Update – VXX

Fellow Traders,

I want to give you an update on my naked put trade on VXX.  I initiated this trade back on 2/29, selling the MAR $22 puts when VXX was over $24.  Since  then VXX has dropped to as low as $15.84.  I’ve continued to roll my puts, first to APR, then MAY.  Last week, although VXX has recovered substantially, it still looked like it was going to stay under $22.  Consequently, I rolled the MAY $22 puts out and down to the JUL $21 for a net credit of $311.05.  As it turned out I rolled a couple of days early.  VXX closed Friday at $22.36.  However, since I don’t posess the ability to see into the future, I’m still happy with my trade.  In just under three months I’ve taken in $1318.17 in premiums against my capital requirement of $11,000.

Regards,

Troy

Update – Silver Wheaton (SLW)

Fellow Traders,

Here’s another update, this time on my position in Silver Wheaton (SLW).  You’ll recall I entered this trade on April 27th by buying 200 shares of SLW at $30.07 and selling two MAY $29 puts at $0.64.   This was my second trade using Ron Groenke’s new “Show the Trade”.  Like my CVX trade, it isn’t working out too well right now.  As a matter of fact I’ve already hit the stop loss limit on my long stock.  Back on May 7th the stock fell through my stop loss at $28.56.  By the time I sold it was at $27.45.  It subsequently fell to as low as $22.94.  It has since recovered a little, closing Friday at $24.63.  Thus, my use of a stop loss benefitted me greatly on this trade.

Like my CVX trade I decided to roll out and down my short puts.  On Friday I rolled my MAY $29 puts out to the SEP $28 puts for a net credit of $129.65.  This now leaves me a net loss of $293.40.  My plan is to continue to roll the puts as necessary to bring the whole trade to a profitable conclusion.

Here’s a current 1-year chart for SLW.

Update – Dividend Superstar – Chevron (CVX)

Fellow Traders,

It’s been a couple of weeks since my post.  A lot has happened to my positions since then.  So today I hope to update you on all of them and also tell you about some possible trades I’m looking to set-up next week.

First up is an update on my CVX trade.  As you’ll recall CVX is my very first trade using Ron Groenke’s new “Show the Trade” functionality in his VISIONS software.  As luck would have it my first trade is not going as well as I’d hoped.  Back on April 26th I bought 100 shares of CVX at $105.59 and sold an additional MAY $105 put at $2.02.  You can read my initial write-up here: http://troysmoneytree.wordpress.com/2012/04/26/new-trade-dividend-superstar-chevron/.

The objective of this trade is to sell CVX at $114.04 or better and to have the put expire OTM.  The stop loss on the stock portion of the trade is $97.14.

Friday, the stock closed at $98.46.  To avoid assignment of the stock at $105 I rolled the MAY put out and down to the SEP $100 strike for a net credit of $119.85.  CVX was trading at around $101 when I rolled the put.  Late in the trading session the market fell apart and so did CVX.   To break-even on the whole trade I need to sell CVX at $102.46 or better.

My path forward is clear.  I will honor my stop loss at $97.14 on my long stock position.  However, I intend to roll the put as necessary to exit the position with a gain.  Below is a current 1-year chart of CVX.

Regards,

Troy

Update – EXC

Fellow Traders,

I wanted to give you an update on my position in EXC.   My last update was about 4 months ago.  You can read it here: http://troysmoneytree.wordpress.com/2012/01/03/new-trade-exc/.  I initiated a long-term position in EXC back in April of 2010.  My objective in this position is to over time accumulate enough shares such that the quarterly dividends will provide a portion of the income I need in retirement.

Since I initiated the position I have periodically sold covered calls and naked puts to generate income off the position and to accumulate additional shares when EXC falls to a favorable price.  Initially I was taking the dividends in cash but recently I’ve began to reinvest them in additional shares.  This should allow me to acquire a substantial number of additional shares over the next 10 years.  Currently, I own 507 shares.

