 24, 2012
Profitable Trade: GDX Naked Puts
On Friday I closed the following transaction for a net profit:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
07/20/2012 BTC 3 GDX Jul 21 2012 42 Puts @.55 -177.28
In this trade we generated $175.86 in 4 months on ~2600 in margin maintenance. This equates to a return of 6.76% or 20.29% annual. This trade shows the power of naked puts and the ability to roll them down and out for a net credit. Even though GDX continued to tank throughout this transaction we were able to still turn a profit.
This one was a bit too much of a wild ride for my temperament, however, so I will probably return to trading blue chip stocks with a rising dividend. Right now I'm watching the weakness in MSFT and INTC closely. If MSFT drops below 29 and INTC gets in the low 24's it will be hard not to pull the trigger on some new naked put trades.
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
07/20/2012 BTC 3 GDX Jul 21 2012 42 Puts @.55 -177.28
In this trade we generated $175.86 in 4 months on ~2600 in margin maintenance. This equates to a return of 6.76% or 20.29% annual. This trade shows the power of naked puts and the ability to roll them down and out for a net credit. Even though GDX continued to tank throughout this transaction we were able to still turn a profit.
This one was a bit too much of a wild ride for my temperament, however, so I will probably return to trading blue chip stocks with a rising dividend. Right now I'm watching the weakness in MSFT and INTC closely. If MSFT drops below 29 and INTC gets in the low 24's it will be hard not to pull the trigger on some new naked put trades.
Monday, July 23, 2012
Profitable Trade: Intel (INTC) Naked Puts
The following puts expired worthless:
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
We earned $90.99 in 12 days in this trade on ~$1500 in margin maintenance. This equates to a 6% return or 184% annual. The returns are so large as there was a quarterly report issued during the time of this trade.
I didn't see an opportunity I liked to roll out and/or down for a credit so I just let them expire worthless. I will look to trade INTC again should it drop under $25.
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
We earned $90.99 in 12 days in this trade on ~$1500 in margin maintenance. This equates to a 6% return or 184% annual. The returns are so large as there was a quarterly report issued during the time of this trade.
I didn't see an opportunity I liked to roll out and/or down for a credit so I just let them expire worthless. I will look to trade INTC again should it drop under $25.
Sunday, July 22, 2012
Profitable Trade: Proctor & Gamble (PG) Naked Puts
The following puts just expired worthless:
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
This was a 114 day trade with an average of ~2300 in margin maintenance. Our return on maintenance is 7.15% or 22.9% annual. I thought about rolling out the 62.5's but decided against it with the recent surge in the stock due to the Ackman intervention. In addition, I believe long term that Costco and Wal-Mart and their brand of products will continue to take market share from the more expensive PG products. That being said I will still sell out of the money puts when fearful dumping of PG stock occurs.
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
This was a 114 day trade with an average of ~2300 in margin maintenance. Our return on maintenance is 7.15% or 22.9% annual. I thought about rolling out the 62.5's but decided against it with the recent surge in the stock due to the Ackman intervention. In addition, I believe long term that Costco and Wal-Mart and their brand of products will continue to take market share from the more expensive PG products. That being said I will still sell out of the money puts when fearful dumping of PG stock occurs.
Monday, July 16, 2012
New Trade: Lowe's (LOW) Naked Puts
Today with the weakness in Dividend Champion/Aristocrat LOW and weakness in the retail spending numbers I entered into the following transaction:
7/16/12 STO 4 LOW Aug 18 '12 24 Puts @.34 $122.97
At the time of this trade LOW was down ~3% to $25.90. If put to me the cost basis will be ~23.70. The yield on cost will be 2.7% which is high for LOW.
This is a 33 day trade with initial margin maintenance of $1500. If they expire worthless I will earn 8.2% return on maintenance or 90.7% annual. In the event the stock continues to drop I will look to roll down and/or out for a net credit. As such, I have an exit strategy in place.
I think that if I can trade my way to a yield on cost of 3% that I will be golden. I could have done that right away by selling the October 21's but I didn't want to commit to that much time.
7/16/12 STO 4 LOW Aug 18 '12 24 Puts @.34 $122.97
At the time of this trade LOW was down ~3% to $25.90. If put to me the cost basis will be ~23.70. The yield on cost will be 2.7% which is high for LOW.
This is a 33 day trade with initial margin maintenance of $1500. If they expire worthless I will earn 8.2% return on maintenance or 90.7% annual. In the event the stock continues to drop I will look to roll down and/or out for a net credit. As such, I have an exit strategy in place.
I think that if I can trade my way to a yield on cost of 3% that I will be golden. I could have done that right away by selling the October 21's but I didn't want to commit to that much time.
Profitable trade: Walgreen's (WAG) Naked Puts
On Friday I closed the following transaction for a profit:
5/30/12 STO 3 WAG Jul 21 2012 28 Puts @.41 $110.75
7/13/12 BTC 3 WAG Jul 21 2012 28 Puts @.03 -9.04
I was able to close the trade without paying commissions so I pulled the trigger. In this trade we made $101.71 in 44 days on ~$1200 in margin maintenance. This equates to a return on maintenance of 8.47% or 70.26% annual. I would have rolled out and/or down but with the recent rise of WAG above 30 I decided to wait. If and when WAG drops to 29 and change I will look to sell the 27 or 28's.
5/30/12 STO 3 WAG Jul 21 2012 28 Puts @.41 $110.75
7/13/12 BTC 3 WAG Jul 21 2012 28 Puts @.03 -9.04
I was able to close the trade without paying commissions so I pulled the trigger. In this trade we made $101.71 in 44 days on ~$1200 in margin maintenance. This equates to a return on maintenance of 8.47% or 70.26% annual. I would have rolled out and/or down but with the recent rise of WAG above 30 I decided to wait. If and when WAG drops to 29 and change I will look to sell the 27 or 28's.
