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.

Profitable Trade: General Electric (GE) Puts

Today I closed out the following investment in a taxable account:

11/17/2011   STO 3 GE Jan 21 14 Puts @.49                             134.75
12/20/2011   BTC 3 GE Jan 21 14 Puts @.05                              -15.04

I closed this trade as I got down to the .05 mark where I'm not charged commissions to exit the trade. In addition I wanted to free up funds for another transaction. We made $119.71 in this transaction. This is a return of 2.94% in 33 days which equates to 32.51% annual. If one were to calculate return on margin (ROM) the returns are impressive. This investment had a low maintenance requirement of $533.24. The ROM is 22.45% or 248.31% annual. I can live with that :)

General Electric (GE) Raises Dividend..Again

General Electric announced that they are raising their dividend by .02 to .17/quarter. GE has been aggressively raising their dividend since they've got their feet firmly planted on the ground again. The yield is now well over 3%. We were happy to see this as we have several GE income investments open at this time.

New Trade: Sold General Electric (GE) Puts

This afternoon with GE down to $15.60 and the DOW down 170 points to 11736.21 I entered into the following transaction:

11/17/11  Sold 3 GE Jan 21 14 Puts@.49             +134.75

I'm happy to own GE at 14. In fact, if put to me my cost basis will be ~13.75 after commissions. The dividend yield on $13.75 is 4.4%. GE's dividend is back on the rise. If the puts expire worthless this is a 3.2% return in 5 weeks which equates to ~32% annual. The maintenance requirement to begin with is only $533.24 and for those that calculate return on margin (ROM) the return is a ridiculous 25.27% or ~250% annual. In the recent past GE only fell to 14 once and then bounced right back up so I'll be surprised if the shares are put to me.

I have to admit it is nice to only pay one commission to enter into this trade as opposed to paying twice to enter a covered call investment.