The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – March Week 2

Posted by mounddweller on March 5, 2011

Fellow Traders,

I don’t have a lot of commentary this week to accompany our weekly picks for the Deep OTM NP Strategy.  Nothing really jumps out at me as a compelling trade.  I will make a few comments about Getty Oil (GTY).  GTY is a Real Estate Investment Trust (REIT) that leases gas stations to operators.  They have over 1,000 locations primarily in the Northeast.  This past week their largest tenant, a subsidiary of the Russion oil company, Lukoil sold their interests to another company which then announced there would be a delay in the March lease payment.  Given the market doesn’t like uncertainty the stock understandably declined precipitously.  The new tenant said it would be making the lease payment on or around March 7th.  That’s Monday.  If the new tenant makes the payment on Monday and the put premium remains high it might be a good trade.  However, I’m not sold on it as a longer term investment.  This new tenant may attempt to reduce the lease rates and thus impact GTY’s ability to maintain its current dividend.

Best of luck to everyone in their trading this week.  Be careful out there.

Regards,

Troy

2 Responses to “Deep OTM NP Strategy – March Week 2”

  1. dealmakr said

    Hi Troy,

    Enjoy reading your scans about NP’s, always check out some of the picks for a possible play, but have been reducing overall NP exposure with the market looking unsteady. Oil north of 105 is a game change possibility no matter what the gov says about inflation. Here are a few updates and a new position on HBAN.

    New Position HBAN 03/04/11

    03/04/11 Bot 8000 HBAN 6.53 (52240)
    03/04/11 Sold 80 Apr 6 put .12
    03/04/11 Sold 80 Apr 7 call .13

    Closed trades Profit/Loss

    Total return on closed trades

    Short 80 Apr 6 Put 960
    Short 80 Apr 7 Call 1040

    Net Position Exposure

    Naked puts 8000 shares
    covered calls 8000 shares

    Opened a position here and will add if it breaks down near 6. A regional bank that may be on the comeback trail. Have been scalping this one intraday, earning out in Apr and will see how things look from there.

    Good Trading

    dealmakr

    Updated position BRCD 03/04/11

    11/24/10 Sold 50 Dec 5 put .13*
    12/01/10 Bot 5000 BRCD 5.02*
    12/01/10 Bot 5000 BRCD 5.01*
    12/01/10 Sold 100 Dec 5 Call .18*
    12/01/10 Sold 100 Dec 5 Put .16*
    12/02/10 Sold 50 Apr 5 Put .50*
    12/03/10 Sold 100 Jan 5 Put avg .225*
    12/07/10 Sold 50 Jan 5 Put .18*
    12/17/10 Sold 50 Jan 5 Put .19*
    12/17/10 Sold 50 Apr 5 Put .50*
    12/30/10 Sold 20 Apr 5 Put .50*
    12/30/10 Sold 20 Apr 7 Call .27*
    01/03/11 Sold 100 Feb 5 Put avg .245*
    01/03/11 Sold 50 Feb 6 Call .27*
    01/03/11 Bot 5000 BRCD 5.36*
    01/04/11 Sold 30 Feb 6 Call .30*
    01/04/11 Sold 50 Jul 5 Put .53
    01/04/11 Bot 5000 BRCD 5.54*
    01/13/11 Sold 100 Jan 6 Call .12*
    02/22/11 Sold 50 Oct 5 Put .32

    Closed trades Profit/Loss

    12/18/10 Exercised 100 Dec 5 Call 1800
    12/18/10 Sold Exercise 10000 BRCD 5 (150)
    12/18/10 Expired 150 Dec 5 Put 2250
    01/13/11 Bot Close 80 Feb 6 Call .35 (550)
    01/13/11 Bot Close 20 Apr 7 Call .28 (20)
    01/22/11 Expired 200 Jan 5 Put 4100
    01/22/11 Expired 100 Jan 6 Call 1200
    01/24/11 Sold 10000 BRCD avg 5.615 1650
    02/19/11 Expired 100 Feb 5 Put 2450
    02/22/11 Bot Close 120 Apr 5 Put .06 5280

    Total Return P/L on closed trades 18010

    Total Position Cost/Premium received

    Short 50 Jul 5 Put 2650
    Short 50 Oct 5 Put 1600

    Net Position Exposure

    Naked Puts 10000 share

    The premium decayed enough to bring in the Apr 5 puts and go out a bit more to Oct while still reducing exposure. Stock still holding fairly well here and may adjust position in the future.