Friday, July 13, 2012
Profitable Trade: Proctor & Gamble (PG) Naked Puts
Today I closed the following transaction for a profit:
06/18/2012 STO 2 PG Jul 21 2012 60 Puts @.61 $110.49
07/13/2012 BTC 2 PG Jul 21 2012 60 Puts @.04 $ 8.03
This is a 25 day trade that has used ~$2500 in margin maintenance. We earned $102.46. This equates to a 4.1% return on maintenance or 60% annual. Thank you Bill Ackman!
I would have liked to have rolled the 60's each month but the stock's sudden rise made me want to take a wait and see approach.
06/18/2012 STO 2 PG Jul 21 2012 60 Puts @.61 $110.49
07/13/2012 BTC 2 PG Jul 21 2012 60 Puts @.04 $ 8.03
This is a 25 day trade that has used ~$2500 in margin maintenance. We earned $102.46. This equates to a 4.1% return on maintenance or 60% annual. Thank you Bill Ackman!
I would have liked to have rolled the 60's each month but the stock's sudden rise made me want to take a wait and see approach.
Monday, July 9, 2012
New Trade: Intel (INTC) Naked Puts
Today with INTC down to about $25.90 I entered into the following trade:
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
This is a 12 day trade on a stock I'd like to own long term. It will soon be a member of the Dividend Achiever family. In fact, I expect the news of a dividend raise in the near future.
If these puts expire worthless we will earn 5.3% or 161.21% annual on $1713 in margin maintenance. The returns are inflated due to an earnings release set for July 17. If the stock drops we have many options to roll out and/or down for a net credit. As such, an exit strategy is in place.
Even if the stock doesn't drop I will probably look to roll on a weekly basis, if possible. INTC has weekly options.
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
This is a 12 day trade on a stock I'd like to own long term. It will soon be a member of the Dividend Achiever family. In fact, I expect the news of a dividend raise in the near future.
If these puts expire worthless we will earn 5.3% or 161.21% annual on $1713 in margin maintenance. The returns are inflated due to an earnings release set for July 17. If the stock drops we have many options to roll out and/or down for a net credit. As such, an exit strategy is in place.
Even if the stock doesn't drop I will probably look to roll on a weekly basis, if possible. INTC has weekly options.
Wednesday, June 20, 2012
Profitable Trade: Johnson & Johnson (JNJ) Naked Puts
Today I closed out the following transaction for a profit:
03/28/2012 STO 2 JNJ Jul 21 2012 62.5 Puts @.95 178.51
06/20/2012 BTC 2 JNJ Jul 21 2012 62.5 Puts @.05 -10.03
We earned $168.48 in 84 days on an average of ~$2400 in margin maintenance. This equates to a 7% return or 30.4% annual. We were able to close out the transaction today with no commission. I now have more powder in the keg for future trades which I feel will present themselves shortly (see WAG and PG).
Monday, June 18, 2012
New Trade: Proctor & Gamble (PG) Naked Puts
Today with PG trading down at ~61.80 I entered into the following transaction:
06/18/2012 STO 2 PG Jul 21 2012 60 Puts @.61 $110.49
This is a 33 day trade that starts out using ~$2000 in margin maintenance. If they expire worthless we will earn 5.52% return on maintenance in 33 days or 61.05% annual.
PG, a tried and true Dividend Champion/Aristrocrat, has shown a lot of support at the 60 level. If put to us our yield on cost will be 3.78% which is much higher than the historical average. If the price sinks we should be able to roll out and down for a net credit, therefore, an exit strategy is in place.
06/18/2012 STO 2 PG Jul 21 2012 60 Puts @.61 $110.49
This is a 33 day trade that starts out using ~$2000 in margin maintenance. If they expire worthless we will earn 5.52% return on maintenance in 33 days or 61.05% annual.
PG, a tried and true Dividend Champion/Aristrocrat, has shown a lot of support at the 60 level. If put to us our yield on cost will be 3.78% which is much higher than the historical average. If the price sinks we should be able to roll out and down for a net credit, therefore, an exit strategy is in place.
Sunday, June 17, 2012
If you're not reading this every week, you should
Please check this out.
Every week this "trading wizard" shares tons of great information, expertise and perspective...for free. Hardly a week goes by where I don't read Mr. Cara's "Week in Review."
Every week this "trading wizard" shares tons of great information, expertise and perspective...for free. Hardly a week goes by where I don't read Mr. Cara's "Week in Review."
Friday, June 8, 2012
Trade Continuation: GDX Naked Puts
Yesterday I continued the following transaction:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
I took the opportunity with the recent strength in GDX to roll out and down 3 strikes for a net credit of $68.43. We have now collected $353.14 in option premium. If put to us at the new strike our cost basis will be $40.82. Not bad considering GDX was trading at 50 at the time we entered into this trade.
If these puts expire worthless we will earn $353.14 in 4 months on an average of ~$2300 in margin maintenance. This equates to a 15.35% return on maintenance or ~46% annual.
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
I took the opportunity with the recent strength in GDX to roll out and down 3 strikes for a net credit of $68.43. We have now collected $353.14 in option premium. If put to us at the new strike our cost basis will be $40.82. Not bad considering GDX was trading at 50 at the time we entered into this trade.
If these puts expire worthless we will earn $353.14 in 4 months on an average of ~$2300 in margin maintenance. This equates to a 15.35% return on maintenance or ~46% annual.
Friday, June 1, 2012
Trade Continuation: GDX Naked Puts
Today I took advantage of the strength in GDX to continue this trade 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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
We were able to roll out and down two strikes for a net credit of $95.49. This increases the amount of option premium collected on this trade to $474.14. If put to us our cost basis will be down to $41.42. This ETF is presently trading at $45.84. Although GDX is volatile this is a nice cushion and we have multiple rolling opportunities available to us if need be. If these puts expire worthless we will earn $467.74 in 4 months on ~$3000 in margin maintenance. This equates to a return of 15.6% or 49.8% annual.
