The Money Tree

Safely Generating Income in Retirement

Archive for February 28th, 2013

New Trade – POT

Posted by mounddweller on February 28, 2013

Fellow Traders,

I slipped in one more trade this month.  Today, I sold 3 APR POT $37 puts at $0.47.  After commissions I netted $131.25 from this trade.  This trade came to me by way of my participation on the Yahoo Covered Calls Naked Puts Option Strategies board.  We have a lively discussion.  For further information on how you can join our group see the link on the left side bar.

Let’s look at what I and others saw that convinced us to get in this trade.  First, let’s look at the 3-month chart for POT.

BLOG - POT 3 MTH Chart

As you can see POT, after hitting the upper BB at around $44 on January 28th began to head south.  On February 20th it hit the lower BB and began to drop rapidly.  On Monday, February 25th it bottomed out and the following day carved out a small gain.  Then on Tuesday it had a big gain and pulled away from the lower BB.  This was the signal that it was time to consider a naked put trade.  Thus, this morning while the stock was hitting its lows of the day I pulled the trigger and sold the APR $37 puts.

Here’s the intra-day chart for today.

BLOG - POT Intraday Chart

If you look closely you’ll see a little blue dot on the chart when POT was around $39.65 at 11:05 ET.  This is when I executed my trade.  You’ll notice POT had hit what was to be its low of the day just a few minutes prior to 11:00.  I watched it bounce off these lows and then retrace and try to retest them.  It didn’t make it before turning back up.  That’s when I decided it was time to jump in.  My timing was good (for once).  I was only one penny away from capturing the highest premium of the day for the APR $37 puts.  The stock took off from there and closed at over $40/share.

Regards,

Troy

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Monthly Results – FEB 2013

Posted by mounddweller on February 28, 2013

Fellow Traders,

You’ll recall last month I started a new series of posts summarizing my monthly trading results.   This being the last day of the month let’s take a look and see how I did.

Number of Closed Positions: 2

Profit on Closed Trades: $(1,338.45) – Yes, I lost money this month.  More on that later…

Total Capital Used on Closed Trades: $39,267.90

Average Number of Days Trades Were Open: 530 – No, that’s not a misprint.  Again, more on that later…

Return on Invested Captial: None, I had a realized loss of capital.

OK, before I move on to the stats for my open trades, let me tell you a little more about these closed trades and the peculiar results.  Actually, I had one losing trade and one winning trade.  The losing trade was a long-held position in EXC that was unexpectedly called away from me.  I had ITM calls that got assigned early so someone could capture EXC’s last $0.525 dividend.  I had held EXC in my account for almost 3 years.  My sale of naked puts and covered calls and the collection of quarterly dividends could not make up for the steady decline in price.  Thus, I lost about $1,500 out of the $20,500 of capital I had in this trade.  I am working to recapture that lost capital by selling a new round of naked puts.  As a result my net loss on EXC is now down to $1,200.

My other closed trade was a winner.  My 3 naked puts in YUM at the $62.50 strike expired OTM.  This resulted in a gain of $214 on $18,750 in capital in 25 days.

Now let’s look at my open trades.

Number of Open Positions: 7

Net Cash Flow in February from Open Positions: $1,288.85

Total Capital Used on Open Trades: $90,340

Net Cash Flow on Invested Capital: 1.43%

This month I am again pleased with the net cash flow on invested capital.  However, I am disappointed in the realized loss of capital from my closed trade in EXC.  I am working hard to learn to avoid sizable losses of capital.

Best of luck to all my readers as we head into March.

Regards,

Troy

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