The Money Tree

Safely Generating Income in Retirement

Archive for July 29th, 2009

New NP Trade – TK

Posted by mounddweller on July 29, 2009

I sold a new round of naked puts on TK this morning.  Below are the pertinent details.

STO 4 TK AUG $15 puts at $0.30

ROIC = 2.00% (.3 / 15), Annualized 29.2%

Downside protection to strike price = 10.93%

Since I have traded NP on TK previously I will not bore you with a long-winded discussion on why I like TK or this particular trade.  Instead, if you’re interested in these details, I recommend you go back and read my earlier post regarding TK dated June 22.

NOTE:  For those of you who are new to my blog or don’t recall the details of my earlier trades in TK, I want to make it clear that I’m not selling these puts as a short-term trade.  I want to own TK long-term and am trying to accumulate a position in TK.  Thus, my trading strategy for TK is somewhat different than that of my other NP trades.

Here is an updated chart of TK.

VISIONS - TK Updated Chart

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New NP Trade – IPI

Posted by mounddweller on July 29, 2009

I executed a new NP trade this morning on IPI.  Here are the pertinent details:

STO 3 IPI AUG $22 puts at $0.50

ROIC = 2.27% (.5 / 22), Annualized = 33.18% (25 days to expiration)

Downside protection to strike price = 14.99% (25.88 – 22 / 25.88)

So, now that we’ve dispensed with the pertinent facts of the trade, let’s discuss why I like this trade.  First the fundamentals.  IPI (Intrepid Potash) is in the business of producing and marketing the sale of potash.  It is much younger (it was founded in 2000) and smaller ($395M in revenue) than it’s more well known competitors, POT and MOS.  However, younger and smaller does not make it inferior.  As a matter of fact it has better performance ratios (i.e. Gross Margin, Oper. Margin) than either POT or MOS.  It also compares favorably with them on ROA and ROE.  IPI also has no long-term debt and over $100M in cash on its balance sheet.  I also like IPI’s growth prospects.  For all these reasons, I would be happy owning IPI is it were to be put to me at $22.

Now, lets look at a few of the technicals.  The TAI (take-action indicator) rating for IPI is ‘TA’ (i.e, take action).  From the chart presented below we can see that it has been trading in the V for the past 17 days.  When I executed my trade IPI was trading around $25.88, just above it’s BL (buy limit) and 50-DMA.  We can also see that it has pulled back a little bit the past couple of days after rebounding strongly from hitting it’s 52-wk back in March.

Here are the other common KPIs (key performance indicators) I used to evaluate this trade.

IPI - Trading Plan Eval Criteria

VISIONS - IPI Chart

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