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Archive for February 10th, 2013

New Trade – GLW

Posted by mounddweller on February 10, 2013

Fellow Traders,

On Friday I entered a new position in Corning (GLW). I executed this trade after watching GLW for the past few weeks. GLW has fallen since hitting $13 in early January. It continued to sink and trace a path along the lower bollinger band finally bottoming at $11.79 on Monday, February 4. On Tuesday the stock bounced off the lower bollinger band and began to move higher. I continued to watch the stock proceed higher on Wednesday and Thursday. By Friday I feared that I had missed my opportunity. However, on Friday morning the stock pulled back and I swooped in buying 1000 shares at $12.14. At first I had tried executing a buy/write for a net debit of $11.78. However, I was unable to get a fill.

I then changed my strategy. I decided to try to time my entry by buying the stock near the bottom and then waiting to sell calls as the stock reached an intra-day overbought condition. Yes, this was a risky move on my part. There were no guarrantees that the stock would move back up at some point later in the day. However, given the previous 3-day rally in the stock I thought it was worth a chance. As it turned out, I was right. I was able to buy the stock as it bounced off its lows of the day. As I mentioned above I bought 1000 shares at $12.14 at 10:59 a.m. Then using a 1-minute price chart and Williams %R I was able to sell the MAR $12 calls at $0.45 around 3:17 p.m. You can see I missed my best chance to sell the calls a short time earlier. Greed got the best of me and I waited too long trying to get one more penny for my calls. Thankfully, I was given a second chance before the market closed to sell the calls at a good price.

BLOG - GLW 1 day chart

Let’s look at my potential profit on this trade.  By buying the stock at $12.14 and selling the MAR $12 calls for $0.45 I have the potential to make a net of $0.31 per share.  My ROIC is 2.55%.  That’s a nice return.  However, it gets even better.  GLW is expected to declare a $0.09 dividend before expiration on March 16th.  If my calls are not exercised early and I am also able to capture this $0.09 dividend it will boost my ROIC to 3.29%.

Best of luck to all my trader friends in the coming week.

Regards,

Troy

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