1) I might have been a bit early to pull the trigger on the Intel trade but I wanted to put some money to work and take advantage of time decay in case this is a real short term bull market. If it drops more I might sell some additional puts at either a nearer month or a lower strike. Does anyone really think that Intel will sport a 4% dividend. 23 or so gets us there. I say that's a buoy.
2) Facebook near month 16's might be a nice put selling trade. But I probably won't touch it because it's not a stock I want to own long term.
3) Where is our next bit of market fear going to come from? Right now it looks like it will come from a normal correction. My guns are locked and loaded.
4) Amazon has a ridiculously high P/E ratio and not very impressive earnings growth. It's not my style but some long term out of the money put buys may pay off nicely.
5) For the first time in years I have put a financial stock on my watch list. I added Bank of America last night. Central banks support the majors. They're kissing cousins who control the printing presses and are good at "financial engineering." The put selling returns are very high.
6) Have a great day. I'm off to get a little exercise.
Chester
Thursday, August 23, 2012
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 21, 2012
Bull Market? Low Volatility...
Are we in a bull market (within a secular bear)? Fear of the Euro has died down, for now, and the market is drifting sideways/up. With lower volatility comes lower premiums.
Precious metals and commodity stocks are on the rise. Is it time to get on the train or will the prices drop back down? I like to sell puts on weakness, not strength...can an old dog learn new tricks?
Blue chip dividend stocks only look good for trades 60 days out. The September strike has premiums that are too low in my opinion. But 60 days is a long time for there to be no event that brings the market down....and a correction is due since we're overbought, right?
To trade or not to trade, that is the question. Thoughts include: Swing at the fat pitch vs. don't miss the train. It's hard not to enter at least one trade a week when I've got more powder in the keg then I've had in a while...Stocks just seem so darn expensive.
Do you all have any thoughts to share??
Precious metals and commodity stocks are on the rise. Is it time to get on the train or will the prices drop back down? I like to sell puts on weakness, not strength...can an old dog learn new tricks?
Blue chip dividend stocks only look good for trades 60 days out. The September strike has premiums that are too low in my opinion. But 60 days is a long time for there to be no event that brings the market down....and a correction is due since we're overbought, right?
To trade or not to trade, that is the question. Thoughts include: Swing at the fat pitch vs. don't miss the train. It's hard not to enter at least one trade a week when I've got more powder in the keg then I've had in a while...Stocks just seem so darn expensive.
Do you all have any thoughts to share??
Sunday, August 19, 2012
Profitable Trade: Freeport-McMoran (FCX) Naked Puts
On Friday the following puts expired worthless:
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 was a 25 day trade with ~$1200 in average margin maintenance. Margin maintenance was reduced from the initial amount of $1600 due to the rise of the underlying stock.
Our return on maintenance was 10.22% or 149% annual. The returns are inflated because this is a volatile security. It is a great stock to trade in my opinion as it has fairly concrete support levels, a great rising dividend, high liquidity and high volatility. This will definitely be one I trade again. I would like to see the stock drop back a bit first, preferably to 32 and change.
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 was a 25 day trade with ~$1200 in average margin maintenance. Margin maintenance was reduced from the initial amount of $1600 due to the rise of the underlying stock.
Our return on maintenance was 10.22% or 149% annual. The returns are inflated because this is a volatile security. It is a great stock to trade in my opinion as it has fairly concrete support levels, a great rising dividend, high liquidity and high volatility. This will definitely be one I trade again. I would like to see the stock drop back a bit first, preferably to 32 and change.
Saturday, August 18, 2012
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.
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.
Thursday, August 16, 2012
Opportunity today with Facebook?
I'm not going to pull the trigger because I don't want to own the stock, however, there looks to be some very interesting opportunities in selling short term out of the money puts. I almost sold next week's 18's but if it drops and goes in the money I'd be kicking myself for breaking my rule of only trading what I want to own. Good luck!
Wednesday, August 15, 2012
Looking at....
Today I'm looking at Caterpillar September 80's and Freeport-McMoran September 30's and 31's. I'm also looking to re-up on Lowes as this Dividend Aristocrat has great daily volatility without ever moving much on a monthly basis. I'd like to sell the 24's again. As always I'm looking for a good entry point for Coca-Cola, Exxon-Mobil, Intel, Microsoft and now Aflac. Happy trading.
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.
Tuesday, August 7, 2012
Waiting like a crocodile...
Ol' Chester is sitting on a bunch of maintenance money but the market keeps creeping up. This little rally looks a bit long in the tooth so I expect to see some down days in the near future. If we can see a string of two to three down days in a row I will look to enter a few put selling trades. I'm keeping an eye on SYY, FCX, LOW, MSFT, INTC, KMB, MCD, CTL, GE and other rising dividend/high dividend stocks. I wanna see some fear!
In the meantime, only my eyes are above the water while the rest of me lies in wait.
In the meantime, only my eyes are above the water while the rest of me lies in wait.
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.
Wednesday, July 25, 2012
Trade Continuation: GDX Naked Puts
Last week I continued my GDX investment as follows:
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
In this latest option roll I was able to get paid $38.26 to roll down a strike AND to reduce my exposure to 2 contracts. By reducing the number of contracts we were able to reduce our maintenance requirement from ~$3200 to ~$2100 thereby freeing up money for other trades. In addition, our percentage return on maintenance increases with the reduction in required maintenance.
It had never occurred to me before to reduce the number of contracts as I roll down and out. Props to Teddi Knight at FullyInformed.com for sharing her experience and insight in that regard.
We have now collected $512.40 in option premium on this trade. Our cost basis if put to us is down to $39.44/share. While this ETF has sunk to new lows recently our cost basis is below that.
