The Money Tree

Safely Generating Income in Retirement

Archive for January 14th, 2011

New NP Trade – ABT

Posted by mounddweller on January 14, 2011

Fellow Traders,

I made another naked put trade today.  Like the naked put trades I made earlier this week this trade was made in a stock that I’ve successfully traded before.  In this case it is Abbott Labs (ABT).  I sold 2 FEB $46 puts at $0.60.   ABT has been falling for several days now and it appears it may have further to fall.  Thus, I limited my trade to only 2 contracts.  My plan is to sell additional contracts if it continues to fall.  Looking at the chart I think it has strong support at $46. 

ABT is a stock that I wouldn’t mind owning in this price range.  It has a strong history of growth in earnings and in raising its dividend annually.

My ROIC is 1.19% with a holding period of around 35 days to expiration.  Not great but not bad either given the blue-chip status of the underlying company, Abbott Labs.

Regards,

Troy

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Deep OTM NP Strategy – JAN Week 1

Posted by mounddweller on January 14, 2011

Fellow Traders,

I have 3 selections for you this week from our Deep OTM NP Strategy. 

As you can see from the chart above two of our three selections are mid-caps with stock prices suggesting they may be viable choices for a NP trade.  In doing some basic DD I found that both CREE and PLCM will be announcing quarterly earnings next week.  That accounts for the relatively high premiums for only 8 days to expiration.  Both CREE and PLCM are relatively expensive from a fundamental perspective, trading at over 21x estimated 2011 earnings.  However, on the plus side both have zero debt and large cash balances.

From a technical perspective I like CREE better than PLCM.  PLCM has had a strong run-up in price in the past 4 months, increasing from just under $29 to almost $42.  CREE has backed off from recent highs, falling from $72 to just under $64.  The other thing I like about the CREE trade is the $57.50 strike price.  It is under CREE’s 200-DMA of around $60.50.

Best of luck to all this week and especially at expiration on Friday.  As always, remember to do your own DD and that nothing written in my blog should be construed as personal investment advice.

Regards,

Troy

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