The Money Tree

Safely Generating Income in Retirement

Archive for February 25th, 2013

New Trades

Posted by mounddweller on February 25, 2013

Fellow Traders,

I executed two new trades today in CAT and INTC.

Catepillar (CAT) is engaged in manufacturing heavy construction equipment.  It has a 52-wk range of $78.25 – $116.40.  Over the past few weeks it had fallen from $100 to close at $91.54 on Friday.  My investing buddy Teddi at www.fullyinformed.com noted in her weekend commentary that CAT appeared to be severely oversold.  Thus, I decided to give it a look.  CAT initially opened higher but then rapidly fell and found support just above $91.00.  I, in my usual fashion, tried to catch the exact bottom and ended up watching the stock move away from me.  After kicking myself for missing the opportunity I decided to keep an eye on CAT.  Later that morning I found CAT once again testing its previous lows and I was determined to not have a repeat performance of watching the opportunity pass me by.  I was looking at the MAR $90 put and wanted to get at least $1.30 for it.  However, in looking at the 3-month price chart (see below) I noticed a gap had occurred between the close on 12/31/2012 and 1/2/2013.  It has been my experience that stocks will often try to backtrack and fill the previous gap.  Thus, I decided an extra bit of caution was warranted.  So instead of selling the MAR $90 put I opted to sell the MAR $87.50 put for $0.63.

BLOG - CAT 3M Chart

After bouncing again off of support at $91 I felt pretty good about my trade.  But then Mr. Market began to wipe the smile off my face.  CAT sold off again and this time the support at $91 did not hold.  CAT ended the day at $89.16.  I am happy I decided to sell the $87.50 put rather than the $90 strike.

My second trade today was in a stock I’ve traded many times, Intel (INTC).  I want to build a significant long-term position in INTC.  I currently own just over 505+ shares and feel the $20 price is a good level to add to my position.  Thus, today I sold 5 MAR $20 puts at $0.25.  INTC was at $20.34 when I executed my trade.

BLOG - INTC 3M Chart

If INTC falls below $20 by MAR expiration I may elect to roll these puts for a couple of months to collect more premium and thus further reduce my cost basis.   If it stays below $20 as the next dividend date approaches I may choose to accept assignment in order to capture the dividend.

Good trading to one and all.

Regards,

Troy

 

 

 

 

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