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.

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.