The Money Tree

Safely Generating Income in Retirement

Archive for September 1st, 2011

Two New NP Trades

Posted by mounddweller on September 1, 2011

Fellow Traders,

I want to update you on two trades I made earlier this week.  Yesterday, I took advantage of the US Justice Department’s decision to attempt to block AT&T proposed merger with T-Mobile.  AT&T (T) sold off hard on the news falling from $29.90 to as low as $28.00 (6.4%).  Believing the market had over-reacted I executed the following trade:

STO 5 T SEP $27 puts at $0.37

This gives me a 1.29% ROIC (net of commissions) with 17 days to expiration (DTE).  Annualized my ROIC is 27.68%

Today, I placed a trade in Annaly (NLY).  I’ve never traded NLY before.  My objective in this trade is very different from almost all of my other naked put trades.  In this case I want to have NLY put to me at $17.   You see NLY goes ex-dividend towards the end of this month (after SEP expiration).  If I have the stock put to me at $17 I will be eligible to receive the $0.65 quarterly dividend.   Here’s the trade I executed:

STO 5 NLY SEP $17 puts at $0.30

Excluding the potential for collecting a dividend this trade gives me a 1.64% ROIC (net of commissions) with 16 days to expiration (DTE).  Annualized my ROIC is 37.32%.

My return gets even better if NLY closes below $17 and I have the stock put to me.  In this case I will hold the stock at least until the ex-dividend date of 9/29.  Doing so will give me a cost basis of $16.05.  At that point I can either sell the stock immediately or sell OCT or NOV calls against my position.  My ROIC including the dividend is a juicy 5.6% with a minimum holding period of 29 days.

Well, that’s it for this evening.  Best of luck to everyone in this new month of September.  I have a feeling it is going to be a wild month.

Regards,

Troy

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What Others are Trading – SEP 2011

Posted by mounddweller on September 1, 2011

Fellow Traders,

Here is the monthly post to which you can post the results of your own trades.  What’s been working for you?  What hasn’t?  Enquiring minds want to know.

Regards,

Troy

 

Posted in Your Picks | 2 Comments »

Weekly NP Strategy – SEP09 Exp.

Posted by mounddweller on September 1, 2011

Fellow Traders,

I’m back with a second week of selections from our Weekly NP Strategy.  Just a quick reminder and warning that this is a work in progress.  This strategy has not been tested in any way.

This week we only have 35 selections that meet our basic criteria (i.e., > 5% OTM, and ROIC > 0.5%).  Of those I only found two that I had even the slightest interest in.  The Goldman Sachs (GS) trade looks OK.  The stock hasn’t traded below the $105 strike price recently.  Several stocks from the list last week reappeared this week, albeit at higher strike prices.

You’ll note I have eliminated some of the columns of data that appeared last week.  I’m hopeful this will allow me to insert the image into the post in a font size that is actually readable.  Last week you needed a magnifying glass to read the chart.  Let me know if you feel any of the data columns I deleted are important and should be added back.

Well, that’s it for tonight.  I’ll be back tomorrow with a post about the results from our first week trades.

Regards,

Troy

Posted in Deep OTM NP Strategy | Tagged: , , | 1 Comment »