The Money Tree

Safely Generating Income in Retirement

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

 

 

 

 

6 Responses to “New Trades”

  1. Martin said

    Looks like a good call selling the lower strike in CAT. Are you planning on buying the stock if it happens to get lower and you get assigned or will you be rolling it down and out if needed?

    • mounddweller said

      Martin,

      Thanks for visiting my blog. I don’t have any desire to own CAT long-term. Thus, if CAT falls beflow my $87.50 strike I will likely roll it out.

      Regards,
      Troy

  2. Tommy said

    Troy,
    Both look good. I’m already in CAT, with a covered call that expires in March. Given the drop, I probably should consider buying it back and then selling a new call.
    Tommy

  3. Tela said

    Troy, what does the “D” indicate on your charts? Death cross?

    t

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