Two days ago in a retiree's taxable account we closed the following trade for a profit:
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
03/21/2012 BTC 3 PEP Apr 21 2012 60 Puts @.05 -15.04
In this trade we earned $135.73 in 40 days on ~$2500 in margin maintenance. This equates to a 5.4% return on maintenance or 49.27% annual. We got to the point where we could close the trade without commissions and look to put the money to work somewhere else. On both of the Pepsico trades our strategy of selling puts after a disappointing quarterly report paid off. It is my experience that when these Dividend Champion, blue chip stalwarts sell off after a quarterly report it provides an opportunity as they usually drift back up to where they were before the report was released as one quarter does not a blue chip make.
Showing posts with label retiree. Show all posts
Showing posts with label retiree. Show all posts
Friday, March 23, 2012
Saturday, February 11, 2012
New Trade: Pepsico (PEP) Naked Puts
Two days ago in a retiree's taxable account I entered into the following trade:
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
I entered into this trade when PEP had tanked down to 64 after it's quarterly report. As stated in my prior post, it has been my experience that when blue chip Dividend Champions release a quarterly report which disappoints it may tank briefly before rising to it's prior price. These were written well below the tank and if put to us the yield on cost will be 3.46% with a dividend rise expected in June. If these puts expire worthless we will earn 5.34% in 73 days on $2800 of margin maintenance which equates to 26.7% annual. If the stock tanks all the way to 60 or below I am confident we can roll the position for a credit.
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
I entered into this trade when PEP had tanked down to 64 after it's quarterly report. As stated in my prior post, it has been my experience that when blue chip Dividend Champions release a quarterly report which disappoints it may tank briefly before rising to it's prior price. These were written well below the tank and if put to us the yield on cost will be 3.46% with a dividend rise expected in June. If these puts expire worthless we will earn 5.34% in 73 days on $2800 of margin maintenance which equates to 26.7% annual. If the stock tanks all the way to 60 or below I am confident we can roll the position for a credit.
Thursday, February 2, 2012
New Trade: Century Link (CTL) Covered Calls
Today with CTL down over 2% I entered into the following trade in a traditional IRA:
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 -148.47
This particular account is for a retiree family member. Century Link was a Dividend Achiever and a Dividend Champion before it froze it's dividend at .725/share. The yield is a whopping 7.73%. CTL goes ex-dividend February 16th and has an earnings report February 15th. I didn't shy away from buying before an earnings report because this is a stock we want to hold long term in this particular portfolio and this increased the income on the calls we wrote since we get paid for volatility.
Our out of pocket is $7223.24 or $36.11 per share. Assuming we don't get called away we will also receive the dividend of $145 which will lower our out of pocket to $7078.24 or $35.39/share. We can also write new calls in two and a half weeks to lower our out of pocket even more. If we do get called away (and don't roll the position) it is still a nice return. I like the setup on this one very much for an enhanced income strategy.
02/02/2012 Bought 200 CTL @36.81 7371.71
02/02/2012 STO 2 CTL Feb 18 2012 37 Calls @.8 -148.47
This particular account is for a retiree family member. Century Link was a Dividend Achiever and a Dividend Champion before it froze it's dividend at .725/share. The yield is a whopping 7.73%. CTL goes ex-dividend February 16th and has an earnings report February 15th. I didn't shy away from buying before an earnings report because this is a stock we want to hold long term in this particular portfolio and this increased the income on the calls we wrote since we get paid for volatility.
Our out of pocket is $7223.24 or $36.11 per share. Assuming we don't get called away we will also receive the dividend of $145 which will lower our out of pocket to $7078.24 or $35.39/share. We can also write new calls in two and a half weeks to lower our out of pocket even more. If we do get called away (and don't roll the position) it is still a nice return. I like the setup on this one very much for an enhanced income strategy.
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