The Money Tree

Safely Generating Income in Retirement

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

4 Responses to “MAR Wrap-up and New APR Trades”

  1. bob james said

    Troy, wouldn’t it be better to eliminate those that have earnings before the next expiry? I am using this method of selling far OTM puts (and sometimes calls) and haven’t had major losses except for when I neglected checking for the next earnings date and ended up closing out a position early when I did finally recognize why the premiums were so high. As it turns out, the position would have been OK, but I felt I didn’t want the risk.

    I think you use mtrig.com, and wish they had the ability to screen for this. I’ve contacted him and he says he’s working on it.

    On your above list, GME’s earning date is March 24. I’ve been using Yahoo’s earnings calendar, http://biz.yahoo.com/research/earncal/g/gty.html

    I also like LDK Solar so sold some April 9 puts today for $.10 (~21% DSP). Other trades were TGT Ap 48Ps for $.39 (hoping it’s bottomed) and ATPG Apr 15Ps for $.18 (~19.8% DSP).

    Thanks for your work on the website.

    • mounddweller said

      Bob,

      Thanks for responding with your comments. It’s encouraging to know people not only visit my site but actually read what I have to say and think about it. My list of deep OTM NP trades is just a starting point. Checking for upcoming earnings releases is something I do as part of my DD before I actually execute a trade. Deciding whether to let an upcoming earnings release influence my trade decision is a stock by stock decision. The more comfortable I am with a stock the less I am going to let the upcoming earnings release impact my trade decision.

      Thanks again for sharing your thoughts and your trades.

      Regards,
      Troy

      • mounddweller said

        Bob,

        I made a mistake in my prior comment. I responded to your comment thinking you were talking about my Deep OTM NP Strategy selections not my regular trades that I had selected for April. Either way, I generally do look for upcoming earnings dates when I do my DD. Sometimes it affects my decision other times it does not.

        Troy

  2. bob james said

    No, you were correct in the first place. I was talking about the deep OTM NP strategy. With the “shotgun” approach to coming up with a large list of stocks to select from, I wondered if removing those with earnings would improve the overall profitability of the strategy. I do understand you don’t select all of them obviously.

    I’m certainly not trying to be critical, or assume you don’t look at earnings dates. But I thought it may skew the results downward when some stocks with bad earnings report and (potentially) cause large losses for the strategy.
    Bob

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