On Friday when SO dipped below 45 to ~44.70 I entered into the following transaction:
09/14/12 STO 3 SO Nov 17 43 2012 Puts @.5 137.69
With Bernanke's latest moves the "risk on" trades are in vogue. That provides weakness/opportunity in the "risk off" trades, i.e., utilities, telecom and healthcare. Southern Company is my favorite utility stock and it has a rising dividend. I have been patiently waiting for the stock to drop below 45 so I could write some out of the money puts.
SO currently has a yield of 4.35%. If put to us our yield on cost will be 4.61% with another dividend rise announcement expected in April 2013. I feel that the yield will buoy the price of the stock.
This is a 64 day trade with an initial maintenance requirement of $2218. If these puts expire worthless we will earn 6.2% return on maintenance or 35.36% annual. If the stock price drops I anticipate volatility will rise and we will be able to roll down and/or out for a net credit. As such, an exit strategy is in place.
This trade illustrates the remarkable returns that naked put selling can generate. I mean this is a utility stock for goodness sake :)
Showing posts with label exit strategy. Show all posts
Showing posts with label exit strategy. Show all posts
Sunday, September 16, 2012
Wednesday, September 12, 2012
New Trade: Phillip Morris (PM) Naked Puts
Today with Phillip Morris showing weakness and trading down below $87/share I entered into the following transaction:
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
09/12/12 STO 2 PM Dec 22 2012 80 Puts @1.23 234.50
I've wanted to trade PM for a while but never had the opportunity as it was in a constant incline while I like to sell puts on weakness. Phillip Morris is a blue chip company with a rising dividend. In fact it raised it's quarterly dividend today to .85/share which increases PM's yield to 3.9%. The stock has been rising but appears to have support above 80. If put to us our yield on cost will be 4.3%.
If the puts expire worthless we will earn $234.50 in 101 days on initial margin maintenance of $2100. This equates to an 11.16% return on maintenance or 40.33% annual. We have downside protection in the neighborhood of 10%. In the event the stock tanks we should be able to roll down and out for a net credit. As such, an exit strategy is in place.
Thursday, September 6, 2012
New Trade: Intel (INTC) Naked Puts
Yesterday with Intel trading down to ~$24.40 I entered into the following transaction:
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
09/05/2012 STO 5 INTC Oct 20 2012 22 Puts@.22 $96.16
This is a 45 day trade that is using $1350 in margin maintenance. If the puts expire worthless we will earn 7.1% or 57.6% annual return on maintenance. If put to us our yield on cost will be a whopping 4.12%.
That's 3 Intel trades I've got going for October with the 24's, 23's and now the 22's. After today's action I feel pretty good about it but if the trades go against me there appears to be ample opportunity to roll down and out for a net credit. As such, an exit strategy is in place.
Wednesday, September 5, 2012
New Trade: ConocoPhillips (COP) Naked Puts
Today when the Dow was down less than 1% and COP had sunk to ~54.80 I entered into the following transaction:
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
09/05/12 STO 3 COP Oct 20 50 Puts @.38 $101.73
ConocoPhillips is a rising dividend, blue chip, oil & gas company. I have been waiting for it to show some weakness, i.e., drop below 55, as I love it's yield as a buoy for the stock price. Today I got my wish although I must admit that the lack of news was a bit disconcerting. Hopefully there are not problems brewing behind closed doors.
This is a 45 day trade that uses ~$1600 in margin maintenance. If the puts expire worthless I will earn 6.36% return on maintenance in 45 days or 51.6% annual.
If COP were to drop below 50 and the stock was put to us our yield on cost would be a whopping 5.3%. I like this yield amount as a buoy of the stock price. If the price tanks I feel confident that I could roll down and/or out for a net credit. As such, an exit strategy is in place.
I have been enjoying writing naked puts far out of the money because the maintenance requirement is so low. This allows me to enjoy higher returns on maintenance and to commit less capital to any one trade. In addition, the downside protection is very high making this a comfortable yet probably profitable setup.
