The Money Tree

Safely Generating Income in Retirement

Update – AMAT

Posted by mounddweller on January 20, 2012

Fellow Traders,

Today I closed my naked put position in Applied Materials (AMAT).  You’ll recall back on December 21st I sold 5 JAN ’13 puts at the $10 strike price.  The premium I received was $1.57/share.  You can read all about AMAT and the reasoning behind the trade here: https://troysmoneytree.wordpress.com/2011/12/21/new-trade-amat/.

So, why did I close the position after just 30 days?  Well, quite simply, I wanted to take advantage in the recent run up in stock prices in general and AMAT in particular.  Back when I entered the trade AMAT was selling for $10.21.  Today it closed at $12.47.  Yes, AMAT like a lot of other stocks in this market has been on a tear of late.  It is up 22.13% in 30 days.  This strong performance had reduced the premium on my naked puts by over 50%.  Thus, I felt  it might be a great opportunity to lock in a gain.

Let’s look at how I did.  As I said earlier I sold the naked puts for $1.57.  Today, I bought them back for $0.75.  Thus, net of commissions, I made $388.10 in 30 days on $5,000 of capital.  My ROIC was 7.76%.  Annualized, my ROIC was 94.44%.  Not bad, huh?

My plan going forward is too continue to watch AMAT.  This market is not going to go straight up.  At some point we will get a correction.  At that time I will evaluate whether it makes since to re-enter this trade.

Regards,

Troy

 

One Response to “Update – AMAT”

  1. dealmakr said

    Nice trade on AMAT, picked up the meat of the move in a short timeframe. I should have looked at this one closer.

    Good Trading

    dealmakr

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