The Money Tree

Safely Generating Income in Retirement

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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2 Responses to “Update – Visa (V) Trade”

  1. Irene S. said

    I also jumped into visa on dec 17th. In a retirement account (no naked options) I bought 100 shares at 67.6697 because it had just dropped so low and I had hoped it bottomed. Purchase $6771.92
    I sold one call june 2011 $65 call @ $7.30 for a credit of 719.05 for a total cost of 6052.87 and a breakeven point of 60.53 if not assigned. If assigned profit of 434.18 plus 30$ dividends. profit = 15.34% per annum if assigned.
    A long time to wait now unless it climbs a lot and I may close it early. Very nice of Charles Schwab to fix their error and put you right.
    Irene

  2. mounddweller said

    Irene,

    I like your trade. You’ve got lots of downside protection in case the market sells off in 2011 but yet still are generating a very nice annualized ROIC.

    Regards,
    Troy

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