Fellow Traders,
Can you believe it’s already Labor Day weekend? Where has this year gone? All of the big boys on Wall Street will be back from the summer homes in the Hampton’s next week. It should be interesting to see how we finish out the year.
Well, let’s take a look at how The Money Tree made out this month.
Number of Closed Positions: 6
Profit on Closed Trades: $1,040.15
Total Capital Used on Closed Trades: $43,133.73
Average Number of Days Trades Were Open: 21.2
Return on Invested Capital: 2.41%
Let’s dig a little deeper into these 6 closed trades. Four of the six closed trades involved naked puts. One was a covered call and the sixth one involved the purchase of calls; something I’d never done before. The four naked put trades all expired OTM. I had puts expire in EXC, LNCO, MSFT, and POT. I sold the EXC AUG $30 puts at $0.40 when Exelon was at $30.55. The puts expired OTM with EXC closing at $30.16. LNCO was at $29.63 when I sold the AUG $27 puts for $0.60. At expiration LNCO closed at $27.63. My trade in MSFT also turned out well, I sold the AUG $30 puts at $0.39 when MSFT was at $31.06. They expired OTM with Microsoft trading at $31.80. My final NP trade involved Potash (POT). With POT trading around $29.08 I sold the AUG $27 puts at $0.32. Potash, at expiration, closed at 30.39.
Before we move on to my open trades let’s look at my two trades involving calls. First up is my covered call trade in SUNE (previously WFR). Long time readers know I’ve been in this position for quite some time. Recently it has become more volatile and I’ve been able to take advantage and sell some calls to reduce my overall net cost. This month I sold the AUG $10 calls at $0.68 when the stock was at $9.95. I ended up buying back the calls for $0.02 after SUNE announced horrible quarterly results which drove the stock price down to $7.20. After the stock recovered I sold another round of calls at the $9 strike. More about this trade next month.
Last, but certainly not least, I want to briefly describe the purchase of my first call trade. I entered this trade after reading about the strategy developed by my friend Teddie at www.fullyinformed.com. It involves the purchase of calls when the $VIX drops below a pre-defined level. I bought 5 OCT $13 calls on the $VIX at $4.30. Later, when the $VIX was still languishing I bought another round of calls. This time I bought 2 OCT $13 calls at $3.10. This brought my average cost down to $3.98. Earlier this week I sold the calls for $4.40. My ROIC on this trade was over 10%. However, I could have done even better if I had spread out my purchases into smaller lots at lower prices. Also, as it turns out I exited the trade too early. Today, the $VIX OCT $13 calls closed at $5.00 bid / $5.30 ask. I’m not complaining though. I made over 10% in 34 days. When the conditions are right I will do this trade again.
Now let’s look at my open trades.
Number of Open Positions: 10 (in 9 stocks)
Net Cash Flow in August from 8 new Open Positions: $1,279.40
Total Capital Used on Open Trades: $76,152.78
Net Cash Flow on Invested Capital: 1.68%
I have previously opened positions in GDX, OKE, and SUNE. My new open positions are in ABT (SEP $34 puts), CAT (SEP $80 puts), CCJ (SEP $19 Puts), EXC (SEP $30 puts), KO (SEP $39 CC), LNCO (SEP $24 puts), SUNE (SEP $9 CC), and TEVA (SEP $37.50 puts).
Going into September I am considering naked put trades in IBM, INTC, MCD, and POT.
Regards,
Troy
The Money Tree 