Profitable Trade: Proctor & Gamble (PG) Naked Puts

Today I closed the following transaction for a profit:

06/18/2012  STO 2 PG Jul 21 2012 60 Puts @.61   $110.49
07/13/2012  BTC 2 PG Jul 21 2012 60 Puts @.04   $    8.03

This is a 25 day trade that has used ~$2500 in margin maintenance. We earned $102.46. This equates to a 4.1% return on maintenance or 60% annual. Thank you Bill Ackman!

I would have liked to have rolled the 60's each month but the stock's sudden rise made me want to take a wait and see approach.

New Trade: Proctor & Gamble (PG) Naked Puts

Today with PG trading down at ~61.80 I entered into the following transaction:

06/18/2012  STO 2 PG Jul 21 2012 60 Puts @.61   $110.49

This is a 33 day trade that starts out using ~$2000 in margin maintenance. If they expire worthless we will earn 5.52% return on maintenance in 33 days or 61.05% annual.

PG, a tried and true Dividend Champion/Aristrocrat, has shown a lot of support at the 60 level. If put to us our yield on cost will be 3.78% which is much higher than the historical average. If the price sinks we should be able to roll out and down for a net credit, therefore, an exit strategy is in place.

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.

I'm smelling opportunity in PG *sniff*

Proctor & Gamble is slowly sinking following an unexciting quarterly report. Today it is at 63 and change. There are the usual pundits out there calling for big trouble. My take? Like we just saw with Pepsico, one quarterly report does not a blue chip make. Like Pepsico I think that once PG consolidates and finds a bottom a great put selling opportunity will be in place. With the recent dividend rise PG's yield above 3.5% should buoy the stock. I'm waiting for the consolidation and then I'm looking at the 60's or if worthwhile the 57.5's. Strong support is at the 57.5 level. For you thrill seekers the 62.5's might be interesting. You can always roll down and out for a credit if you don't go out too far on the strike date.

On a side note the recent bribery allegations make Wal-Mart another interesting blue chip dividend stock to watch.

New Trade: Proctor & Gamble (PG) Naked Puts

Yesterday in a taxable account I entered into the following transaction:

03/29/2012    STO 2 PG July 21 2012 62.5 Puts @.88      164.47

Proctor & Gamble is a tried and true Dividend Champion. It was showing a bit of weakness yesterday trading at 66 and change so I pulled the trigger on this little trade. PG is set to raise it's dividend next quarter so the share price should be supported a bit by the increase in yield. As of now the yield is 3.1%. If put to us our yield on cost, with the raise, will exceed 3.6% which is well above the historical average. The maintenance requirement on this trade is ~$2000. If these puts expire worthless we will earn $164.47 in 114 days on $2000 of margin maintenance. This equates to an 8.2% return or 26.25% annual. At this price we should be able to roll out and down for a net credit so we have an exit strategy in place.

The End of Fear?

For sure the answer is no...but for now there doesn't seem like there's much fear out there. The risk on trades are happening. Folks are moving money out of bonds and into stocks. We've got money to spend but are patiently waiting for a correction or at least a healthy dose of fear. I'd like to write out of the money puts on Proctor & Gamble and Johnson & Johnson as they will be announcing dividend hikes soon. I also think Pepsico has stabilized and will begin rising to get it's PE more in line with Coca-Cola.

There's a chance the market will keep rising but I definitely won't enter into any trades until we have a day in the red. In the meantime patience is a virtue.

FYI other stocks I'm looking to trade are Altria, AT&T, Chevron, General Dynamics and Microsoft.

Profitable Trade: Proctor & Gamble (PG) Naked Puts

In a taxable account the following naked puts expired worthless:

01/23/2012   STO 4 PG Mar 17 2012 60 Puts @ .29             153.36

We earned 3.64% in 54 days on a margin maintenance requirement of $4209.60. This includes commission costs and equates to 24.6% annual.

Recent Trade Thoughts

I usually enter into new investments when the market is down and investors are fearful. For the last couple of weeks those times have been rare. I'm a patient person and I've learned to let the market come to me. There are some traders who I respect greatly, i.e., Bill Cara, who are bullish on the markets.

So why did I enter some trades when the market has been bullish? I didn't want to have the train leave the station with me standing on the platform. In any event, I only entered into some conservative out of the money put plays on stocks I would love to own. These were Coca-Cola, Proctor & Gamble and Johnson & Johnson. If put to me the yield on cost would be well above average. In addition, some of these are set to raise their dividends. I also entered into a covered call transaction on Conoco-Phillips. I like this one as they are going to spin off shares and are set to raise the dividend. It also diversifies us into oil and gas.

I've also been trading the precious metals which bottomed a couple of weeks ago. Now that they are back in their bullish trend I'm losing a bit of interest going forward. I'm looking for dips preferably large ones where folks are talking about precious metals cratering.

I think that GOOG may be providing a good opportunity for out of the money put writing, especially 30 or 40 points below where it's trading right now. I probably won't participate, however, as it violates my rule of only trading something I really want to own.

Other than these trades I think it's time to wait for a correction. Obvious opportunities should appear. I've got a ton of cash and margin to work with. With my recent trades I just took a little nibble in case we are off to new highs.

New Trade: Proctor and Gamble (PG) Naked Puts

Today in a taxable account with PG down below 65 due to some analyst downgrades I entered into the following transaction:

01/23/2012   STO 4 PG Mar 17 2012 60 Puts @ .29             153.36

Proctor & Gamble doesn't really need much of an introduction. It is a Dividend Champion, Dividend Aristocrat, blue chip, widow and orphan holding. It will be raising it's dividend next time around. If these get put to us our yield on cost would be over 3.5%, before the dividend increase. PG has shown great support at the 60 level. If the price sinks we have the option of taking the shares, writing covered calls and collecting dividends or rolling the position. We like both of these alternatives. If these puts expire worthless we will earn 3.64% in 54 days on a margin maintenance requirement of $4209.60. This includes commission costs and equates to 24.6% annual.