The Money Tree

Safely Generating Income in Retirement

Archive for October 1st, 2011

Recent Trades

Posted by mounddweller on October 1, 2011

Fellow Traders,

I want to update you on some of my recent trades.  Since I last provided an update I have added to one position and opened three more positions.  First, let me update you on my NP position in Petroleo Brasileiro (PBR).  You’ll recall I initiated this position back in May by selling JUN $32 puts.  You can read my write-up about why I entered the trade here: https://troysmoneytree.wordpress.com/2011/05/24/new-np-trades-2/.  From May through July this trade was working wonderfully.  My puts would expire OTM and I would then rewrite them the following month.  Since August the trade has not been working so well.  PBR has declined steadily and I have been rolling my puts at the $31 strike price.  I am now short the JAN $31 puts.  I will continue to roll these puts as long as possible until the price of PBR recovers.

Because PBR has declined substantially and I still believe it is a compelling value I have chosen to sell additional puts at the $20 strike price.   On 9/22 I sold OCT $20 puts at $0.33.  At the time PBR was trading around $23.45.  Yesterday, it closed at $22.45.  The 5-year chart below will show you while I chose the $20 strike price.

Even during the financial crisis in late 2008 PBR didn’t fall much below $20.  Also, at $20 PBR would be trading at 74% of its book value.  My plan is to continue to sell puts at the $20 strike price until PBR begins to recover.  If it should continue to fall below $20 I will begin rolling the $20 strike price puts as well.  I will then commit the last of my planned capital for this trade at a new lower strike price, perhaps at the $17 strike price.

OK, let’s move on to my new positions.  My new positions are in Corning (GLW), Annaly (NLY), and Microsoft (MSFT).  GLW was brought to my attention by an investing buddy of mine.  He is very conservative so when he thinks a trade is nice, I listen.   On 9/22 I sold OCT $10 puts at $0.13.  At the time GLW was trading at $12.25.  This trade gives me a 1.16% ROIC (net of commissions) with almost 20% DSP.  Below is the 5-year chart for Corning.  The $10 strike price is very near the bear market lows.  Other factors leading me to make this trade are GLW’s over $2.60/share in cash (net of all long-term debt) on its balance sheet, its book value of $13.56, and its P/E ratio of 6.

This week I made my two other new trades.  I sold NLY NOV $16 puts for $0.38.  I sold these puts after NLY went ex-dividend.

My last trade was in MSFT.  I sold OCT $23 puts at $0.32.  Net of commissions my ROIC for this trade is 1.3%.  The following 2-year chart shows why I like this trade.

Well, now you are all caught up.  As you can see I am always on the look out for good trades outside of those generated by my two NP strategies.  As the current market volatility continues I will be on the look-out for other good trades.

Best of luck to you in the weeks ahead.

Regards,

Troy

 

Posted in Portfolio Updates | Tagged: , , , , | 4 Comments »

Weekly NP Strategy – SEP 30 Expiration Results

Posted by mounddweller on October 1, 2011

Fellow Traders,

You’ll recall last week I chose 3 trades out of the 119 selections presented to us.  My chosen trades were as follows:

(1) INTC $20 strike

(2) MSFT $24 strike

(3) QCOM $45 strike

Let’s see how my chosen trades turned out.  First, up is INTC.  INTC closed at $21.62 last Thursday.   Over the next 6 trading days it traded as high as $22.98 and closed Friday just $0.01 above its low of $21.33.  Thus, the puts finished OTM and folks who took this trade earned 0.55% ROIC in just 6 trading days.

Next up is MSFT.    MSFT closed last Thursday at $25.06. It got as low as $24.73 and yesterday closed at $24.89.   This trade paid $0.24 or 1.00% ROIC.  That is an incredible one week yield for a AAA rated, blue-chip stock like MSFT.

Last up is QCOM.  It closed at $50.03 a week ago Thursday.  Since then QCOM has fallen consistently and closed at its low for the week at $48.63.  However, the $45 strike finished well OTM.  The ROIC was 0.53%.

Well, that’s it for our week in review.  The Weekly NP Strategy continues to perform well despite high volatility.

Regards,

Troy

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Deep OTM NP Strategy – OCT Week 3

Posted by mounddweller on October 1, 2011

Fellow Traders,

Below is the list of possible trades for our Deep OTM NP Strategy.  This week we have 62 selections from which to choose.  Unfortunately, I couldn’t find anything that suited me given the current market conditions.  However, your risk tolerance may be different than mine and there are many solid companies to choose from on our list.

Best of luck in your trades this week.

Regards,

Troy

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What Others are Trading – OCT 2011

Posted by mounddweller on October 1, 2011

Fellow Traders,

Let’s hear what trades you’ve recently made or are considering.  Just add a comment to this post.

Regards,

Troy

 

Posted in Your Picks | 4 Comments »