The Money Tree

Safely Generating Income in Retirement

Archive for March 22nd, 2012

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:

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.




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