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.

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...