Tuesday, September 4, 2012
New Trade: Caterpillar (CAT) Naked Puts
Today with the Dow down 90 points and CAT down to $82.20 I entered into the following transaction:
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
09/04/12 STO 2 CAT Sep22 2012 77.5 Puts @.57 102.46
Caterpillar is a blue chip, rising dividend stock with high volume and high volatility. CAT has been raising it's dividend for 19 years and the last rise was very healthy which I take as a vote of confidence from management. I've been watching Caterpillar for signs of weakness to enter a position and today provided that. There appears to be strong support for CAT at $80/share.
This is an 18 day trade with only 13 days of active trading included in those 18 days. If these puts expire worthless we will earn 5.38% on $1905 of margin maintenance or 109% annual. If put to us our yield on cost will be 2.7% which is high for CAT. If the stock drops we should have ample opportunity to roll down and/or out for a net credit. As such, we have an exit strategy in place.
Monday, August 27, 2012
New Trade: Intel (INTC) Naked Puts
On Friday before the close with Intel trading at ~24.85 I entered into the following transaction:
08/24/12 STO 5 INTC Oct 20 2012 23 Puts @.35 161.20
This is essentially a one strike down, double down of my trade of a few days ago. I was able to take advantage of weakness/fear in Intel due to the Buffett hangover and weak results from Hewlett-Packard and Dell. If put to us our yield on cost will be right under 4% and we're just one roll away from a yield on cost above 4%. I feel pretty good that a 4% yield will buoy the stock price. In addition, we have strong support at the 25 price level.
This is a 57 day which uses ~$1800 in margin maintenance. If the puts expire worthless we will earn ~8.95% or 57.3% annual return on maintenance. If the stock drops I feel confident we can roll out and/or down for a net credit. As such, an exit strategy is in place.
08/24/12 STO 5 INTC Oct 20 2012 23 Puts @.35 161.20
This is essentially a one strike down, double down of my trade of a few days ago. I was able to take advantage of weakness/fear in Intel due to the Buffett hangover and weak results from Hewlett-Packard and Dell. If put to us our yield on cost will be right under 4% and we're just one roll away from a yield on cost above 4%. I feel pretty good that a 4% yield will buoy the stock price. In addition, we have strong support at the 25 price level.
This is a 57 day which uses ~$1800 in margin maintenance. If the puts expire worthless we will earn ~8.95% or 57.3% annual return on maintenance. If the stock drops I feel confident we can roll out and/or down for a net credit. As such, an exit strategy is in place.
Wednesday, August 22, 2012
New Trade: Intel (INTC) Naked Puts
This afternoon with the market down ~80 points and Intel down to ~$25.70 I entered into the following transaction:
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
Buffett just sold his stake in Intel. Bill Cara just sold his stake. Fear and uncertainty is setting in for Intel. I took this opportunity to write puts a point below the 25 support level.
This is a 59 day trade which will initially take $1700 in margin maintenance. If the puts expire worthless, return on maintenance will be 10% in 59 days or 61.86% annual. If put to us our yield on cost will be 3.8%. That yield should buoy the stock absent unforeseen market conditions. In the event the stock tanks we will look to roll down and out for a net credit. As such, an exit strategy is in place.
08/22/12 STO 5 INTC Oct 20 2012 24 Puts @.37 $171.18
Buffett just sold his stake in Intel. Bill Cara just sold his stake. Fear and uncertainty is setting in for Intel. I took this opportunity to write puts a point below the 25 support level.
This is a 59 day trade which will initially take $1700 in margin maintenance. If the puts expire worthless, return on maintenance will be 10% in 59 days or 61.86% annual. If put to us our yield on cost will be 3.8%. That yield should buoy the stock absent unforeseen market conditions. In the event the stock tanks we will look to roll down and out for a net credit. As such, an exit strategy is in place.
Tuesday, August 14, 2012
New Trade: McDonald's (MCD) Naked Puts
Yesterday with the market down a bit and MCD trading at 87.90 I entered into the following transaction:
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
McDonald's is a Dividend Aristocrat/Champion/Achiever that really needs no introduction. There has been a bit of weakness in the stock as of late due to July same store sales declining a miniscule percentage. I almost pulled the trigger on the 82.5's a few days ago when MCD was at 86.10 but decided against it because I thought the market and the stock still had room to drop. Opportunity missed.
