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.

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.

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.

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...