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Archive for March 20th, 2011

MAR Wrap-up and New APR Trades

Posted by mounddweller on March 20, 2011

Fellow Traders,

Like many of you I’ve spent a good portion of this weekend reviewing how I did in March and looking for potential April trades.  Here’s a brief recap of my March activity.  First, my closed trades:

(1) Back on February 4th I sold 4 MRK MAR $31 puts at $0.35.  After commissions I netted $128.03.  These puts expired OTM.

(2) On February 28th I sold 3 RVBD MAR $35 puts at $0.45.  After commissions I netted $123.77.  This was one of my Deep OTM NP Strategy selections.  The puts expired OTM.

Now, onto my trades which remained open.

(1) First Exelon (EXC).  I started this trade almost one year ago, back on April 16th.  My most recent activity includes selling 2 APR $43 calls at $0.90 and then buying them back late last week at $0.30.  Also, earlier this month I sold 3 APR $40 puts at $0.50.  Between selling calls and puts, and the dividends received I have reduced my cost basis from $42.50 to $37.46.

(2) Next up is Hugoton Royalty Trust (HGT).  This is my third trade in HGT.  The first two were very successful.  I initiated this third trade back on March 1st, buying 500 shares of HGT at $21.50.  On March 17th I sold 5 AUG $22.50 calls at $0.80.    The strategy with HGT is to buy the shares, sell calls 4-6 month out, and then collect monthly dividends.

(3) CSCO is my next open position.  Back on February 10th I opened this trade by selling 5 MAR $18 puts at $0.21.  On Friday I rolled these puts out to JUN for a $0.70 net credit.

(4) NOK is up next.  I did a buy/write on them back on March 11th at a net debit of $8.17.  I sold the APR $9 calls. 

(5) My remaining open position is in Getty (GTY).  On March 14th I sold 5 MAR $22.50 puts at $0.55.  These puts expired ITM and thus I will have 500 shares of GTY put to me at $22.50 on Monday morning.  My plan is to sell the JUN $25 calls at $0.75 and collect the $0.48 dividend which will be paid in mid-April.

Now onto my my list of potential trades for April.

Let’s briefly look at each of these.

(1) First up is Gamestop (GME).  You’ll notice I have them listed twice.  That’s because I can’t decide which trade I like better.  I like the ROIC with the $19 put and I have traded GME at this strike price with good results before.  However, I like the $18 strike because there is better support at this price.

 (2) Next is CSCO.  As I mentioned above I am already short 5 contracts at the $18 strike.  This trade expands my position by selling more puts at a much lower strike.

(3) Aflac (AFL) is my next pick.  It has fallen sharply because of the tremendous disaster in Japan where it does a lot of business.  It closed at $50.47 on Friday well off its 52-wk high of $59.54.

(4) JNJ is up next.  I ‘borrowed’ this pick from by investing buddy Teddi over at www.fullyinformed.com.  JNJ is approaching bargain territory so this is a good trade despite the sparcity of DSP.

(5) AT&T (T) is fast approaching their ex-dividend date and is trading at a nice price.  Thus, I’m happy to enter a buy/write trade here and reinitiate a position in T.

(6) Last up is GTY which I discussed up above.  As I said before I intend to sell CCs against the shares I’m acquiring tomorrow.  With a dividend yield in excess of 8% I won’t mind holding this one for awhile.

Best of luck to all my readers out there.  Let me know your thoughts on my trades and I would enjoy hearing what trades you’re considering.

Regards,

Troy

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Deep OTM NP Strategy – APR Week 4

Posted by mounddweller on March 20, 2011

Fellow Traders,

We have a total of 38 selections meeting our Week 4 criteria.  However, I don’t think all 38 are worthy of our risk capital.  As I mentioned in my MAR results post I think it is imperative, given the current market volatility, that we become more selective in what we choose to trade.  So, while I am posting the entire list of 38, I would like to highlight a few that caught my eye as having a good risk/reward profile.

Running down the list the first stock that caught my attention was Interdigital Communications (IDCC).  It closed Friday at $42.01.  The put I’m interested in is the $35 strike.  It has a bid price of $0.60 giving us a ROIC of 1.71% with 18.11% DSP.  Some will take one look at the chart and immediately wonder if I am out of my mind.  The stock had a strong run up from $25 to 57.50 and has since fallen sharply back to the low $40s.   But if you look closely you can see the stock is trying to find a bottom and that the money flow has bottomed out and is beginning to recover.  That technical indicator coupled with the stocks excellent fundamentals makes it a worthy candidate for an NP trade.  IDCC has a net margin of almost 40%!  Yes, you read that correctly, 40%.  It also boasts almost $12/share of cash sitting on its balance sheet.    It currently trades at about 12x trailing earnings.

The second stock that caught my eye was LDK Solar (LDK).  This is a stock I successfully traded under similar circumstances back in late November.  Friday, the stock closed at $11.47.  The APR put at the $9 strike closed at $0.15.  This gives us a 1.67% ROIC with 22.84% DSP. 

The third stock I noticed is one that was on our list last month as well, Rambus (RMBS).  We all know the technology stocks have been taking a beating of late.  Rambus is no exception.  In the past few weeks it has fallen from just over $22 to almost $18.  Friday it closed at $19.06.  The $16 put is at $0.36 bid.  This yields an ROIC of 2.25% and 17.94% DSP.  The $16 stike is below the 52-wk low of $16.94.

I also found three other stocks on the list which I feel are worthy of your consideration.  They are AGO, TSL, and WFR.  AGO insures bonds, while TSL and WFR are solar related stocks.

Best of luck to everyone this month.  I think we are in for quite a ride. 

Regards,

Troy

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