The Money Tree

Safely Generating Income in Retirement

Archive for May 18th, 2009

No New Trades – Portfolio Update

Posted by mounddweller on May 18, 2009

Well guys and gals another month is behind us.  Not much to report at this juncture.  I have no plans to open any new positions this week.   However, as always, that is subject to change based on Mr. Market.

I did, however, sell another round of calls against my position in Forest Labs.  (FRX).  I sold 4 JUN $25 calls for $0.30.  You may recall I originally established a position in FRX back in January, buying 200 shares at $25.60.  Since then between selling CC and NP, and picking up an additional 200 shares I now have a net cost basis of $21.93/share.  If assigned at June expiration I will have a ROIC of 11.99% (28.24% annualized).   This is a much better return than the overall market.

Also, wanted to update you on the status of XLI.  My shares in XLI were called away at May expiration.  Because of an error in predicting the future direction of the market (go figure) I was only able to eek out a very small gain on this position.  My ROIC was a whopping 0.44%.  Yes, you read that correctly, it was less than 1%.  In hindsight, I believe my mistake was made back on March 23rd when I chose to sell the MAY $20 calls.  If you’ll recall the market had bottomed just a couple weeks before around March 5/6.  Fear and uncertainty still prevaled a couple weeks later and I believed the market would soon turn back down.  As we all now know, that didn’t happen.  We are now 10 weeks into this bear market rally.  XLI, like most everything else has continued to rally. 

Now some of you may be wondering why I didn’t roll-out in this position by buying back my MAY $20 and selling either the JUN $20 calls or roll-up into the JUN $22 or $23 calls.  I did give this some consideration and if the economy and market were more sound I probably would have done it.  However, with this rally looking a little long in the tooth and the economy in shambles I decided to take some money off the table and be happy with my very small gain. 

A couple more quick updates.  First, my AFLAC (AFL) MAY $26 put expired OOM.  This was an excellent trade as I made 2.21% in less than two weeks.  I may sell more AFL puts later this month if the opportunity presents itself.  Also, my JEC JUN $35 puts continue to look good.  Of course, we have over 30 days left to expiration so Mr. Market still has plenty of opportunity to make me look foolish.

Finally, as I noted above, I don’t have any immediate plans to open any new positions.  However, I did want to alert you to what I feel is an excellent opportunity.  Fluor (FLR) is currently trading around $44.82 with the JUN $45 call selling for around $2.35.  If called the ROIC is around 5.6%.  An excellent return for a very solid company.  I also like the JUN $40 puts.

Best of luck to all of you in your trades this month.

Regards,

Troy

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