This trade demonstrates the power of put selling. When I entered this trade GDX was just below 50 which I incorrectly thought was a strong support level. At one point during this transaction GDX had fallen below 40. Weak hands were flushed but I stuck to my guns. Some would say I was foolish, however, there were so many strikes to roll out and down to I was not going to be a weak hand who bought high and sold low.
I'm not out of the woods on this trade yet, however, I am feeling like I'm in the driver's seat. I'm learning that when a stock tanks, the volatility and the premiums increase thereby creating opportunities for enhanced returns. It seems odd that some of my greatest returns are on trades that initially went against me. Many seasoned traders would have been "prudently" stopped out.
Note: Why didn't I hold the June puts to expiration and drain all the time value and take advantage of the great time decay in the last two weeks? Two reasons: 1) when the opportunity presented I wanted to roll down and out 2 strikes and get paid ~$100 to do it; and 2) I'm going to be on vacation options expiration week and I don't want to have any trading concerns on my mind. Silly reason? Obviously I don't think so. :)
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
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
We were able to roll out and down two strikes for a net credit of $95.49. This increases the amount of option premium collected on this trade to $474.14. If put to us our cost basis will be down to $41.42. This ETF is presently trading at $45.84. Although GDX is volatile this is a nice cushion and we have multiple rolling opportunities available to us if need be. If these puts expire worthless we will earn $467.74 in 4 months on ~$3000 in margin maintenance. This equates to a return of 15.6% or 49.8% annual.
This trade demonstrates the power of put selling. When I entered this trade GDX was just below 50 which I incorrectly thought was a strong support level. At one point during this transaction GDX had fallen below 40. Weak hands were flushed but I stuck to my guns. Some would say I was foolish, however, there were so many strikes to roll out and down to I was not going to be a weak hand who bought high and sold low.
I'm not out of the woods on this trade yet, however, I am feeling like I'm in the driver's seat. I'm learning that when a stock tanks, the volatility and the premiums increase thereby creating opportunities for enhanced returns. It seems odd that some of my greatest returns are on trades that initially went against me. Many seasoned traders would have been "prudently" stopped out.
Note: Why didn't I hold the June puts to expiration and drain all the time value and take advantage of the great time decay in the last two weeks? Two reasons: 1) when the opportunity presented I wanted to roll down and out 2 strikes and get paid ~$100 to do it; and 2) I'm going to be on vacation options expiration week and I don't want to have any trading concerns on my mind. Silly reason? Obviously I don't think so. :)
Wednesday, May 30, 2012
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.
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.
Tuesday, May 29, 2012
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.
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.
Monday, May 21, 2012
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...
5/29 note: this would've been a goodie...
Monday, May 14, 2012
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.
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.
Tuesday, May 1, 2012
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.
On a side note the recent bribery allegations make Wal-Mart another interesting blue chip dividend stock to watch.
Saturday, April 28, 2012
Put Selling over Covered Calls because...
1) Single commission;
2) If the stock shoots up in value, the value of the puts decline. Then close out. With covered calls if the stock shoots up so does the premium. This scenario is much trickier to close out for a profit.
3) If the stock declines a lot it sucks for both but it really sucks for covered calls as you bought at that price. Rolling options is much trickier on a covered call than a put when the stock declines. The out of the money put seller has a buffer of the out of the money strike plus the premium received before she gets hurt. In addition, it is much easier to roll down and out for a credit.
4) Leverage in a margin account is more powerful with puts. In fact there is no cost for using margin when selling puts.
5) Even though you don't collect dividends the premiums are higher on puts to reflect that.
Note: potential trades on my radar include PG, WMT and JNJ due to their recent weakness. A couple of strikes down from the present price, a couple or three months out oughta do ya. If they decline further it's easy to roll down and out for a credit.
2) If the stock shoots up in value, the value of the puts decline. Then close out. With covered calls if the stock shoots up so does the premium. This scenario is much trickier to close out for a profit.
3) If the stock declines a lot it sucks for both but it really sucks for covered calls as you bought at that price. Rolling options is much trickier on a covered call than a put when the stock declines. The out of the money put seller has a buffer of the out of the money strike plus the premium received before she gets hurt. In addition, it is much easier to roll down and out for a credit.
4) Leverage in a margin account is more powerful with puts. In fact there is no cost for using margin when selling puts.
5) Even though you don't collect dividends the premiums are higher on puts to reflect that.
Note: potential trades on my radar include PG, WMT and JNJ due to their recent weakness. A couple of strikes down from the present price, a couple or three months out oughta do ya. If they decline further it's easy to roll down and out for a credit.
Friday, April 27, 2012
Profitable Trade: SLV Naked Puts
Today the following puts expired worthless:
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
Margin maintenance on the trade was $1745. In three days we earned 3.08% return on maintenance or 374% annual.
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
Margin maintenance on the trade was $1745. In three days we earned 3.08% return on maintenance or 374% annual.
Wednesday, April 25, 2012
New Trade: SLV Naked Puts
Today I entered into the following short term trade:
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
Saturday, April 21, 2012
Profitable Trade: SLV Naked Puts
Yesterday the following naked puts expired worthless:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver stayed range bound so these puts expired worthless. We earned 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual. We'll look to put that margin maintenance to work soon. I like the opportunities provided by the recent weakness in JNJ. I'm looking at the 60 puts a few months out.
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver stayed range bound so these puts expired worthless. We earned 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual. We'll look to put that margin maintenance to work soon. I like the opportunities provided by the recent weakness in JNJ. I'm looking at the 60 puts a few months out.
