The Money Tree

Safely Generating Income in Retirement

Archive for October, 2013

Portfolio Update – October 2013 Results

Posted by mounddweller on October 31, 2013

Fellow Traders,

Happy Halloween.  We’ve survived the month of October.  While the month wasn’t boring it didn’t live up to its its reputation for extreme volatility.   Looks like we may have to wait a little longer for that long anticipated correction.

Now let’s take a look at how The Money Tree made out this month.

Number of Closed Positions: 7

Profit on Closed Trades: $1,094.70

Total Capital Used on Closed Trades: $62,471.60

Average Number of Days Trades Were Open: 28.4

Return on Invested Capital: 1.75%

Let’s dig a little deeper into these 7 closed trades.  Four of the seven closed trades involved naked puts.  Two were covered calls.  The last trade involved the purchase of VIX call options.  I had puts expire in ABT, T, and TEVA.  I also bought to close puts in CCJ for a small profit.

I sold the ABT SEP $33 puts on September 30 when the underlying was trading at $33.29.  By expiration ABT had popped up and closed at $37.29.

I sold the T $33 puts on October 3 for $0.38 when the underlying was at $33.71.  At expiration T was at $34.61.

While TEVA was at $37.73 I sold the SEP $37.50 puts for $0.58.  At expiration TEVA was at $40.00.

Regular readers will know that I’ve had an open trade in CCJ since early September.  I have been rolling the puts at the $19 strike.  I chose not to roll down during this time because I had confidence that the stock would eventually recover.  Today, with the stock at $19.22 I bought back my DEC $19 puts.

Now let’s look at my two covered call trades.  First up is my trade in KO.  Back on August 23rd I bought KO for $38.42 and concurrently sold the SEP $39 calls for $0.34.  On September 12th KO went ex-dividend making me eligible to receive the $0.28 dividend.  With KO trading at $38.94 on expiration day I decided to roll my calls out into OCT.  Doing so gave me an additional net credit of $0.62.  On October 1 I received the $0.28 dividend.  Then, on October 15 with the stock at $37.85 I bought back my OCT $39 calls for $0.03.  Doing so allowed me to close the trade having earned 2.94% ROIC capital in 53 days.

My other covered call trade was in Sysco Foods (SYY).  This was my first trade in SYY.  On September 30 I bought 400 shares of SYY at $31.93 and then sold the OCT $32 calls for $0.25.  At expiration I had my shares called away from me.  However, since I had owned the stock on the ex-dividend date I was eligible to receive the $0.28 dividend later that month on October 28.  My ROIC was 1.74% in 28 days.

My last closed trade involved the purchase of $VIX $13 calls at $3.80 and their subsequent sale for $4.60 a mere 13 days later.  This was my second successful VIX trade.  This time I made almost 19% ROIC in less than two weeks.

Now let’s look at my open trades.

Number of Open Positions: 7; 4 naked puts, 1 covered calls, and 1 call purchase

Net Cash Flow in October from 4 new naked put Open Positions: $356.50

Cash Flow from 1 covered calls: $171.55

Capital Used on Open Cash Secured Naked Put Trades: $51,000.00

Capital Used on Open Covered Call Trades: $11318.50

Capital Used on $VIX call option purchase: $760.00

Net Cash Flow on Invested Capital: 0.85%

I have previously opened positions in GDX, and OKE.  My new open positions are in CSCO (NOV $22 puts), YUM (NOV $65 Puts and DEC $62.50 puts), EXC (JAN $28 puts), TEVA (NOV $37.50 puts), $VIX (JAN $13 calls) and GDX (JAN $30 calls).

Going into November I have no potential trades to offer up.  The market is at elevated levels and I’m not comfortable selling puts on most of my usual candidates.  However, I am looking to possibly sell calls against my long-term positions in INTC and MSFT.



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