New Trade: Sold SLV Naked Puts

A couple of days ago I entered into the following transaction in a taxable account:

01/30/2012    STO 7 SLV Feb 18 2012 30 Puts @.23                        145.70

It looks like the precious metals bottomed ~ three weeks ago. SLV has been north of 30 and rising for some time. If it drops SLV has provided good opportunities to roll out to the next month and down a strike for a net credit. As such, we have an additional exit strategy in place. If I hadn't been dealing with a family emergency I probably would have been a tad more patient and waited for SLV to drop a bit and written the less risky 29's for a little less return. I didn't have that luxury but I wanted to put time decay to work while I was out of town. If these puts expire worthless we will earn $145.70 in 18 days on $2800 margin maintenance (which is free BTW). This equates to a 5.2% return or 105.44% annual.

Profitable Trade: SLV Covered Call

Today we were assigned out of our position in SLV in a Roth IRA. The trade was as follows:


12/19/2011   Bought 100 SLV @ 28.389                                    -2848.85
12/19/2011   STO 1 SLV Jan 21 2012 29 Call@1.12                     +101.27
01/21/2011   Sold 100 SLV @ 29                                                2879.94

We made $132.94 in 33 days. This equates to a 4.84% return or 53.5% annual. There weren't any juicy near month options to roll so we let it get assigned. I'll be hoping to find an opportunity to get this cash back in play soon.

Profitable Trade: GDX Naked Puts

Today I closed and took profits in the following transaction in a taxable account:

12/30/2011    STO 3 GDX Jan 21 2012 48 Puts @.5               137.71
01/12/2011    BTC 3 GDX Jan 21 2012 48 Puts @.02               -6.04

We made $131.67 in 12 days on a margin maintenance requirement of ~ $2300. This equates to a return on margin of 5.7% or 173.3% annual. This account is now all cash and we're waiting for the next opportunity. The market is feeling toppy but as we've learned we will let the prices come to us and not chase trades just for the sake of trading.

New Trade: SLV Naked Puts

Yesterday in a taxable account with SLV at ~ 26.30  I entered into the following transaction:

12/28/2011   STO   7 SLV  Dec 30 2011 25 Puts@.12                               68.66

This is a 2 day trade on $2900 in margin maintenance. Time decay is a great ally here.  If they expire worthless it will earn 2.36% or 430.7% annual. If silver continues to collapse I will probably roll this position.

New Trade: Silver (SLV) Covered Call

Today I entered into the following transaction in a Roth IRA:

12/19/2011   Bought 100 SLV @ 28.389                                    -2848.85
12/19/2011   STO 1 SLV Jan 21 2012 29 Call@1.12                    +101.27

Silver has been slaughtered as of late and it is trading at the bottom of it's trading range. Our out of pocket is $27.47 which is at or below the bottom of SLV's trading range for the last year. We are bullish on precious metals and look at the recent downturn as a buying opportunity. If we get called away we will make $133 in 33 days which equates to 4.84% or 53.53% annual.

Trade Continuation: GDX Covered Call

Today I continued a GDX Gold Miner's ETF investment in a traditional IRA as follows:

10/25/2011  10:37:57     Bought 100 GDX @ 56.7268                              -5,682.67    
10/25/2011  10:38:30     Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52               141.23    
10/27/2011  10:52:44     Bought 1 GDX Oct 28 2011 56.0 Call @ 3              -310.76    
10/27/2011  10:53:06     Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1                399.23    
11/10/2011  10:11:02     Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6          -470.76    
11/10/2011  10:12:04     Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75              564.22
12/19/2011  10:15:55     Sold 1 GDX Feb 18 2012 56.0 Call @ 1.5                139.23

With this transaction our amount out of pocket is down to $52.20/share. That's good because the ETF has dropped to 52 and change. We are bullish the precious metals and believe that the recent downturn provides a buying opportunity. In fact we have some GDX puts that we wrote at the 52 strike.

It should be noted that before we entered into this trade we actually collected $489.25 in put money which we are not reflecting in these calculations. In any event, if we get called away in February we will make $380 which equates to 6.9% or ~21.1% annual. If we don't get called away then we'll write new calls, with a good hard look being given to the 56 strike again.

Trade continuation: GDX covered call

Today I rolled my GDX investment in a Roth IRA. The entire transaction is as follows:

10/25/2011  10:37:57     Bought 100 GDX @ 56.7268                              -5,682.67    

   
10/25/2011  10:38:30     Sold 1 GDX Oct 28 2011 56.0 Call @ 1.52               141.23

   
10/27/2011  10:52:44     Bought 1 GDX Oct 28 2011 56.0 Call @ 3              -310.76   

   
10/27/2011  10:53:06     Sold 1 GDX Nov 19 2011 56.0 Call @ 4.1                399.23   

   
11/10/2011  10:11:02     Bought 1 GDX Nov 19 2011 56.0 Call @ 4.6          -470.76   

   
11/10/2011  10:12:04     Sold 1 GDX Dec 17 2011 56.0 Call @ 5.75              564.22

Today with GDX taking a breather and down to ~60.20 at the time of this transaction, I was able to roll out the deep in the money 56 calls for a net credit of $93.46.  My cost basis/downside protection is lowered to $53.59. If I get assigned I'll make ~$241 or 4.3% which is annualized to ~26%. Not bad for a very conservative deep in the money investment.