Friday, April 20, 2012
Trade Continuation: GDX Naked Puts
Today on options expiration Friday I continued the following transaction:
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
GDX has trended downward and was at ~46.40 when I continued this transaction. After draining every drop of time value I rolled out one month and down two strikes for a net credit. Margin maintenance on this trade is ~$2800. If these puts expire worthless we will earn $234.21 in 61 days which is an 8.36% return on maintenance or 50% annual. At the close GDX dropped down to 46.10. The precious metals miners have not been able to get much of a bid. Sentiment is very low and most of the weak hands have had to have been scared away. In the event GDX continues its downward descent I will look to roll out and down again for a net credit. If put to us our cost basis will be $44.21 so we still have some breathing room in this trade. We will have time decay over the weekend and I won't look to roll down and out until I've wrung every drop of time value out of this trade.
Note: when these puts went into the money, margin maintenance increased to ~$3200 which will lower the returns
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
GDX has trended downward and was at ~46.40 when I continued this transaction. After draining every drop of time value I rolled out one month and down two strikes for a net credit. Margin maintenance on this trade is ~$2800. If these puts expire worthless we will earn $234.21 in 61 days which is an 8.36% return on maintenance or 50% annual. At the close GDX dropped down to 46.10. The precious metals miners have not been able to get much of a bid. Sentiment is very low and most of the weak hands have had to have been scared away. In the event GDX continues its downward descent I will look to roll out and down again for a net credit. If put to us our cost basis will be $44.21 so we still have some breathing room in this trade. We will have time decay over the weekend and I won't look to roll down and out until I've wrung every drop of time value out of this trade.
Note: when these puts went into the money, margin maintenance increased to ~$3200 which will lower the returns
Tuesday, April 17, 2012
New Trade: Sold SLV Naked Puts
Yesterday I entered into the following transaction:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
Thursday, April 12, 2012
Thoughts on GDX Trade...
I've always wanted online authors to reveal their thought patterns when a trade seemingly goes against them. Alas, there head is usually in the sand. I'm bucking the trend with this post.
Well GDX has fallen below support and seems to be consolidating at ~46. I sold the April 47 puts @.53 in one account. There is still some time decay to be had and I'm going to gobble it all up before deciding what to do next. Next Friday at expiry I'm looking to roll out and down to the May 45's but only if I can get a worthwhile credit. Otherwise I will roll out and down to the May 46's or July 44's.
Either way I expect a floor to be in place soon. The Fed saying they aren't going to engage in quantative easing for a while is hogwash IMO. Our debt is rising as I type. In any event there are many more strikes that I can roll out and down for a credit. My undefeated streak ain't ending on the gold miners! :)
Any thoughts?
Well GDX has fallen below support and seems to be consolidating at ~46. I sold the April 47 puts @.53 in one account. There is still some time decay to be had and I'm going to gobble it all up before deciding what to do next. Next Friday at expiry I'm looking to roll out and down to the May 45's but only if I can get a worthwhile credit. Otherwise I will roll out and down to the May 46's or July 44's.
Either way I expect a floor to be in place soon. The Fed saying they aren't going to engage in quantative easing for a while is hogwash IMO. Our debt is rising as I type. In any event there are many more strikes that I can roll out and down for a credit. My undefeated streak ain't ending on the gold miners! :)
Any thoughts?
Monday, April 2, 2012
Profitable Trade: Walgreen's (WAG) Naked Puts
Today I closed the following transaction for a profit:
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
04/02/2012 BTC 3 WAG Apr 21 2012 31 Puts @.05 -15.04
We made $151.67 in 33 days on ~$1400 in margin maintenance. This equates to a return on maintenance of 10.83% or 119.78% annual. These returns are inflated because there was an upcoming quarterly report and fear of fallout from the Express Scripts deal.
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
04/02/2012 BTC 3 WAG Apr 21 2012 31 Puts @.05 -15.04
We made $151.67 in 33 days on ~$1400 in margin maintenance. This equates to a return on maintenance of 10.83% or 119.78% annual. These returns are inflated because there was an upcoming quarterly report and fear of fallout from the Express Scripts deal.
My Favorite Blog...hands down
My favorite blog is Fully Informed. This author, Teddi Knight, is brilliant and experienced. I've been investing for over 20 years but she has been trading for 42 years. When I see she has a new post I giddily click on it and voraciously devour it. Well, maybe not with so much drama but you get the point. :)
Most blogs I read in all honesty don't enlighten me and it seems that some generate articles just to attract potential marketing dollars to their site.
To each his own but I have to say: Fully Informed rocks!
Honorable Mention: I also read Bill Cara's Week in Review every week. Bill has been trading for 50 years or so. Cara's blog can be found here.
Happy Trading
Most blogs I read in all honesty don't enlighten me and it seems that some generate articles just to attract potential marketing dollars to their site.
To each his own but I have to say: Fully Informed rocks!
Honorable Mention: I also read Bill Cara's Week in Review every week. Bill has been trading for 50 years or so. Cara's blog can be found here.
Happy Trading
Friday, March 30, 2012
New Trade: Proctor & Gamble (PG) Naked Puts
Yesterday in a taxable account I entered into the following transaction:
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
Proctor & Gamble is a tried and true Dividend Champion. It was showing a bit of weakness yesterday trading at 66 and change so I pulled the trigger on this little trade. PG is set to raise it's dividend next quarter so the share price should be supported a bit by the increase in yield. As of now the yield is 3.1%. If put to us our yield on cost, with the raise, will exceed 3.6% which is well above the historical average. The maintenance requirement on this trade is ~$2000. If these puts expire worthless we will earn $164.47 in 114 days on $2000 of margin maintenance. This equates to an 8.2% return or 26.25% annual. At this price we should be able to roll out and down for a net credit so we have an exit strategy in place.
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
Proctor & Gamble is a tried and true Dividend Champion. It was showing a bit of weakness yesterday trading at 66 and change so I pulled the trigger on this little trade. PG is set to raise it's dividend next quarter so the share price should be supported a bit by the increase in yield. As of now the yield is 3.1%. If put to us our yield on cost, with the raise, will exceed 3.6% which is well above the historical average. The maintenance requirement on this trade is ~$2000. If these puts expire worthless we will earn $164.47 in 114 days on $2000 of margin maintenance. This equates to an 8.2% return or 26.25% annual. At this price we should be able to roll out and down for a net credit so we have an exit strategy in place.