    Good Trading

    dealmakr

    Updated position XRX 03/04/11

    11/30/10 Sold 50 Dec 11 Put .16*
    11/30/10 Sold 30 Dec 11 Put .15*
    12/06/10 Bot 3000 XRX 11.74
    12/06/10 Sold 30 Apr 12 Call .82*
    12/31/10 Sold 25 Jul 9 Put .30
    01/21/11 Sold 30 Feb 12 Call .12*
    01/27/11 Sold 30 Feb 11 Call .16*
    02/09/11 Sold open 30 Jul 12 Call .32
    02/22/11 Bot 1500 XRX 11
    02/22/11 Sold 15 Apr 11 Call .46
    02/23/11 Sold 25 Oct 9 Put .52

    Closed Trades Profit/Loss

    12/18/10 Expired 80 Dec 11 Put 1250
    12/29/10 Dividend .0425 on 3000 shares 127.5 (corrected)
    01/21/11 Bot close 30 Apr 12 Call .28 1620
    02/13/11 Bot close 30 Feb 11 Call .13 90
    02/19/11 Expired 30 Feb 12 Call 360

    Total Return P/L on closed trades 3447.5

    Long 4500 XRX 11.74 (51720)

    Short 15 Apr 11 Call 690
    Short 30 Jul 12 Call 960
    Short 25 Jul 9 Put 750
    Short 25 Oct 9 Put 1300

    Net Position Exposure

    Covered Calls 4500 shares
    Naked Puts 5000 shares

    Well I was looking to add a bit and did so just before things fell out of bed. Now a bit under water with XRX @ 10.42 as I type.

    Good Trading

    dealmakr

    Updated position EK 03/04/11

    Opened another round of Mar 3.5 puts, but the stock is still weak and might have to bring them in also. It now remains to be seen as to how to work this position from the standpoint of how to try and work out of the hole or to close it out and take the loss. Comments welcome.

    01/05/11 Sold 50 Feb 5 Put .20*
    01/05/11 Sold 50 Jul 4 Put .25
    01/25/11 Sold 50 Feb 5 Put avg .555*
    01/26/11 Sold 50 Jul 4 Put .70
    02/07/11 Sold 50 Feb 3.5 Put .06*
    02/08/11 Sold 50 Feb 3.5 Put .06*
    02/23/11 Sold 50 Mar 3.5 Put .13
    02/28/11 Sold 50 Mar 3.5 put .18

    Closed trades Profit/Loss

    02/16/11 Bot close 100 Feb 5 Put 1.34 (9625)
    02/19/11 Expired 100 Feb 3.5 put 600

    Total return on closed trades (9025)

    Short 100 Mar 3.5 Put 1550
    Short 100 Jul 4 put 4775

    Net Position Exposure

    Naked puts 20000 shares

    Good Trading

    dealmakr

    • dealmakr said

      Hi Troy,

      Some now closed positions and updates

      Updated position EK 03/11/11

      Decided to take the loss on the position after EK in all of their wisdom issued another 250mm in debt @ 10.65% interest. Just makes me wonder why with over a billion cash on the books the issuance took place. Even though 50mm is going to pay down some debt due in 2013 @7.25%, makes you think that things aren’t as good as it seems, after all why borrow higher to pay back lower cost shorter term debt.

      Not all plays work out and after the prior disappointments, to me it was time to leave for some hopefully better plays as my confidence level in the management of this company is zero.

      Position closed

      01/05/11 Sold 50 Feb 5 Put .20*
      01/05/11 Sold 50 Jul 4 Put .25*
      01/25/11 Sold 50 Feb 5 Put avg .555*
      01/26/11 Sold 50 Jul 4 Put .70*
      02/07/11 Sold 50 Feb 3.5 Put .06*
      02/08/11 Sold 50 Feb 3.5 Put .06*
      02/23/11 Sold 50 Mar 3.5 Put .13*
      02/28/11 Sold 50 Mar 3.5 put .18*

      Closed trades Profit/Loss

      02/16/11 Bot close 100 Feb 5 Put 1.34 (9625)
      02/19/11 Expired 100 Feb 3.5 put 600
      03/11/11 Bot close 100 Mar 3.5 put .42 (2650)
      03/11/11 Bot close 100 Jul 4 put 1.05 (5725)

      Total return on closed trades (17400)

      Net Position Exposure

      0

      Good Trading

      dealmakr

      Updated position BRCD 03/15/11

      11/24/10 Sold 50 Dec 5 put .13*
      12/01/10 Bot 5000 BRCD 5.02*
      12/01/10 Bot 5000 BRCD 5.01*
      12/01/10 Sold 100 Dec 5 Call .18*
      12/01/10 Sold 100 Dec 5 Put .16*
      12/02/10 Sold 50 Apr 5 Put .50*
      12/03/10 Sold 100 Jan 5 Put avg .225*
      12/07/10 Sold 50 Jan 5 Put .18*
      12/17/10 Sold 50 Jan 5 Put .19*
      12/17/10 Sold 50 Apr 5 Put .50*
      12/30/10 Sold 20 Apr 5 Put .50*
      12/30/10 Sold 20 Apr 7 Call .27*
      01/03/11 Sold 100 Feb 5 Put avg .245*
      01/03/11 Sold 50 Feb 6 Call .27*
      01/03/11 Bot 5000 BRCD 5.36*
      01/04/11 Sold 30 Feb 6 Call .30*
      01/04/11 Sold 50 Jul 5 Put .53*
      01/04/11 Bot 5000 BRCD 5.54*
      01/13/11 Sold 100 Jan 6 Call .12*
      02/22/11 Sold 50 Oct 5 Put .32*

