The Money Tree

Safely Generating Income in Retirement

What Others Are Trading – July 2010

Posted by mounddweller on July 8, 2010

Guys,

Sorry I’m so late in getting this set-up.  Been out of town on business and really busy.  Let’s here what you’re trading.

Regards,

Troy

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8 Responses to “What Others Are Trading – July 2010”

  1. Rich said

    Altria Scorecard update:

    I rolled my MO Jul 20 covered call to Jan 20 today. Together with the $35 dividend posted to my account last week this now gives me a seven month return on capitol of 10%. This would equate to a 17% annual return if I can keep duplicating this.

  2. i started selling naked puts on 15 what i call rock solid companies. 2 months out. 250K if assigned, 2500k in premiums. if anyone wants my list let me know. John

  3. Rich said

    After the close yesterday, Alcoa reported better than expected earnngs and at the open today the stock rose some. I took advantage and rolled my JUL 12 put to Aug and rolled my JUL 14 put to Oct. Both only netted me a small credit but it will also give me more time for the stock to recover if the market’s current trend will continue.

    I do not own any shares of AA at this time. Overall, I have a seven month ROC of 7.7% on this scorecard.

  4. Rich said

    My Jul 26 call and Jul 24 put on AT&T both expired out of the money last friday. AT&T is expected to announce 2Q earnings this week and I will wait to see the results before I sell calls against my 200 shares. In the meantime, instead of selling another cash secured put on T I instead sold a Aug 22 put on Microsoft. This only gave me a small credit since MSFT was trading above 25 at the time. However, if I can earn a 6% annual return on MSFT this would beat their dividend yield by 4% and I would not have to own the stock. I’m not sure if this is the best way to make the most of this capitol but it seems very low risk. Any comments?

    Rich

  5. Rich said

    AT&T announced 2Q earnings that beat the street and moved up in trading this morning on above average volume. I sold 2 Aug 26 covered calls @.18 this morning for a net credit of $26.50. My YTD return on this scorecard is now 7.88% for seven months. I should also get the Aug dividend of approx $84 on the 200 shares I own. If I should get assigned at Aug expiry I will revert to selling cash secured puts and continue to build cash on this scorecard.

    Rich

  6. hank said

    Hi,
    I wanted your opinion on something.
    Using EJ, selling the Aug 15 puts back on Jul 12 when EJ was 16.00 you could have got .60.
    Now if EJ is below 15 on Aug 20 you get to keep the premium.
    If EJ is below 15 on Aug 20, then the stock would be put to you at 15 and minus your .60 your basis is 14.40.
    If you did not want the stock but just wanted out, you could sell the Sept 15 for about 1.50 or higher.
    This gives you downside protection to 12.90
    14.40 – 1.50 = 12.90.
    Most likely you will be assigned at 15.
    If so, your return would be .60 = 1.50 = 2.10.

    2.10 / 15.00 = 14% for 2 months or about 7%/month.

    This seems a pretty good strategy if you do not want to keep the stock.

    Comments.

    Hank

    • mounddweller said

      Hank,

      First, thanks for posting your question. Now let me answer your question…

      I have to assume your question is hypothetical because EJ is currently well above $15; having closed on Friday at $16.30. Thus, you are not in any danger of having EJ put to you at $15. However, with 15 trading days left to expiration anything can happen.

      Let’s assume EJ is < $15 on 8/20 and as you decribed you decide to roll out another month instead of having the stock put to you. Before you sell the SEP $15 put for $1.50 you will have to buy back the AUG $15 put. If you sold the put for $0.60 when EJ was above $15 more than likely you are going to have to pay more than $0.60 to buy it back. Let's just assume it is now priced at $0.90. Now your rate of return is calculated as follows: ($0.60 -0.90) + 1.50 = $1.20. $1.20 / $15 = 8.0%. Your monthly return would be around 4.0%. However, don't forget you're still underwater on the stock. You can keep rolling it out like this everymonth for a little more credit but eventually either one of two things will happen, (1) the stock recovers to above $15 and your puts expire, or (2) you can't rollout for a credit anymore and you then decide to have the stock put to you at $15. If the second scenario comes to pass you will then need to determine your net cost in the stock. If it is less than the price of EJ stock you can just sell at the market price the Monday after having had the stock put to you and walk away with a small profit. If not, you can either sell at a loss or try to sell covered calls on the shares until you do reduce your net cost to below the current price of the stock.

      Hope this helps. If not, let me know and we'll try again.

      Regards,
      Troy

    • hank said

      Hi,
      I left out a very important word after Sept 15, “”calls””.
      I said,

      I should have said, If you did not want the stock but just wanted out, you could sell the Sept 15 “”calls”” for about 1.50 or higher.

      If I was in danger at Aug expiry of being put, I would not roll out and sell puts again, but just have the stock be put to me and then sell ITM covered calls to get out again or collect a nice premium if the stock continued to fall.

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