The Money Tree

Safely Generating Income in Retirement

New NP Trade – TK

Posted by mounddweller on June 22, 2009

All,

First and foremost let me be very clear, this is unlike any of my recent NP trades.  For the past several months all of my NP trades have had the following objective and risk profile:

Objective: Achieve > 2.5% ROIC by selling NPs at a strike price where I feel there is little probability of having the stock put to me.

Risk Profile: (1) > 10% downside protection, (2) strike price < 52-wk low or significant level of support.

This TK trade is different.  This is not a short-term trade.  I want to own TK long-term.  However, I think the current price is a little high so I’m going to sell naked puts at a strike price where I wouldn’t mind owning the stock.  My objective is to accumulate 700-900 shares at an average cost of around $15. 

So today I sold 2 TK JUL $17.5 puts at $0.70.   The stock has fallen sharply over the past few days from a recent high of $23.48.  This follows an equally rapid rise from a low of $15.55 back on June 3rd.  The sharp increase in price was due to a short squeeze.  I suspect the sell-off reflects a return to the previous trend.

This is not my first NP trade in TK.  TK originally caught my eye back on June 3rd.  At that time I sold 2 JUN $15 puts for $0.70.  During the subsequent short squeeze I bought them back for $0.05.  My thought was I might have another opportunity to sell them again prior to expiration if TK fell.

So, I’m guessing some of you might be wondering why I didn’t originally post my first trade here on my blog.  Well, quite simply because it didn’t fit my earlier trade pattern and I thought it might ‘muddy the waters’ so to speak.  But, in rethinking through my goals of this blog I decided that if I used Ron’s VISIONS approach and software to identify the opportunity and time the trade then I should record it on the blog.

Below you’ll find my complete trading history in TK and a copy of the TK price chart.

TK Transactions

 

 

 

VISIONS - TK Chart

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2 Responses to “New NP Trade – TK”

  1. Rich said

    Hey Troy, been awhile since I posted a comment. I’m still having good results with the 2X ETFs UYG and URE. As of June expire I was up 21% and 18% respectively in both since Jan. I also sold my first NP on a URE Jun 3 put. thats almost like getting free money. I sold a AA July 10 put for a .53 premium. If the put is assigned that would be a 5.3% gain. AA is one of the DOW stocks that is trending in a nice range right now.

    Rich

    • mounddweller said

      Rich,

      Sorry for the delayed response. My only ETF trades of late involve UNG. I sold JUL $13 and $14 naked puts. Sounds like you’re doing well. Keep at it.

      Regards,
      Troy

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