The September expiration will make this trade 6 months old. If the shares expire worthless we will earn $512.40 on an average of ~$2600 in margin maintenance. This equates to a return on maintenance of ~19.7% or or 39.4% annual.
03/20/2012 STO 3 GDX Apr 21 2012 47.0 Put @ .53 146.75
04/20/2012 BTC 3 GDX Apr 21 2012 47.0 Put @.63 -201.24
04/20/2012 STO 3 GDX May 19 2012 45 Put @.97 288.70
05/14/2012 BTC 3 GDX May 19 2012 45 Put @3.46 1050.24
05/14/2012 STO 3 GDX Jun 16 2012 45 Put @3.99 1194.68
06/01/2012 BTC 3 GDX Jun 16 2012 45 Put @1.20 - 372.25
06/01/2012 STO 3 GDX Jul 21 2012 43 Put @1.60 467.74
07/19/2012 BTC 3 GDX Jul 21 2012 43 Put @1.40 -432.24
07/19/2012 STO 2 GDX Sep 22 2012 42 Put @2.41 470.50
In this latest option roll I was able to get paid $38.26 to roll down a strike AND to reduce my exposure to 2 contracts. By reducing the number of contracts we were able to reduce our maintenance requirement from ~$3200 to ~$2100 thereby freeing up money for other trades. In addition, our percentage return on maintenance increases with the reduction in required maintenance.
It had never occurred to me before to reduce the number of contracts as I roll down and out. Props to Teddi Knight at FullyInformed.com for sharing her experience and insight in that regard.
We have now collected $512.40 in option premium on this trade. Our cost basis if put to us is down to $39.44/share. While this ETF has sunk to new lows recently our cost basis is below that.
The September expiration will make this trade 6 months old. If the shares expire worthless we will earn $512.40 on an average of ~$2600 in margin maintenance. This equates to a return on maintenance of ~19.7% or or 39.4% annual.
Tuesday, July 24, 2012
Profitable Trade: GDX Naked Puts
On Friday I closed the following transaction for a net profit:
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
07/20/2012 BTC 3 GDX Jul 21 2012 42 Puts @.55 -177.28
In this trade we generated $175.86 in 4 months on ~2600 in margin maintenance. This equates to a return of 6.76% or 20.29% annual. This trade shows the power of naked puts and the ability to roll them down and out for a net credit. Even though GDX continued to tank throughout this transaction we were able to still turn a profit.
This one was a bit too much of a wild ride for my temperament, however, so I will probably return to trading blue chip stocks with a rising dividend. Right now I'm watching the weakness in MSFT and INTC closely. If MSFT drops below 29 and INTC gets in the low 24's it will be hard not to pull the trigger on some new naked put trades.
03/19/2012 STO 3 GDX Jun 16 2012 45 Puts@.99 284.71
06/07/2012 BTC 3 GDX Jun 16 2012 45 Puts@.68 -216.28
06/07/2012 STO 3 GDX Jul 21 2012 42 Puts@.99 284.71
07/20/2012 BTC 3 GDX Jul 21 2012 42 Puts @.55 -177.28
In this trade we generated $175.86 in 4 months on ~2600 in margin maintenance. This equates to a return of 6.76% or 20.29% annual. This trade shows the power of naked puts and the ability to roll them down and out for a net credit. Even though GDX continued to tank throughout this transaction we were able to still turn a profit.
This one was a bit too much of a wild ride for my temperament, however, so I will probably return to trading blue chip stocks with a rising dividend. Right now I'm watching the weakness in MSFT and INTC closely. If MSFT drops below 29 and INTC gets in the low 24's it will be hard not to pull the trigger on some new naked put trades.
Monday, July 23, 2012
Profitable Trade: Intel (INTC) Naked Puts
The following puts expired worthless:
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
We earned $90.99 in 12 days in this trade on ~$1500 in margin maintenance. This equates to a 6% return or 184% annual. The returns are so large as there was a quarterly report issued during the time of this trade.
I didn't see an opportunity I liked to roll out and/or down for a credit so I just let them expire worthless. I will look to trade INTC again should it drop under $25.
07/09/12 STO 4 INTC Jul 21 2012 25 Puts @.26 90.99
We earned $90.99 in 12 days in this trade on ~$1500 in margin maintenance. This equates to a 6% return or 184% annual. The returns are so large as there was a quarterly report issued during the time of this trade.
I didn't see an opportunity I liked to roll out and/or down for a credit so I just let them expire worthless. I will look to trade INTC again should it drop under $25.
Sunday, July 22, 2012
Profitable Trade: Proctor & Gamble (PG) Naked Puts
The following puts just expired worthless:
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
This was a 114 day trade with an average of ~2300 in margin maintenance. Our return on maintenance is 7.15% or 22.9% annual. I thought about rolling out the 62.5's but decided against it with the recent surge in the stock due to the Ackman intervention. In addition, I believe long term that Costco and Wal-Mart and their brand of products will continue to take market share from the more expensive PG products. That being said I will still sell out of the money puts when fearful dumping of PG stock occurs.
03/29/2012 STO 2 PG July 21 2012 62.5 Puts @.88 164.47
This was a 114 day trade with an average of ~2300 in margin maintenance. Our return on maintenance is 7.15% or 22.9% annual. I thought about rolling out the 62.5's but decided against it with the recent surge in the stock due to the Ackman intervention. In addition, I believe long term that Costco and Wal-Mart and their brand of products will continue to take market share from the more expensive PG products. That being said I will still sell out of the money puts when fearful dumping of PG stock occurs.
Subscribe to:
Posts (Atom)