Wednesday, March 28, 2012
New Trade: Johnson & Johnson (JNJ) Naked Puts
Today at the close of the market I entered into the following trade:
03/28/2012 STO 2 JNJ Jul 21 2012 62.5 Puts @.95 178.51
JNJ, one of the bluest of the blue chip Dividend Champions, was trading at just under 65 at the time I entered this trade. If these puts expire worthless we will earn $178.51 in 115 days on ~$2200 of margin maintenance. This equates to an 8.1% return on maintenance or 25.7% annual. JNJ currently yields 3.5% and it's set to hike it's dividend next quarter. If put to me the yield on cost will be around 4%. These puts were written near JNJ's support level. If the stock drops I feel confident I will be able to roll out and down for a net credit. As such, I have an exit strategy in place.
03/28/2012 STO 2 JNJ Jul 21 2012 62.5 Puts @.95 178.51
JNJ, one of the bluest of the blue chip Dividend Champions, was trading at just under 65 at the time I entered this trade. If these puts expire worthless we will earn $178.51 in 115 days on ~$2200 of margin maintenance. This equates to an 8.1% return on maintenance or 25.7% annual. JNJ currently yields 3.5% and it's set to hike it's dividend next quarter. If put to me the yield on cost will be around 4%. These puts were written near JNJ's support level. If the stock drops I feel confident I will be able to roll out and down for a net credit. As such, I have an exit strategy in place.
Dividend Tax Hike?
I've read that the dividend tax rate of 15% may be shot down. I tend to think that this is rhetoric so some shady, back room deals can be made to grease the palms of the politicians supporters. With this looming, however, I wonder if it's smart to enter into new transactions on dividend stalwarts or take a wait and see approach. On the other hand if I'm right and the tax cuts are extended then this is an opportunity to take advantage of investor fear and pull in higher option premium. What's your take on the dividend tax?
Note: I read that the hike wouldn't take effect until 2013 so we've got some time.
Note: I read that the hike wouldn't take effect until 2013 so we've got some time.
Tuesday, March 27, 2012
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.
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.
Monday, March 26, 2012
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.
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.
Friday, March 23, 2012
Profitable Trade: Pepsico (PEP) Naked Puts
Two days ago in a retiree's taxable account we closed the following trade for a profit:
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
03/21/2012 BTC 3 PEP Apr 21 2012 60 Puts @.05 -15.04
In this trade we earned $135.73 in 40 days on ~$2500 in margin maintenance. This equates to a 5.4% return on maintenance or 49.27% annual. We got to the point where we could close the trade without commissions and look to put the money to work somewhere else. On both of the Pepsico trades our strategy of selling puts after a disappointing quarterly report paid off. It is my experience that when these Dividend Champion, blue chip stalwarts sell off after a quarterly report it provides an opportunity as they usually drift back up to where they were before the report was released as one quarter does not a blue chip make.
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
03/21/2012 BTC 3 PEP Apr 21 2012 60 Puts @.05 -15.04
In this trade we earned $135.73 in 40 days on ~$2500 in margin maintenance. This equates to a 5.4% return on maintenance or 49.27% annual. We got to the point where we could close the trade without commissions and look to put the money to work somewhere else. On both of the Pepsico trades our strategy of selling puts after a disappointing quarterly report paid off. It is my experience that when these Dividend Champion, blue chip stalwarts sell off after a quarterly report it provides an opportunity as they usually drift back up to where they were before the report was released as one quarter does not a blue chip make.
Profitable Trade: Pepsico (PEP) Naked Puts
Today in a taxable account I closed the following trade for a profit:
02/09/2012 STO 2 PEP Mar 17 2012 62.5 Puts @.7 128.51
03/06/2012 BTC 2 PEP Mar 17 2012 62.5 Puts @.63 -137.48
03/06/2012 STO 2 PEP July 21 2012 60 Puts @1.58 314.36
03/23/2012 BTC 2 PEP July 21 2012 60 Puts @.6 -131.48
We made $173.91 in 42 days on ~$1800 in margin maintenance. This is a 9.66% return on maintenance or 83.94% annual. I could have waited it out and slowly let these puts expire worthless but we had wrung the fast money out of the trade and I'm looking for other places to use the money to get a higher return.
02/09/2012 STO 2 PEP Mar 17 2012 62.5 Puts @.7 128.51
03/06/2012 BTC 2 PEP Mar 17 2012 62.5 Puts @.63 -137.48
03/06/2012 STO 2 PEP July 21 2012 60 Puts @1.58 314.36
03/23/2012 BTC 2 PEP July 21 2012 60 Puts @.6 -131.48
We made $173.91 in 42 days on ~$1800 in margin maintenance. This is a 9.66% return on maintenance or 83.94% annual. I could have waited it out and slowly let these puts expire worthless but we had wrung the fast money out of the trade and I'm looking for other places to use the money to get a higher return.
Tuesday, March 20, 2012
New Trade: GDX Naked Puts
Today at the close I entered into the following transaction in a taxable account:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ 0.53 146.75
As stated in my prior post I believe that GDX has reached it's support level of $50/share. I sold these while GDX was trading at ~$49.60/share. If these puts expire worthless we will earn $146.75 in 32 days on margin maintenance of $2,350.00. This equates to a return on maintenance of 6.24% or 71.17%f annual. If this precious metal miners ETF drops we should be able to roll out and down for a net credit. As such, an exit strategy is in place. As long as there is not an immediate drop in price we have time decay working in our favor and our prospects for rolling increase each day.
Note: ITM the maintenance increased to ~$3,000.
