The Money Tree

Safely Generating Income in Retirement

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

6 Responses to “Update – BBY”

  1. Tony Mlejnek said

    Great site Troy! I just had a question regarding commissions as you posted them in your table. It appears you are paying $9.15 or $9.75 for 2 contracts, who is your broker? I’m looking for lower cost brokers right now as I generally trade 2-4 contracts. Any advice? Thanks!

  2. mounddweller said

    Tony,

    Thanks!

    My trading accounts are at Charles Schwab. Their standard rate for options trades is $8.95 + $0.75 per contract. About a year or so ago I asked them to review my trading volume to see if I could qualify for a discount. I was able to negotiate a rate of $7.95 + $0.60 per contract.

    If you trade a lot they will work with you.

    Regards,
    Troy

    • Tony Mlejnek said

      Thanks for your response Troy, just a follow up are you using Schwab’s StreetSmart Edge platform for your options trading or their web based?
      OptionsXpress is owned by Schwab but their pricing seems high. My concerns are it seems we smaller traders are paying too much for commissions,i.e. several brokers now, Tradestation, Interactive brokers, MB trading are not charging a base fee at all for options and are only charging $1 or less per contract, that makes a huge difference when trading only 2-4 contracts. Have you had any experience with the 3 other brokers I mentioned? What are your thoughts on pricing?

      Sorry if this isnt the right forum for these questions I’m just looking for an experienced traders thoughts or ideas. Perhaps we could exchange further information through email if that is more appropriate, I don’t know if other readers will be interested in my questions? Thanks again for sharing!

      • mounddweller said

        Tony,

        Sorry for the delayed response. Yes, I do use Schwab’s StreetSmart Edge platform. I haven’t taken the time to learn everything it can do but the functions I do use I like.

        I agree that a lower price is always better but I will say there is something to the old saying “you get what you pay for.” With Schwab, I know I’m going to get great service. In my mind that’s worth paying a little bit exta. As one of their ‘active traders’ I always get quick, professional service whether it comes from texting directly with them online or calling their 800 number.

        I haven’t used any of the other brokers you referenced so I can not comment on the quality of their service. However, I suspect their is a reason they can offer those low prices. Lower headcount, fewer ‘bells & whistles’, etc.

        I understand exactly where you are coming from with regard to higher commissions and smaller trades. That is why I petitioned Schwab to lower my commission structure. I was finding it was cost prohibitive to pay their regular rates for a small 2 or 3 contract postion. It really became a problem when I needed to roll out a position. However, I will say one good thing about that is that on occasion it can act as a brake to slow you down from making less than perfect trades.

        Regards,
        Troy

      • Tony Mlejnek said

        Thanks again Troy for sharing your thoughts, I will keep you posted on my progress. I really appreciate your insight!

        Best of luck,

        Tony

  3. […] Update – BBY […]

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