The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – JAN Week 3

Posted by mounddweller on January 1, 2011

Fellow Investors,


Below is the list of stocks meeting our selection criteria for Week 3 of the JAN option expiration period.

While proper execution of the strategy calls for us to sell puts on each stock meeting our criteria, this isn’t always practical.   The selections this week show one reason why this is true.  Four of the 5 stocks have a premium of $0.05.  Thus, unless a substantial number of contracts are sold it is difficult to generate a reasonable amount of income net of commissions.

The MBI trade looks interesting and a reasonable bet.  I’m using ‘bet’ literally.  MBIA is not a stock I’d like to own.  It certainly has a cloud over its head.  However, from a trading perspective, it might be worth a look.  The stock popped up this week and the $10 put  looks reasonably safe.

A quick word about IMMR.  I have held this stock in my long-term investing portfolio for several years.  They are the undisputed leader in haptics technology, having been awarded 500 patents for this technology.  No real news to explain the jump in price over the last few trading days of 2010.  I wouldn’t mind owning more of this stock at $5.

One last item to note this week.  Several stocks that made our list previously this month met our criteria again this week.  Specifically, I’m referring to SIGA, VHC, ZLC, and VRGY.  Some at the same strike price while others were at different strike prices.  I eliminate them from our list because, assuming you sold puts for that stock earlier in the month, you wouldn’t want to “double up” on your risk by selling puts on the same company again later in the month. 

For those of you who didn’t sell puts on either SIGA or VHC earlier this month, you might want to to look at and consider both the $11 and $12 strike prices for one or both stocks.



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