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ 0.53 146.75
As stated in my prior post I believe that GDX has reached it's support level of $50/share. I sold these while GDX was trading at ~$49.60/share. If these puts expire worthless we will earn $146.75 in 32 days on margin maintenance of $2,350.00. This equates to a return on maintenance of 6.24% or 71.17%f annual. If this precious metal miners ETF drops we should be able to roll out and down for a net credit. As such, an exit strategy is in place. As long as there is not an immediate drop in price we have time decay working in our favor and our prospects for rolling increase each day.
Note: ITM the maintenance increased to ~$3,000.
Monday, March 19, 2012
New Trade: GDX Naked Puts
This morning in a taxable account I entered into the following trade:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
If these puts expire worthless we will earn a 15.5% return on margin maintenance of $1835.11 in 89 days. This equates to 63.56% annual. GDX is at it's support level of $50/share. These puts are written 10% below that. When there is a strong market without fear these shares have suffered. This trade is based upon the belief that: 1) the market is toppy; 2) precious metals are still in a bull market due to fundamentals and, therefore, buying on the dips is warranted; and 3) support levels have held up well. In the event I'm wrong, I have an exit strategy in place as GDX is a strong candidate to roll down and out for a net credit.
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
If these puts expire worthless we will earn a 15.5% return on margin maintenance of $1835.11 in 89 days. This equates to 63.56% annual. GDX is at it's support level of $50/share. These puts are written 10% below that. When there is a strong market without fear these shares have suffered. This trade is based upon the belief that: 1) the market is toppy; 2) precious metals are still in a bull market due to fundamentals and, therefore, buying on the dips is warranted; and 3) support levels have held up well. In the event I'm wrong, I have an exit strategy in place as GDX is a strong candidate to roll down and out for a net credit.
Sunday, March 18, 2012
Trade Continuation: Walgreen's (WAG) Naked Puts
In a taxable account I continued the following transaction:
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
This was another trade I couldn't monitor while on vacation and disconnected from the world... so I rolled it down and out for a credit. Margin maintenance on this trade is down to $1532.00. If these expire worthless we will earn $222.93 in 54 days which equates to a return on maintenance of 14.55% or 98.35% annual. Not too shabby. :)
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
This was another trade I couldn't monitor while on vacation and disconnected from the world... so I rolled it down and out for a credit. Margin maintenance on this trade is down to $1532.00. If these expire worthless we will earn $222.93 in 54 days which equates to a return on maintenance of 14.55% or 98.35% annual. Not too shabby. :)
Profitable Trade: Proctor & Gamble (PG) Naked Puts
In a taxable account the following naked puts expired worthless:
01/23/2012 STO 4 PG Mar 17 2012 60 Puts @ .29 153.36
We earned 3.64% in 54 days on a margin maintenance requirement of $4209.60. This includes commission costs and equates to 24.6% annual.
01/23/2012 STO 4 PG Mar 17 2012 60 Puts @ .29 153.36
We earned 3.64% in 54 days on a margin maintenance requirement of $4209.60. This includes commission costs and equates to 24.6% annual.
Thursday, March 8, 2012
Trade Continuation: Pepsico (PEP) Naked Puts
A couple of days ago in a taxable account I continued the following transaction:
02/09/2012 STO 2 PEP Mar 17 2012 62.5 Puts @.7 128.51
03/06/2012 BTC 2 PEP Mar 17 2012 62.5 Puts @.63 -137.48
03/06/2012 STO 2 PEP July 21 2012 60 Puts @1.58 314.36
With a drop in PEP price below 62.5, I rolled this position for a unique reason. I'm too busy right now with my business to monitor these trades and I'm going on vacation next week during option expiration and won't have good computer access. I rolled out and down for a net credit. If put to me my cost basis will be ~58.50/share and Pepsico is set for another dividend raise so the yield on cost will be a juicy 3.75% or so. In my opinion, that ain't gonna happen. If it does I feel great about this becoming a great enhanced income, double dividend candidate. In other words I'll start writing covered calls on the position collecting option premium and dividends. BTW for this trade we are using $2257.77 in margin maintenance. If they expire worthless we will earn $305.39 in 171 days which equates to 13.53% or 28.87% annual.
02/09/2012 STO 2 PEP Mar 17 2012 62.5 Puts @.7 128.51
03/06/2012 BTC 2 PEP Mar 17 2012 62.5 Puts @.63 -137.48
03/06/2012 STO 2 PEP July 21 2012 60 Puts @1.58 314.36
With a drop in PEP price below 62.5, I rolled this position for a unique reason. I'm too busy right now with my business to monitor these trades and I'm going on vacation next week during option expiration and won't have good computer access. I rolled out and down for a net credit. If put to me my cost basis will be ~58.50/share and Pepsico is set for another dividend raise so the yield on cost will be a juicy 3.75% or so. In my opinion, that ain't gonna happen. If it does I feel great about this becoming a great enhanced income, double dividend candidate. In other words I'll start writing covered calls on the position collecting option premium and dividends. BTW for this trade we are using $2257.77 in margin maintenance. If they expire worthless we will earn $305.39 in 171 days which equates to 13.53% or 28.87% annual.
Tuesday, February 28, 2012
New Trade: Walgreen's (WAG) Naked Puts
Today in a taxable account I entered into the following transaction:
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
Walgreen's is a Dividend Champion, Dividend Achiever and Dividend Aristocrat. If these puts expire worthless we will earn 11.59% in 53 days on $1421.06 in margin maintenance. This equates to 79.82% annual. If the stock drops below support levels it appears that we can roll down and out for a net credit....and I only roll for a net credit.
02/28/2012 STO 3 WAG Apr 21 2012 31 Puts @.59 164.71
Walgreen's is a Dividend Champion, Dividend Achiever and Dividend Aristocrat. If these puts expire worthless we will earn 11.59% in 53 days on $1421.06 in margin maintenance. This equates to 79.82% annual. If the stock drops below support levels it appears that we can roll down and out for a net credit....and I only roll for a net credit.
