The Money Tree

Safely Generating Income in Retirement

New Trade – EXC

Posted by mounddweller on January 3, 2012

Fellow Traders,

I entered a new trade in Exelon (EXC) today.  Actually, I entered two trades but only one got filled.  Many of my long-time readers know that I have had a position in EXC since April 2010.  I started out by selling naked puts at the $42.50 strike price.  I had the stock put to me at that price.  Since then I have sold covered calls and collected dividends on those original 200 shares.  I have also sold naked puts from time to time in an effort to acquire another 300 shares.

Today, EXC along with a whole host of other utility stocks took a substantial hit despite the overall market rising strongly.  I took advantage of this by deciding to sell another round of naked puts.  Specifically, I did the following:

STO 3 FEB $40 puts at $0.65.

I wavered between selling the JAN $41 puts at $0.40 and the FEB $40 at $0.65.  In the end I decided to go with the FEB $40 strike because it was closer to a stronger line of support.

Today, I also tried to BTC my JAN $44 calls.  However, this trade went unfilled as I had a limit order in to buy at $0.05.  Had I been willing to pay $0.10 I most likely would have been able to close out that trade.

Including my latest NP trade today I have been able to reduce my net cost over the past 21 months from $42.50 to $32.31.  That is a 23.98% ROIC.  My goal in this trade is to eventually own 500-800 shares of EXC with a ZERO net cost.  Granted I have a long way to go to accomplish that goal but I feel I’ve gotten a good start.

Regards,

Troy

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3 Responses to “New Trade – EXC”

  1. Dave said

    Wow this seems like a great trade to be Troy… All the best with achieving this goal…

    So a few questions I have for you…

    1) When finding new stocks/ positions to enter, what software do you use? Do you still use Rons software?

    2) When you are in a position, what signals do you look for when selling a call? Is it simply the resistance levels or do you use indicators… Please inform?

    Thanks Troy

    Dave

    • mounddweller said

      Dave,

      Yes, I still use Ron’s VISIONS software, albeit not as diligently as I used to. Currently, I’m more focused on identifying trading opportunities in a relatively small list of large-cap companies I call my ‘dividend superstars’.

      I also still use an option screener on my friend, Patrick’s web-site at http://www.mtrig.com. I use it to search for weekly option trades.

      Regarding your second question, the answer really is ‘it depends’. For example in my EXC position, I’ve found that it peaks in price usually right before it goes ex-dividend. Thus, I will try to sell a covered call right before the ex-date. Likewise, after it goes ex-dividend I look for a short-term bottom to form and then sell my naked puts.

      Other trades are different. It depends on my objective for that particular trade. If I just want to collect the premium and am not interested in holding the stock long-term I will sell at ATM or OTM call depending upon whether the overall market is trending up or not. If it is a stock that I wouldn’t mind owning for a while to either collect dividends or perhaps a short-term capital gain then I’ll look for a call option two or three months out and OTM. I rarely use resistance to determine my call strike prices but I often use support levels to determine my put strikes.

      Hope this helps.

      Regards,
      Troy

  2. […] an update on my position in EXC.   My last update was about 4 months ago.  You can read it here: https://troysmoneytree.wordpress.com/2012/01/03/new-trade-exc/.  I initiated a long-term position in EXC back in April of 2010.  My objective in this position […]

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