Trade continuation: GLD covered call

I rolled GLD calls in a taxable account as follows:

11/10/2011  09:41:06         Bought 4 GLD Nov 19 2011 162.0 Call @ 10.3        -4,133.04              
   
11/10/2011  09:42:52         Sold 4 GLD Dec 17 2011 163.0 Call @ 11.2            + 4,466.87    

These calls are deep in the money. I got to have my cake and eat it too. I was able to roll up another dollar in strike price and get paid $333.83 for doing so. At some point if GLD takes off too much I can see this yumminess coming to an end. It's pretty amazing that I can roll when this deep in the money and the extreme downside protection helps this gal sleep like a baby at night.  

No Fear Today

The market is acting a bit like a bull market as of late with lower volatility and mostly trending upward. This makes it hard for a gal to swoop in and invest while others are selling. History says that patience will be rewarded especially in a debt ridden world. In the meantime time decay is working in the option sellers favor.

Precious metals seem to be taking a bit of a breather today and with all the money printing, quantitative easing and the like it's hard to be bearish. Many of my precious metal ETF calls are now deep in the money. This makes rolling for a credit a little more challenging.

Long Term Secular Bear? How to Play It?

If you look at the S&P chart for the last 10 years a couple of things stand out. First, 10 years out and we're about where we started. Second, the S&P has been been making lower lows and lower highs. I would not be surprised to see the S&P reach the lowest low before the beginning of the next secular bull market. Historically a bear is finished devouring it's prey when the P/E multiples of stocks are in the low single digits and everyone and her cosmetologist has sworn off stocks forever.

Financials usually lead us out of bear markets and into bull markets. Do you see that happening anytime soon?

This girl thinks the best way to play this market is to write in the money covered calls (or out of the money cash covered puts) on select Dividend Champions or commodity ETFs, picking off short term dividends and option premiums. I think income investors should be patient, build cash reserves and preferably enter positions when the herd is scared. 

Profitable Trade: SLV Silver Miner ETF

The trade looks something like this:

 10/20/2011  15:43:21         Bought 200 SLV @ 29.6899                                       -5,947.97          
   
 10/20/2011  15:43:45         Sold 2 SLV Oct 28 2011 29.0 Call @ 1.49                       286.47            
 10/31/2011  10:18:09         OPTION ASSIGNED (SLV Oct 28 2011 29.0 Call)

 10/31/2011  10:18:09         Sold 200 SLV @ 29                                                    5,779.89

In 11 days we made $118.39 on an investment of $5661.50 or  2.1%, including commissions.This equates to an annual return of 69.7%.

Report Card: For those keeping track our success rate is at 100% since the inception of this blog although the sample rate of 2 closed transactions is admittedly rather small.

Trade continuation: GLD Gold ETF covered call

BTC 2 GLD Oct. 28 163's @ 5.15
STO 2 GLD Nov. 19 165's @ 5.95

This is another example of rolling out a short time period and having your cake and eating it too. GLD had a nice run up to ~169 and we were able to write new covered calls that allow us to participate 2 more dollars per share on the increase and bring in income of $80 per contract. This lowers our cost basis by .80 and provides .80 more downside protection. In addition the expiration date for these calls is only 3 weeks out.

I will only roll out a covered call if it brings in income. Chasing price increases and paying for that right brings Don Quixote to mind...

Trade continuation: SLV Silver ETF covered call

SLV has risen sharply in the last few days. I find it hard to resist rolling forward for a short period of time, getting a net credit and increasing the strike price so I can participate some more in the price increase. I had that opportunity today with SLV.

BTC 4 SLV Oct 28 32 Calls @ 1.71
STO 4 SLV Nov 19 33 Calls @ 1.92

This trade brought in $21/contract, lowers our cost basis, increases downside protection and allows us to participate more in the rise in price. With the market rising overall with the easing of Europe fears I'm not particularly excited about entering into new income positions.

Trade continuation: GDX covered call

GDX jumped up to 59 so I decided to continue this trade rather than close it out. The transaction now looks like this:

10/25 Bought GDX @56.72
10/25 STO GDX Oct. 28, 2011 56 Call @ 1.52
10/27 BTC GDX Oct. 28, 2011 56 Call @ 3.00
10/27 STO GDX Nov 19, 2011 56 Call @ 4.10

With the recent  rise in the market and precious metals, I'm not too excited about entering into any new income positions. I like to swoop in during fearful times, not euphoric times. I decided to take advantage of the herd's hopefulness and increase downside protection from $55.20 to $54.10 and bring in additional income of $110 per contract. This is a very conservative roll out as GDX is deep in the money.

If we get called out we get 3.4% in less than a month or ~45% annually. Not bad for a very conservative trade...

GDX Covered Call Trade

Bought GDX @56.72
STO GDX Oct. 28, 2011 56 Call @ 1.52

This in the money weekly option has only 3 days left before expiration. If it gets called out we'll make $80 per contract for 3 days on a $5520.00 investment. That's a 1.45% return for 3 days or 176.41% annually. These calculations are exclusive of commissions.

Precious metals seemed to have bottomed and began their ascent once again. We would prefer to get called out but if not we'll simply write next week's call of our choosing. If it really craters we might write a monthly call. We have downside protection on this 3 day  trade to $55.20.