Last month I sold 3 APR $38 puts for $0.45.  EXC for the first time in quite a while fell below $38.  Thus, I chose to roll my puts out into MAY.  I did this by buying to close (BTC) the APR puts for $0.30 and selling to open (STO) the MAY puts for $0.85.  This resulted in a net credit of $153.43 further reducing my average cost in EXC to $35.65.

To date I have had my position in EXC for just over two years.   During that time my total cash returns have been $2,691.28 (net of commisions). This gives me a ROIC of 28.31%.  Annualized this comes out to 14.06%.

I hope to be able to replicate this strategy with other blue-chip, high dividend companies once they come into my buying range.  Other companies I’d like to implement this strategy with include AT&T (T), Intel (INTC), and Wal-Mart (WMT).

Regards,

Troy

Update – VXX

Fellow Traders,

Mr. Market is still refusing to cooperate with regard to my VXX trade.  As you’ll recall back on 2/29 I sold 5 MAR $22 puts for $0.50.  VXX at the time was at around $24.75.  Since then the VIX and VXX have continued to fall.  Consequently, I have been rolling out my puts, each time for a net credit.

Today, I bought to close my 5 APR $22 puts for $4.40 and sold 5 MAY $22 puts for $4.95, a net credit of $0.55.

So today here’s where I stand in this trade.  My plan is to continue to roll this out until VXX recovers back to $22.  Thus far I have a total net credit (after commissions) of $1,007.12.  That’s a 9.56% ROIC.

Regards,

Troy

 

Update – VXX

Fellow Traders,

On Friday I was unable to roll my 5 VXX MAR23 $22 puts out a week for a net credit.  Instead I had to roll out to the normal APR monthly $22 put for a net credit of $0.45.  I placed my trade before lunch and had to wait until just before 2 pm CT before it finally executed.  The bid price on the spread was $0.35 all day and it didn’t want to budge.  I had decided that if it hadn’t executed by the last half hour of trading I was going to cancel the trade, accept having VXX put to me at $22, and then write the APR $22 calls on Monday morning.  The APR $22 calls at the time were going for $0.46-$0.47.

However, as I said I was able to roll out to APR by BTC MAR23 $22 at $4.65 and STO APR $22 at $5.10.  Doing so now gives me a total net credit (after commissions) of $746.07 against my capital requirement of $11K.  Thus, if VXX recovers and finishes OTM by April close I wll have earned 6.8% in about 7 weeks.  If VXX doesn’t recover by APR expiration I’ll try rolling out to a May expiration.

I’m learning a lot in this trade.  Even in the 21st century the school of hard knocks remains an effective teacher;-)

Regards,

Troy

Update – VXX

Fellow Traders,

I want to update you on my VXX trade.  As you’ll recall I entered this position back on February 29th, selling 5 VXX MAR naked puts at a strike price of $22.  The premium I received was $0.50/share.

At the time I placed the trade VXX was trading around $24.52.  The recent low had been $23.72.  My strike price at $22 seemed reasonably safe.  Alas, the best laid plans often don’t work out.   While I thought the market was ripe for a correction which would cause VXX to rise just the opposite happened.  The market has continued to move higher sending the VIX and VXX lower.  Friday, VXX closed at $21.56.

Rather than have VXX put to me I elected to roll out my position.  However, instead of rolling my puts out to the normal monthly APR expiration I chose to roll them to the next available weekly expiration on Friday, March 23rd.    With just 8 days to expiration I was able to roll out with a net credit of $0.62.

Net of commissions my total credit thus far in this trade is $535.02.   If VXX closes above $22 on Friday I will have earned a 4.86% ROIC with a holding period of only 24 days.  If VXX remains below $22 next week I will roll out another week.  Sooner or later the  market will have a down day or two and that will be my opportunity to close the trade at a profit.