This trade at the 85's is still pretty good as 85 is a strong support line for MCD. If the stock drops I will roll out and/or down for a net credit. As such, an exit strategy is in place.
If put to us our yield on cost will be ~3.3% and MCD is set to raise it's dividend in November. This dividend rise should buoy the stock. If these puts expire worthless we will earn 4.3% on margin maintenance of $3078.25 in 40 days which equates to 39.23% annual return on maintenance.
I didn't see any fat pitches to swing at so I entered into this one trade to take advantage of time decay in what I see as a fairly safe play.
08/13/12 STO 2 MCD Sep 22 2012 85 Puts @.72 132.50
McDonald's is a Dividend Aristocrat/Champion/Achiever that really needs no introduction. There has been a bit of weakness in the stock as of late due to July same store sales declining a miniscule percentage. I almost pulled the trigger on the 82.5's a few days ago when MCD was at 86.10 but decided against it because I thought the market and the stock still had room to drop. Opportunity missed.
This trade at the 85's is still pretty good as 85 is a strong support line for MCD. If the stock drops I will roll out and/or down for a net credit. As such, an exit strategy is in place.
If put to us our yield on cost will be ~3.3% and MCD is set to raise it's dividend in November. This dividend rise should buoy the stock. If these puts expire worthless we will earn 4.3% on margin maintenance of $3078.25 in 40 days which equates to 39.23% annual return on maintenance.
I didn't see any fat pitches to swing at so I entered into this one trade to take advantage of time decay in what I see as a fairly safe play.
Thursday, July 26, 2012
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.
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.
Monday, July 16, 2012
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.
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.
Monday, July 9, 2012
New Trade: Intel (INTC) Naked Puts
Today with INTC down to about $25.90 I entered into the following trade:
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
This is a 12 day trade on a stock I'd like to own long term. It will soon be a member of the Dividend Achiever family. In fact, I expect the news of a dividend raise in the near future.
If these puts expire worthless we will earn 5.3% or 161.21% annual on $1713 in margin maintenance. The returns are inflated due to an earnings release set for July 17. If the stock drops we have many options to roll out and/or down for a net credit. As such, an exit strategy is in place.
Even if the stock doesn't drop I will probably look to roll on a weekly basis, if possible. INTC has weekly options.
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
This is a 12 day trade on a stock I'd like to own long term. It will soon be a member of the Dividend Achiever family. In fact, I expect the news of a dividend raise in the near future.
If these puts expire worthless we will earn 5.3% or 161.21% annual on $1713 in margin maintenance. The returns are inflated due to an earnings release set for July 17. If the stock drops we have many options to roll out and/or down for a net credit. As such, an exit strategy is in place.
Even if the stock doesn't drop I will probably look to roll on a weekly basis, if possible. INTC has weekly options.
Monday, June 18, 2012
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.
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.
Wednesday, April 25, 2012
New Trade: SLV Naked Puts
Today I entered into the following short term trade:
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
04/24/2012 STO 3 Apr 27 2012 29.5 Puts @.22 53.71
This is a tiny 3 day trade that is attempting to take advantage of SLV falling below 30, of precious metals consolidating their lows and of some wicked time decay. Margin maintenance on the trade is $1745. The return on maintenance is 3.08% or 374% annual. If silver drops we have many options to roll down and out for a net credit. As such an exit strategy is in place.
Tuesday, April 17, 2012
New Trade: Sold SLV Naked Puts
Yesterday I entered into the following transaction:
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
04/16/2012 STO 3 SLV April 21 2012 30 Puts @.29 74.71
Silver has been pretty steady in the 30 - 32 range for quite some time now. In this account we have some longer term trades so I wanted to put some shorter term money to work. Even though SLV has been range bound the option premiums are still relatively high. It is very easy to roll out and down for a credit especially since there are weekly options available so an exit strategy is in place. If these puts expire worthless we will earn 4.3% in 5 days on $1737.13 in margin maintenance. That equates to 313.9% annual.
