The Money Tree

Safely Generating Income in Retirement

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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