New Trade: Walgreen's (WAG) Naked Puts
Yesterday in a taxable account I entered into the following transaction:
02/27/2012 STO 4 WAG Mar 17 2012 32 Puts @.23 78.99
Walgreen's is a Dividend Champion, Achiever and Aristocrat. It has been trading in a narrow range and I took advantage of a drop in price to write these puts. If these expire worthless we will earn 3.64% on $2165.25 in margin maintenance or 69.92% annual. If the stock drops it looks like these puts can be rolled down and out for a net credit.
02/27/2012 STO 4 WAG Mar 17 2012 32 Puts @.23 78.99
Walgreen's is a Dividend Champion, Achiever and Aristocrat. It has been trading in a narrow range and I took advantage of a drop in price to write these puts. If these expire worthless we will earn 3.64% on $2165.25 in margin maintenance or 69.92% annual. If the stock drops it looks like these puts can be rolled down and out for a net credit.
Saturday, February 18, 2012
Profitable Trade: GDX Covered Call
Yesterday I closed out a GDX Gold Miner's ETF investment in a traditional IRA as follows:
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
12/19/2011 10:15:55 Sold 1 GDX Feb 18 2012 56.0 Call @ 1.5 139.20
02/16/2012 13:22:44 Sold 100 GDX @ 54.15 5405.10
I would have written a new call on this transaction, however, the person who I was trading for passed away and my involvement with the account ended as well. In this trade we made $185.10. This equates to 3.42% or 10.95% annual.
It should be noted that before we entered into this trade we actually collected $489.25 in put money which we are not reflecting in these calculations.
10/25/2011 10:37:57 Bought 100 GDX @ 56.7268 -5,682.67
10/25/2011 10:38:30 Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52 141.23
10/27/2011 10:52:44 Bought 1 GDX Oct 28 2011 56.0 Call @ 3 -310.76
10/27/2011 10:53:06 Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1 399.23
11/10/2011 10:11:02 Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6 -470.76
11/10/2011 10:12:04 Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75 564.22
12/19/2011 10:15:55 Sold 1 GDX Feb 18 2012 56.0 Call @ 1.5 139.20
02/16/2012 13:22:44 Sold 100 GDX @ 54.15 5405.10
I would have written a new call on this transaction, however, the person who I was trading for passed away and my involvement with the account ended as well. In this trade we made $185.10. This equates to 3.42% or 10.95% annual.
It should be noted that before we entered into this trade we actually collected $489.25 in put money which we are not reflecting in these calculations.
Profitable Trade: Century Link (CTL) Covered Calls
Today our CTL shares got assignws in a traditional IRA:
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 +148.47
02/16/2012 Sold 200 CTL @37 7378.01
We made $154.77 in 14 days which is a 2.14% return or 55.8% annual. I would have rolled this position and captured the dividend but I was too busy and couldn't get to it. Anyway, this turns out to be a profitable trade nonetheless.
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 +148.47
02/16/2012 Sold 200 CTL @37 7378.01
We made $154.77 in 14 days which is a 2.14% return or 55.8% annual. I would have rolled this position and captured the dividend but I was too busy and couldn't get to it. Anyway, this turns out to be a profitable trade nonetheless.
Profitable Trade: Coca Cola (KO) Puts
Yesterday the following puts expired worthless in a taxable account:
01/11/2011 STO 4 KO Feb 18 2012 65 Puts @ .51 +190.95
Coca Cola was trading at ~69 at options expiry. The margin maintenance on this trade was $4400. We earned $190.95 in 39 days. This equates to a return on margin of 4.34% or 40.61% annual.
01/11/2011 STO 4 KO Feb 18 2012 65 Puts @ .51 +190.95
Coca Cola was trading at ~69 at options expiry. The margin maintenance on this trade was $4400. We earned $190.95 in 39 days. This equates to a return on margin of 4.34% or 40.61% annual.
Friday, February 17, 2012
Profitable Trade: Conoco Phillips (COP) Covered Calls
Yesterday in a traditional IRA I earned a profit in 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
02/16/2012 Sold 200 COP @ 70 13979.75
We made $295.65 when these shares were assigned. We held the shares for 34 days. Our rate of return was 2.1% which equates to 22.54% annual.
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
02/16/2012 Sold 200 COP @ 70 13979.75
We made $295.65 when these shares were assigned. We held the shares for 34 days. Our rate of return was 2.1% which equates to 22.54% annual.
Saturday, February 11, 2012
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.
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.
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.
Profitable Trade: SLV Naked Puts
Yesterday in a taxable account I closed out the following transaction for a profit:
01/30/2012 STO 7 SLV Feb 18 2012 30 Puts @.23 145.70
02/10/2012 BTC 7 SLV Feb 18 2012 30 Puts @.05 -35.09
In this trade we made $110.61 in 10 days on a maintenance requirement of $2800.00. This equates to a 3.95% return on margin or 144% annual. I closed out the trade when there was no commission.
01/30/2012 STO 7 SLV Feb 18 2012 30 Puts @.23 145.70
02/10/2012 BTC 7 SLV Feb 18 2012 30 Puts @.05 -35.09
In this trade we made $110.61 in 10 days on a maintenance requirement of $2800.00. This equates to a 3.95% return on margin or 144% annual. I closed out the trade when there was no commission.
Monday, February 6, 2012
Dividend Growth Portfolio Additions
Last week in my Dividend Growth Portfolio I made the following purchases: Century Link (CTL), Coca-Cola (KO) and Realty Income Corp. (O). Unlike many dividend growth investors I choose to reinvest the shares back into the stock that paid the dividend.
Century Link hasn't raised their dividend for over a year so they drop from the Dividend Achievers and Dividend Champions list. I'm not concerned, however, as they recently made some strategic acquisitions including the acquisition of Qwest. The dividend payout ratio is only 50% and the yield is ~7.75%. My money is on a return to dividend growth sometime in 2012 or 2013.
