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Safely Generating Income in Retirement

Archive for December 27th, 2010

Update – Visa (V) Trade

Posted by mounddweller on December 27, 2010

Friends,

I took advantage of the jump in Visa (V) today by BTC my JAN $65 puts and STO JAN $67.5 puts for a net credit of $0.45/share.

Originally, back on 12/17, I had sold the JAN $65 puts at $1.75.  Holding these to expiration would have generated a ROIC of 2.61% with a holding period of 36 days.  Today, with V jumping back above $70, I saw the opportunity to increase my ROIC with very little additional risk.  The additional $0.45/share will increase my ROIC from 2.61% to 3.09%.   If, at expiration, I choose to have the stock put to me at $67.50 I will own 200 shares of Visa at a cost basis of $65.46.

Finally, a quick plug for my broker, Charles Schwab.  I entered my trade today as ‘All or None’.   However, the floor trader at the CBOE failed to notice this and only executed one of my two outstanding contracts.  I call Schwab and they contacted the CBOE on my behalf.  Schwab made sure my other contracts were executed at my previously set net credit price (even though the market had moved away from a net credit of $0.45 down to $0.41).  Scwab then called me back to tell me everything had been taken care of and to ensure I was happy with the execution.

Regards,

Troy

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Posted in Portfolio Updates | Tagged: , | 2 Comments »

UPDATE – NP Strategy – JAN Week 4

Posted by mounddweller on December 27, 2010

Friends,

Just a quick couple of notes on my NP Strategy selections, VRGY and LPHI. VRGY also has a $10 strike price that looks very attractive. This morning it is trading at a bid/ask of $0.10/$0.15 and has traded as high as $0.18. Anything above $0.15 would work for me. At $0.15 you would have a 1.5% ROIC with 23.5% downside protection.

Now, an update on LPHI. Earlier this morning I read the WSJ article about LPHI. It does not cast LPHI in a very favorable light. I also read the LPHI CEO’s rebuttal. My advice would be to proceed with caution. The $14.75 strike price that appeared in our selection results has a very wide bid/ask spread of $0.20/$0.75. I see that as a ‘red flag’. I am going to hold off selling any puts on LPHI until I see how this shakes out. I recommend you do the same.

Regards,
Troy

Posted in Deep OTM NP Strategy | Tagged: , , | 2 Comments »