The Money Tree

Safely Generating Income in Retirement

New NP Trade

Posted by mounddweller on May 4, 2009

This morning I executed a NP trade on AFLAC (AFL).  I came across this opportunity over the weekend after running a scan using Visions’ Scout Express.  After finding AFL in the scan I spent some more time reviewing the opportunity.  It seemed too good to pass up.  Fundamentals look good.  AFL has already announced 1st QTR earnings.  They were good.  Like everything else it has rebounded nicely since the market bottomed in early March.  

However, I must note that this trade falls outside of Ron’s parameters for an ideal set-up.  The TAI is at WT (wait), the Buy Rank (BR) is negative, and the stock is above it’s Buy Limit (BL).  The lone positive is the Put Factor (PF) of 4.34.

At the end of the day though, I still like this trade.  IMO, the risk/reward ratio is favorable.  With the MAY 26s I get 11.32% of downside protection and a ROIC of 2.31% with only 10 days remaining to expiration.

Thus, at the open this morning I pulled the trigger on the AFL MAY 26 puts (AJOQT).  I sold 5 puts for $0.60. The MAY 25s (AFLQE) also looked good at $0.40. 

AFLAC is a high quality stock so, worst case, if I get assigned I’m OK with owning it.

afl

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2 Responses to “New NP Trade”

  1. Jeff said

    Smart man. Put it in my CC stable on 4/28 and could make 7.75% if ITM next Friday. – Jeff

  2. mounddweller said

    Thanks Jeff! It’s not everyday that one can find these kind of opportunities in the market. I’m getting better at recognizing and pouncing on them when they do occur. Previously, I’ve hesitated too long and the opportunity is lost. BTW…what strike price did you sell?

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