The Money Tree

Safely Generating Income in Retirement

New Trade – CCJ

Posted by mounddweller on October 14, 2012

Fellow Traders,

I opened up a new position in Cameco Corporation (CCJ) on Friday.  Specifically, I sold to open 5 NOV $18 puts at $0.40.  I think once you see the 1 and 5 year charts on CCJ you’ll see one of the reasons I like this trade.  So here you go…

In both cases you can see CCJ is nearing lows.  What you can’t see, but I’d encourage you to check out for yourself is the MACD and Stochastics on CCJ.  Both, in my opinion, suggest the sell-off has just about ran its course.

CCJ also has good fundamentals.  Over the past 5 years it has doubled it’s quarterly dividends while maintaining a low payout ratio of only 35%.  It’s forward P/E is a very reasonable 12.  Cash and L/T debt are virtually even.

Even though CCJ is not a stock I’m planning to own long-term I always look at the fundamentals to make sure I would be comfortable owning it if my trade doesn’t work out as planned.

In this case, barring a meltdown in the overall stock market, I do not see CCJ falling much below $19.  So, if my puts expire worthless as I plan I will have made 2.22% ROIC with a holding period of about 35 days.

Oh, one final note.  This is not my first rodeo with CCJ.  Twice last year I sold NPs on it.  The first time at the $25 strike price and the second time at the $16 strike price.  The $25 strikes I was able to buy back for $0.05 and the $16 puts expired worthless.

Regards,

Troy

 

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