      Closed trades Profit/Loss

      12/18/10 Exercised 100 Dec 5 Call 1800
      12/18/10 Sold Exercise 10000 BRCD 5 (150)
      12/18/10 Expired 150 Dec 5 Put 2250
      01/13/11 Bot Close 80 Feb 6 Call .35 (550)
      01/13/11 Bot Close 20 Apr 7 Call .28 (20)
      01/22/11 Expired 200 Jan 5 Put 4100
      01/22/11 Expired 100 Jan 6 Call 1200
      01/24/11 Sold 10000 BRCD avg 5.615 1650
      02/19/11 Expired 100 Feb 5 Put 2450
      02/22/11 Bot Close 120 Apr 5 Put .06 5280
      03/15/11 Bot close 50 Jul 5 Put .28 1250
      03/15/11 Bot close 50 Oct 5 puts .44 (600)

      Total Return P/L on closed trades 18660

      Net Position Exposure 0

      Position closed

      With current events in Japan being hard to quantify, the position has been closed along with many other NP’s.

      Good Trading

      dealmakr

      Updated position XRX 03/16/11

      11/30/10 Sold 50 Dec 11 Put .16*
      11/30/10 Sold 30 Dec 11 Put .15*
      12/06/10 Bot 3000 XRX 11.74
      12/06/10 Sold 30 Apr 12 Call .82*
      12/31/10 Sold 25 Jul 9 Put .30
      01/21/11 Sold 30 Feb 12 Call .12*
      01/27/11 Sold 30 Feb 11 Call .16*
      02/09/11 Sold open 30 Jul 12 Call .32
      02/22/11 Bot 1500 XRX 11
      02/22/11 Sold 15 Apr 11 Call .46
      02/23/11 Sold 25 Oct 9 Put .52
      03/14/11 Sold 15 Oct 12 Call .40
      03/16/11 Sold 15 Jul 11 Call .30
      03/16/11 Sold 25 Oct 12 Call .30

      Closed Trades Profit/Loss

      12/18/10 Expired 80 Dec 11 Put 1250
      12/29/10 Dividend .0425 on 3000 shares 127.5 (corrected)
      01/21/11 Bot close 30 Apr 12 Call .28 1620
      02/13/11 Bot close 30 Feb 11 Call .13 90
      02/19/11 Expired 30 Feb 12 Call 360

      Total Return P/L on closed trades 3447.5

      Long 4500 XRX avg/share 11.50 (51720)

      Short 15 Apr 11 Call 690
      Short 15 Jul 11 Call 450
      Short 30 Jul 12 Call 960
      Short 25 Jul 9 Put 750
      Short 25 Oct 9 Put 1300
      Short 40 Oct 12 Call 1350

      Net Position Exposure

      Covered Calls 4500 shares
      Naked Calls 4000 shares
      Naked Puts 5000 shares

      XRX now under 10 with the market in a swoon and its anyones guess where things are going from here in the short term.

      Good Trading

      dealmakr

      Updated Position HBAN 03/16/11

      03/04/11 Bot 8000 HBAN 6.53 (52240)
      03/04/11 Sold 80 Apr 6 put .12
      03/04/11 Sold 80 Apr 7 call .13
      03/07/11 Bot 2500 HBAN 6.68 (16700)
      03/07/11 Sold 25 Jul 6 Put .33
      03/07/11 Sold 25 Jul 7 call .45
      03/09/11 Bot 5000 HBAN 6.77 (33850)
      03/14/11 Sold 50 Jul 8 call .16

      Closed trades Profit/Loss

      03/16/11 Dividend .01 on 15500 shares 155

      Total return on closed trades 155

      Long 15500 HBAN avg/share 6.63 (102790)

      Short 80 Apr 6 Put 960
      Short 80 Apr 7 Call 1040
      Short 25 Jul 6 Put 825
      Short 25 Jul 7 Call 1125
      Short 50 Jul 8 Call 800

      Net Position Exposure

      Naked puts 10500 shares
      covered calls 15500 shares

      Still believe it to be one of the better regional banks on the comeback trail, doesn’t mean that you can’t end up in the mud though.

      Good Trading

      dealmakr

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