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.
Friday, August 31, 2012
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.
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