Regards,

Troy

New Trade – PEP

Fellow Traders,

Earlier this week, Wednesday to be exact, I entered a NP trade on a stock I previously had never traded.  Here’s the trade I executed:

STO 2 MAR PEP $62.50 puts at $0.80.

At the time Pepsi (PEP) was trading around $63.40.  Since then it has continued to fall.  It closed Friday at $62.68.  So why did I decide to trade PEP?  Well, quite honestly because I wasn’t finding much else on my normal watch list that I liked.  So, given the recent steep drop in PEP since they announced lackluster earnings, I decided they were looking oversold and were due for a bounce.  Thus far, it looks like my logic was faulty and they may have further to fall.  However, that’s the beauty of trading large-cap, blue-chip companies.  You can be wrong in the short-term but still come out looking like a genius in the long-term.

If PEP does not bounce before MAR expiration I will have a decision to make, either let the stock be put to me at $62.50 or roll out the MAR puts to APR or maybe even JUN.

If I take assignment at a net cost of $61.70 I will be earning about 3.4% in dividends.  PEP has a good history of growing its dividend.  In the past five years it has grown from $0.30/quarter to $0.515/quarter.  That’s a compound growth rate of about 14%/year.

If I roll out a month or two my objective would be to earn 1%/month in put premiums.  If volatility stays low that may be difficult.  If volatility picks up it should be very achievable.

Regards,

Troy

 

Update – PBR Trade

Fellow Traders,

I closed out my position in PBR today.  Specifically, I BTC 3 JUL $31 puts at $2.57.  As you can see from the list of transactions below I had been in PBR for quite some time (for me anyway).  I initiated my trade in PBR back in May 2011 by selling OTM naked puts at the $32 strike.  After these expired I wrote another round of puts at the $31 strike.  This was followed by a third round, again at the $31 strike.  It was at this point that PBR fell through support and I began rolling out my puts to avoid assignment.  I had to roll out my puts three times before I was finally able to close the position at a profit.

All in all I didn’t do too badly on this trade given the depth to which PBR plunged after falling through support between $31 and $32.  You can see I actually took the opportunity to sell additional puts at the $20 strike when the stock was down around $23.

Here’s a 1-year chart for PBR.

So, after holding onto this position for 247 days, why did I choose to close it out and not wait until it got closer to my JUL expiration?  Two reasons…(1) PBR and the overall market have had a significant run-up in the past several weeks.  I wanted to exit, with profit in hand, before the market and/or PBR reversed and I ended up giving back some of my gains.  (2) What had originally acted as support between $31 and $32 is now going to act as resistance.  Who knows if PBR will be able to punch back through and continue onto higher ground or fall back.

All in all I’m pretty proud of this trade because it shows that if one is patient and actively manages a position you can dig yourself out of a substantial hole.

Regards,

Troy

Update – BBY

Fellow Traders,

I want to update you on my naked put trades in Best Buy (BBY).  You’ll recall back on December 28th I opened two positions in BBY.  In one I sold 2 JAN $22.50 puts at $0.56.  In the other I sold 3 MAR $20.00 puts, also at $0.56.  You can read more about these trades and my rationale for making them here: http://troysmoneytree.wordpress.com/2011/12/28/new-trade-bby/.

Like most of the market, BBY has gone up in the new year.  It was $23.06 when I placed my trades in late December.  Today it closed at $25.36.

The JAN $22.50 puts expired OTM this past weekend.  Over the past few days I had been keeping track of the premium on the MAR $20 puts.  I was looking for an opportunity to ‘take my money and run’ without leaving too much on the table.  That opportunity came yesterday.  I was able to buy back the MAR $20 puts for $0.11.  This allowed me to capture over 80% of the value in the puts in about one-third of the total time remaining prior to expiration.

Below are the results of my BBY trades:

As you can see this trade turned out nicely.  With a holding period of 26 days or less I earned about 2.50% ROIC.   Annualized it works out to around 35%.  Wouldn’t it be nice if all my trades could work out this nicely!

Regards,

Troy