Coca-Cola needs no introduction. I might have bought in on the high end of price but it is due to raise it's dividend next quarter. I will look to add more on dips.
Realty Income is "The Monthly Dividend Company." I've been trading this stock for some time and love it as an enhanced income or double dividend candidate. I also love the monthly dividend and look forward to the compounding effect of that. I will likewise look to buy more on dips.
My Dividend Growth Portfolio is separate and distinct from my income trading accounts. These are my buy and hold retirement accounts. Like many dividend investors I am looking to increase my monthly passive income so that said passive income may fund my retirement years.
Century Link hasn't raised their dividend for over a year so they drop from the Dividend Achievers and Dividend Champions list. I'm not concerned, however, as they recently made some strategic acquisitions including the acquisition of Qwest. The dividend payout ratio is only 50% and the yield is ~7.75%. My money is on a return to dividend growth sometime in 2012 or 2013.
Coca-Cola needs no introduction. I might have bought in on the high end of price but it is due to raise it's dividend next quarter. I will look to add more on dips.
Realty Income is "The Monthly Dividend Company." I've been trading this stock for some time and love it as an enhanced income or double dividend candidate. I also love the monthly dividend and look forward to the compounding effect of that. I will likewise look to buy more on dips.
My Dividend Growth Portfolio is separate and distinct from my income trading accounts. These are my buy and hold retirement accounts. Like many dividend investors I am looking to increase my monthly passive income so that said passive income may fund my retirement years.
Thursday, February 2, 2012
Profitable Trade: GDX Naked Puts
Today in a taxable account I closed the following transaction for a profit:
01/20/2012 STO 4 GDX Feb 18 2012 49 Puts @.57 214.89
02/02/2012 BTC 4 GDX Feb 18 2012 49 Puts @.03 -12.05
In this trade we made $202.84 in 13 days on margin maintenance of ~ $3200.00. This equates to a return of 6.34% or 178% annual. I could have waited for these puts to expire worthless but we had drained most of the profit out of the trade and there was no commission at exit. I'm going to be looking for other, more profitable opportunities in this account.
01/20/2012 STO 4 GDX Feb 18 2012 49 Puts @.57 214.89
02/02/2012 BTC 4 GDX Feb 18 2012 49 Puts @.03 -12.05
In this trade we made $202.84 in 13 days on margin maintenance of ~ $3200.00. This equates to a return of 6.34% or 178% annual. I could have waited for these puts to expire worthless but we had drained most of the profit out of the trade and there was no commission at exit. I'm going to be looking for other, more profitable opportunities in this account.
New Trade: Century Link (CTL) Covered Calls
Today with CTL down over 2% I entered into the following trade in a traditional IRA:
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 -148.47
This particular account is for a retiree family member. Century Link was a Dividend Achiever and a Dividend Champion before it froze it's dividend at .725/share. The yield is a whopping 7.73%. CTL goes ex-dividend February 16th and has an earnings report February 15th. I didn't shy away from buying before an earnings report because this is a stock we want to hold long term in this particular portfolio and this increased the income on the calls we wrote since we get paid for volatility.
Our out of pocket is $7223.24 or $36.11 per share. Assuming we don't get called away we will also receive the dividend of $145 which will lower our out of pocket to $7078.24 or $35.39/share. We can also write new calls in two and a half weeks to lower our out of pocket even more. If we do get called away (and don't roll the position) it is still a nice return. I like the setup on this one very much for an enhanced income strategy.
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 -148.47
This particular account is for a retiree family member. Century Link was a Dividend Achiever and a Dividend Champion before it froze it's dividend at .725/share. The yield is a whopping 7.73%. CTL goes ex-dividend February 16th and has an earnings report February 15th. I didn't shy away from buying before an earnings report because this is a stock we want to hold long term in this particular portfolio and this increased the income on the calls we wrote since we get paid for volatility.
Our out of pocket is $7223.24 or $36.11 per share. Assuming we don't get called away we will also receive the dividend of $145 which will lower our out of pocket to $7078.24 or $35.39/share. We can also write new calls in two and a half weeks to lower our out of pocket even more. If we do get called away (and don't roll the position) it is still a nice return. I like the setup on this one very much for an enhanced income strategy.
New Trade: Sold SLV Naked Puts
A couple of days ago I entered into the following transaction in a taxable account:
01/30/2012 STO 7 SLV Feb 18 2012 30 Puts @.23 145.70
It looks like the precious metals bottomed ~ three weeks ago. SLV has been north of 30 and rising for some time. If it drops SLV has provided good opportunities to roll out to the next month and down a strike for a net credit. As such, we have an additional exit strategy in place. If I hadn't been dealing with a family emergency I probably would have been a tad more patient and waited for SLV to drop a bit and written the less risky 29's for a little less return. I didn't have that luxury but I wanted to put time decay to work while I was out of town. If these puts expire worthless we will earn $145.70 in 18 days on $2800 margin maintenance (which is free BTW). This equates to a 5.2% return or 105.44% annual.
01/30/2012 STO 7 SLV Feb 18 2012 30 Puts @.23 145.70
It looks like the precious metals bottomed ~ three weeks ago. SLV has been north of 30 and rising for some time. If it drops SLV has provided good opportunities to roll out to the next month and down a strike for a net credit. As such, we have an additional exit strategy in place. If I hadn't been dealing with a family emergency I probably would have been a tad more patient and waited for SLV to drop a bit and written the less risky 29's for a little less return. I didn't have that luxury but I wanted to put time decay to work while I was out of town. If these puts expire worthless we will earn $145.70 in 18 days on $2800 margin maintenance (which is free BTW). This equates to a 5.2% return or 105.44% annual.
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.
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.
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.
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.
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 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.
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.
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.
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.
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.
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