Results – July 2013

Fellow Traders,

July is history.  Wow, 2013 is going quickly.  July turned out to be a good month.  Let’s check those results.

Number of Closed Positions: 7

Profit on Closed Trades: $1,272.00

Total Capital Used on Closed Trades: $71,350.00

Average Number of Days Trades Were Open: 24.6

Return on Invested Capital: 1.78%

Let’s dig a little deeper into these 7 closed trades.  All 7 of the closed trades involved naked puts.  Six of the seven expired OTM.  The other one was my ‘day-trade’ in POT which I wrote about yesterday.  I had puts expire in CHRW, CAT, KO, TEVA, and two positions in LNCO.  I sold the CHRW JUL $55 puts at $1.10 when CHRW was at $55.97 (it has strong support at $55).  The puts expired OTM with CHRW closing at $60.60.  CAT was at $83.86 when I sold the JUL $80 puts for $1.00.  At expiration CAT closed at $85.65.  My first time trading KO also turned out well, I sold the JUL $38 puts at $0.40 when KO was at $39.54.  They expired OTM with KO trading at $41.09.  Last up are my two trades in LNCO.  With LNCO trading around $30.70 I sold the JUL $27.50 and JUL $25 puts at $1.05 and $0.55 respectively.  It was a wild ride.  LNCO dropped to an intra-day low of $23.03 on July 5 before recovering to close on expiration at 32.18.

Now let’s look at my open trades.

Number of Open Positions: 7 (in 5 stocks)

Net Cash Flow in July from Open Positions: $(110.45)

Total Capital Used on Open Trades: $65,662.93

Net Cash Flow on Invested Capital: (0.168%)

Currently I have open positions in EXC, GDX, OKE, MSFT, and SUNE (WFR).   Let’s look at each one starting with EXC.  I just can’t seem to find the right rhythm with EXC.  If I weren’t wanting to re-establish a long-term position in this company I would have given up long ago and moved onto trading something else.  Long time readers will recall that I had a position in EXC that got called away in 2012.  Since then I have been trying to build a new position.  In May I started by selling the JUN $34 puts.  As EXC continued to move up more I feared having it run away from me so I lost my patience and bought 200 shares at $35.55 only to see it begin to fall almost immediately.  I ended up having to roll the JUN $34 puts out and down to JAN $33 for a small credit.  Then in June I sold more puts at the $32 strike.  As these went ITM I rolled them down and out as well to the JUL $31 puts.  When the JUL $31 puts went ITM I decided to cut my losses and bought to close them for a small debit.  Again, my patience cost me.  EXC bounced and closed at JUL expiration above $31.  Had I been more patient they would have expired OTM.  Finally, to finish the EXC saga for this month, today I sold some AUG $30 puts at $0.40 in an effort to reduce the debit I created when I closed the JUL $31 puts too early.  All of this activity has put me at just about at break-even.  The only one getting rich on this trade is my broker.

Let’s move onto my remaining open trades.  I won’t bore you with any more details on GDX.  It continues to hover between $26-$28.  I am way under water on this trade.  Next up is OKE.  Like, EXC I’m having trouble figuring this one out.  This is another company I’m trying to establish a long-term position in.  Back in May I sold JUN puts at the $47.50 strike.  Shortly thereafter the bottom fell out on the stock and I ended up rolling my position down and out to the JAN $45 puts for a $0.30 net credit.  Then in June I sold another round of JUL puts at the $42.50 strike.  When OKE fell below $42.50 I decided to close that position and began looking to sell something else further out and down for a credit.  Alas, like with EXC, had I just been patient the JUL $42.50 would have expired OTM.

OK, not all of my open positions are basket cases.  I actually have two open positions that are performing well.  I am short MSFT AUG $30 puts.  I opened the trade on July 19 selling the AUG $30 puts for $0.39 while MSFT was at $31.06.  I have no reason to believe these won’t expire OTM.

My last open position is in SUNE (WFR).  You’ll recall last month that I mentioned that I had sold the JUL $10 calls at $0.25.  These ended up expiring OTM so I wrote another round of calls for August also at the $10 strike.  I was able to sell these for $0.68.  SUNE has been on both sides of $10 this week so time will tell if I’ll get called away at expiration or be able to write another round of calls.

 

Going into August I am considering another round of naked put trades TEVA, CAT, CHRW, and CCJ.  All are once again approaching key support levels.

Regards,

Troy

New Trade – POT

Fellow Traders,

 

My trade today in POT was a first for Troy’s Money Tree.  Why is that, you ask?  Well, because I ended up mimicking a day-trader.  By that I mean that I was in and out of the trade in just a few short hours.

 

I have been keeping an eye on POT for the past several days.  As a matter of fact I had actually tried to place a trade in it yesterday but thankfully never got filled.  Specifically, I had placed an order to STO AUG $36 puts at $0.51 when it was down around its lows of the day.

This morning before the market opened I noticed the news about Russia’s Uralkali Group, the world’s largest fertilizer producer, pulling out of a cartel and vowing to ramp up production.  I then checked pre-market prices for all of the major fertilizer producers.  As expected all, including POT, were going to open significantly lower.

After the market opened I looked at various expiration months.  The market was moving so fast there were no options available for AUG expiration at POT’s opening price.  I then decided to look at the JAN14 expiration.  By keeping an eye on the fast stochastics and the William’s R technical indicators I was able time my entry at close to the daily low for POT.  With POT trading at $29.15 I sold the JAN14 $28 puts for $2.58.

My plan upon entering the trade was to watch for the subsequent bounce and close the trade when I could buy back the puts at $1.29 or better (50% of the entry price).  I had anticipated this could take a month or two to achieve.

I checked in on POT’s price periodically throughout the day (unfortunately, I still have a day job).  I wanted to be ready to bail out quickly if I had mistimed my entry and the stock continued to fall.  After a late lunch I noticed that POT was back over $30 and moving steadily higher.  I started paying closer attention to it and shortly after 2 pm CT I decided it might make sense to alter my original trading plan.  With the JAN $28 put trading at just under $2.00 I realized I could buy to close my position and achieve a 2% ROIC in about 5 hours of elapsed time.

I continued to closely watch the trade.  Like in the morning when I opened the trade I was watching the fast stochastics and William’s R to time my exit.  When the stock began to pull away from the upper Bollinger Band that’s when I made my move.  With POT trading at $31.65 I bought to close my JAN14 $28 puts at $1.71.

My ROIC on this trade, net of commissions, was 2.95%!  The unrealistic annualized return is an astronomical 1075%.

My plan now is to continue to watch POT and the other fertilizer manufacturers like MOS, IPI, and AGU to see if I can detect a floor in the pricing.  At that point I’ll look to sell another round of puts for either the AUG or SEP expiration depending on how many days remain to expiration.

I’ll be back later this week with a summary of my July results.  It’s been a good month.

Regards,

Troy