Risks are strength in the dollar and that the GLD and SLV house of cards come crashing down as there is no guarantee these precious metals are backed by physical gold and silver.
Friday, March 30, 2012
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.
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.
Wednesday, March 28, 2012
New Trade: Johnson & Johnson (JNJ) Naked Puts
Today at the close of the market I entered into the following trade:
03/28/2012 STO 2 JNJ Jul 21 2012 62.5 Puts @.95 178.51
JNJ, one of the bluest of the blue chip Dividend Champions, was trading at just under 65 at the time I entered this trade. If these puts expire worthless we will earn $178.51 in 115 days on ~$2200 of margin maintenance. This equates to an 8.1% return on maintenance or 25.7% annual. JNJ currently yields 3.5% and it's set to hike it's dividend next quarter. If put to me the yield on cost will be around 4%. These puts were written near JNJ's support level. If the stock drops I feel confident I will be able to roll out and down for a net credit. As such, I have an exit strategy in place.
03/28/2012 STO 2 JNJ Jul 21 2012 62.5 Puts @.95 178.51
JNJ, one of the bluest of the blue chip Dividend Champions, was trading at just under 65 at the time I entered this trade. If these puts expire worthless we will earn $178.51 in 115 days on ~$2200 of margin maintenance. This equates to an 8.1% return on maintenance or 25.7% annual. JNJ currently yields 3.5% and it's set to hike it's dividend next quarter. If put to me the yield on cost will be around 4%. These puts were written near JNJ's support level. If the stock drops I feel confident I will be able to roll out and down for a net credit. As such, I have an exit strategy in place.
Tuesday, March 20, 2012
New Trade: GDX Naked Puts
Today at the close I entered into the following transaction in a taxable account:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ 0.53 146.75
As stated in my prior post I believe that GDX has reached it's support level of $50/share. I sold these while GDX was trading at ~$49.60/share. If these puts expire worthless we will earn $146.75 in 32 days on margin maintenance of $2,350.00. This equates to a return on maintenance of 6.24% or 71.17%f annual. If this precious metal miners ETF drops we should be able to roll out and down for a net credit. As such, an exit strategy is in place. As long as there is not an immediate drop in price we have time decay working in our favor and our prospects for rolling increase each day.
Note: ITM the maintenance increased to ~$3,000.
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ 0.53 146.75
As stated in my prior post I believe that GDX has reached it's support level of $50/share. I sold these while GDX was trading at ~$49.60/share. If these puts expire worthless we will earn $146.75 in 32 days on margin maintenance of $2,350.00. This equates to a return on maintenance of 6.24% or 71.17%f annual. If this precious metal miners ETF drops we should be able to roll out and down for a net credit. As such, an exit strategy is in place. As long as there is not an immediate drop in price we have time decay working in our favor and our prospects for rolling increase each day.
Note: ITM the maintenance increased to ~$3,000.
Monday, March 19, 2012
New Trade: GDX Naked Puts
This morning in a taxable account I entered into the following trade:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
If these puts expire worthless we will earn a 15.5% return on margin maintenance of $1835.11 in 89 days. This equates to 63.56% annual. GDX is at it's support level of $50/share. These puts are written 10% below that. When there is a strong market without fear these shares have suffered. This trade is based upon the belief that: 1) the market is toppy; 2) precious metals are still in a bull market due to fundamentals and, therefore, buying on the dips is warranted; and 3) support levels have held up well. In the event I'm wrong, I have an exit strategy in place as GDX is a strong candidate to roll down and out for a net credit.
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
If these puts expire worthless we will earn a 15.5% return on margin maintenance of $1835.11 in 89 days. This equates to 63.56% annual. GDX is at it's support level of $50/share. These puts are written 10% below that. When there is a strong market without fear these shares have suffered. This trade is based upon the belief that: 1) the market is toppy; 2) precious metals are still in a bull market due to fundamentals and, therefore, buying on the dips is warranted; and 3) support levels have held up well. In the event I'm wrong, I have an exit strategy in place as GDX is a strong candidate to roll down and out for a net credit.
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