The Money Tree

Safely Generating Income in Retirement

Archive for January 24th, 2012

Update – BBY

Posted by mounddweller on January 24, 2012

Fellow Traders,

I want to update you on my naked put trades in Best Buy (BBY).  You’ll recall back on December 28th I opened two positions in BBY.  In one I sold 2 JAN $22.50 puts at $0.56.  In the other I sold 3 MAR $20.00 puts, also at $0.56.  You can read more about these trades and my rationale for making them here: https://troysmoneytree.wordpress.com/2011/12/28/new-trade-bby/.

Like most of the market, BBY has gone up in the new year.  It was $23.06 when I placed my trades in late December.  Today it closed at $25.36.

The JAN $22.50 puts expired OTM this past weekend.  Over the past few days I had been keeping track of the premium on the MAR $20 puts.  I was looking for an opportunity to ‘take my money and run’ without leaving too much on the table.  That opportunity came yesterday.  I was able to buy back the MAR $20 puts for $0.11.  This allowed me to capture over 80% of the value in the puts in about one-third of the total time remaining prior to expiration.

Below are the results of my BBY trades:

As you can see this trade turned out nicely.  With a holding period of 26 days or less I earned about 2.50% ROIC.   Annualized it works out to around 35%.  Wouldn’t it be nice if all my trades could work out this nicely!

Regards,

Troy

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