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Archive for March, 2012

Update – VXX

Posted by mounddweller on March 25, 2012

Fellow Traders,

On Friday I was unable to roll my 5 VXX MAR23 $22 puts out a week for a net credit.  Instead I had to roll out to the normal APR monthly $22 put for a net credit of $0.45.  I placed my trade before lunch and had to wait until just before 2 pm CT before it finally executed.  The bid price on the spread was $0.35 all day and it didn’t want to budge.  I had decided that if it hadn’t executed by the last half hour of trading I was going to cancel the trade, accept having VXX put to me at $22, and then write the APR $22 calls on Monday morning.  The APR $22 calls at the time were going for $0.46-$0.47.

However, as I said I was able to roll out to APR by BTC MAR23 $22 at $4.65 and STO APR $22 at $5.10.  Doing so now gives me a total net credit (after commissions) of $746.07 against my capital requirement of $11K.  Thus, if VXX recovers and finishes OTM by April close I wll have earned 6.8% in about 7 weeks.  If VXX doesn’t recover by APR expiration I’ll try rolling out to a May expiration.

I’m learning a lot in this trade.  Even in the 21st century the school of hard knocks remains an effective teacher;-)

Regards,

Troy

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Weekly NP Strategy – MAR30 Expiration

Posted by mounddweller on March 22, 2012

Fellow Traders,

The Weekly NP Strategy has 42 possible trades this week.  As usual you can find them here on the Yahoo group board: http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/.

Out of the 42 possibilities I found three that I liked.  First up is Mosaic Company (MOS).  The Mosaic Company engages in the production and marketing of concentrated phosphate- and potash-based crop nutrients for the agriculture industry worldwide.  MOS closed today at $56.27.  The strike price of the put we’re interested in is $52.50.   While this is somewhat higher than its 52-wk low of $44.86 I still like the trade.  Here’s why, looking at the one year chart it appears that MOS has support at $55.  It has bounced off of this level multiple times in both February and March.  The premium on the MAR30 $52.50 put is $0.27 giving a ROIC of 0.51% for the 8-day holding period.

The next two trades that interested me are in the same stock, Research in Motion (RIMM).  Research In Motion Limited (RIM) designs, manufactures, and markets wireless solutions for the worldwide mobile communications market.  I’m sure most of you are aware that RIMM has been taken to the cleaners by Apple and the iPhone.  As a matter of fact I just saw a headline today that iPhone sales had overtaken Blackberry in its home country of Canada.

So, why would I consider a trade in RIMM.  Well, primarily because both of the strike prices I’m interested in ($11 and $12) are below the lows encountered late last year when everyone was trying to get out of RIMM as fast as possible.   Back on December 20th RIMM closed at $12.52.  It retested those lows earlier this month closing at $12.90 on March 7th.

The $12 strike price has a premium of $0.25 indicating a potential ROIC of 2.08%.  The $11 strike price has a premium of $0.11.  Yield is an even 1.00%.

Both RIMM and MOS are debt free and trade at reasonable multiples to current and prospective earnings.  RIMM is especially cheap trading at < 4x current earnings and just over 4x prospective earnings.

That’s it for this week.  Best of luck trading in the coming weeks.  Be safe…it could be a bumpy ride for awhile.

Regards,

Troy

 

Posted in Weekly NP Strategy | Tagged: , , | 2 Comments »

Update – VXX

Posted by mounddweller on March 18, 2012

Fellow Traders,

I want to update you on my VXX trade.  As you’ll recall I entered this position back on February 29th, selling 5 VXX MAR naked puts at a strike price of $22.  The premium I received was $0.50/share.

At the time I placed the trade VXX was trading around $24.52.  The recent low had been $23.72.  My strike price at $22 seemed reasonably safe.  Alas, the best laid plans often don’t work out.   While I thought the market was ripe for a correction which would cause VXX to rise just the opposite happened.  The market has continued to move higher sending the VIX and VXX lower.  Friday, VXX closed at $21.56.

Rather than have VXX put to me I elected to roll out my position.  However, instead of rolling my puts out to the normal monthly APR expiration I chose to roll them to the next available weekly expiration on Friday, March 23rd.    With just 8 days to expiration I was able to roll out with a net credit of $0.62.

Net of commissions my total credit thus far in this trade is $535.02.   If VXX closes above $22 on Friday I will have earned a 4.86% ROIC with a holding period of only 24 days.  If VXX remains below $22 next week I will roll out another week.  Sooner or later the  market will have a down day or two and that will be my opportunity to close the trade at a profit.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , , | 8 Comments »

Weekly NP Strategy – 0317 Expiration

Posted by mounddweller on March 8, 2012

Fellow Traders,

As most of you know this week isn’t a true weekly options week.  In reality it is just the last week before the normal monthly options expiration which occurs next Friday.  Thus, I don’t have any picks for you this week.  However, I did run the screen for you looking at all trades  with at least 5% DSP and 0.5% ROIC.    This screen returned 275 possible trades.

You’ll notice the number of possible trades is much higher than the 33 we found last week.  Again this is because our universe covers all stocks with options not just stocks which have weekly options.

I’ll post the file out on the Yahoo group board.  You can find it here: http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/.

Regards,

Troy

 

Posted in Weekly NP Strategy | 2 Comments »

What Others are Trading – March 2012

Posted by mounddweller on March 2, 2012

Fellow Traders,

Here’s your chance to show off your trading skills.  Let my other readers know what’s working for you or what’s not.

Regards,

Troy

 

Posted in Your Picks | 2 Comments »

Weekly NP Strategy – MAR 9 Exp.

Posted by mounddweller on March 1, 2012

Fellow Traders,

My apologies, It’s been hit or miss the past few weeks with me posting the Weekly NP Strategy selections.  But, this week, I’m back with another round of trades for you to consider.

It was pretty slim pickin’s this week.  Only 33 trades met our 5% DSP and 0.5% ROIC selection criteria.  Of those only 2 caught my eye as good possibilities.

First up is Abercrombie & Fitch (ANF).  This isn’t the first time it has shown up on our Weekly NP Strategy screen.  This week its the $45 strike price we’re interested in.  The stock closed today at $47.33 and the $45 put has a bid premium of $0.33.  This gives us a 0.73% ROIC with 5.62% DSP.  ANF has a 52-wk low of $40.25 which it hit exactly one month ago.  Looking at the 1-yr chart you’ll see ANF has solid support at $45.  It bounced off this level several times over the past few months before finally succumbing to the repeated pressure in early February.

My second selection this week is a trade very similar to the one I made earlier this week.  It involves the ETN, VXX.  You may recall VXX tracks the performance of the volatility index VIX.  Earlier this week I placed a trade selling the regular MAR monthly expiration puts at the $22 strike.  The weeklies at the same strike also look like a good trade.  The MAR 9 $22 put has a bid premium of $0.22.  The ETN closed today at $24.14 giving us a 1.00% ROIC with 9.78% DSP.  While VXX has a 52-wk low of $19.88, it hasn’t closed below $23 in several months.

Well, there you have it.  Just two trades this week, but both I think are worthy of your time and further due diligence.

Regards,

Troy

PS.  Oops, almost forgot.  If you want to see the other 31 trades you can find them here:

http://finance.groups.yahoo.com/group/CoveredCalls-NakedPuts_OptionStrategies/files/

 

Posted in Weekly NP Strategy | Tagged: , , | 2 Comments »