The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘covered calls’

September 2014 Results

Posted by mounddweller on October 6, 2014

Fellow Traders,

There isn’t much to report for the month of September.  The level of activity at work has severely curtailed my trading.  This is both a good and a bad thing.  Good in that it has allowed me to miss several ‘opportunities’ which likely would have resulted in a bad trade and would have put me in a rescue mode.  Bad in that I did make a few snap decisions which I’m now regretting.  Let’s first look at the trades I closed in September.

I closed 3 trades in September.  They were in KMI, TGT, and TROW.  KMI is a stock in which I’m looking to build a long-term position.  I have been trading naked puts in KMI since February.  The range of puts I have sold has been $32.50 – $37.50.  In September I had 2 SEP $37.50 puts expire OTM.  This trade netted me $118.05 with a ROIC of 1.57%.  I kept the trade very small because I felt KMI might fall further and I wanted to be able to roll out and down while increasing the number of contacts as necessary.  That didn’t happen so I’m happy with a small profit.

Next up is TGT.  My TGT trade started back in early August as a buy/write in order to capture the dividend.  I bought the stock at $58.06 and sold the AUG $58 calls.  The calls were exercised and I had the stock called away from me at expiration and after the ex-date.  The dividend landed in my account on September 10.  This trade was also small, only a couple hundred shares.  I netted $195.10 and my ROIC was 1.68%.

My last closed trade was in TROW.  TROW is another stock in which I’d like to build a long-term position.  Back in July I began this effort by selling the AUG $80 put.  TROW fell significantly in AUG and rather than accept assignment I decided to roll the AUG puts out into SEP.  TROW subsequently recovered and the SEP $80 puts expired OTM.  This trade netted me $216.60 and my ROIC was 2.71%.  I am now waiting to reenter the trade with NOV expirations being the target.

Now let’s take a look at the new trades I opened in September.  Actually one, VALE is a trade I opened in late August.  You’ll recall I sold the SEP $12.50 puts for $0.15 and said I’d let the stock be put to me if they expired ITM.  The purpose of doing so was to be long the shares and in a position to capture the substantial $0.40 semi-annual dividend whose ex-date is October 17.  The trade started out as planned but has fallen much further than I anticipated.  I am now sitting on a substantial unrealized loss as I bought the stock at $12.50 and it closed today at $11.31.  This, however, is an improvement over its low last week of $10.61.  My plan remains to sell $12.50 calls after it recovers and I’ve earned the dividend.  Now it just looks like it’ll take a bit longer than I originally anticipated.

My new open trade is in ADI.  Specifically, I sold the OCT $49 puts at $0.75.  This is one of those cases where I took my eye off the ball and let the trade run away from me.  My original intent was to sell the puts as the result of the stock hitting and bouncing off the lower Bollinger Band.  The trade was to end when the rebound petered out and I had captured a large portion of the initial premium.  Unfortunately as I mentioned at the beginning of the post I’ve been very busy at work and I missed the turn in the stock.  ADI got as high $50.64 after bouncing off the lower Bollinger Band at around $48.72.  Today, ADI closed at $47.15.  Unless we have a big bounce in ADI before expiration, I’ll need to roll this position out and down.  I’ll likely increase the number of puts in the trade and roll down to the $48 strike.

So there you have it.  That’s the extent of my trading during September.  Best of luck to everyone as we head into the historically volatile month of October.

Regards,

Troy

 

 

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August 2014 Results

Posted by mounddweller on August 29, 2014

Fellow Traders,

Well another month has passed us by.  This one seemed to pass by very quickly.  Let’s see how I did.

I closed 5 positions this month, 4 were winners and one was a loser.  Let’s put the bad news behind us and talk about the loser first.  Back in April of this year I bought JUL $VIX puts.  My rationale was that the VIX was very low and that we’d have a pullback at some point before July expiration after all the big shots on Wall Street headed for the Hamptons in late May.  Alas, the substantial pullback I felt was a certainty never transpired.  Instead the averages just kept plowing on to new highs and the $VIX got even lower.

In early JUL as expiration drew ominously closer I decided to roll my puts out by selling the JUL puts and buying AUG puts.  The total amount of capital I had in the trade at this point was $1,578.  Thankfully for me we finally got a small, quick pullback in early AUG which allowed me to exit the position with a loss of just $530.  Am I happy about the loss, definitely not!  However, it is a much better result than losing the entire $1,578.  I could have rolled out again and tried to wait out being able to exit at a profit but given the market’s trend to the upside I decided to just cut my losses and move on.

This was the 3rd time I’ve tried to trade the $VIX.  I’ve lost money 2 of the 3 times.  I doubt I’ll try this trade again anytime soon.  OK, enough said about the lone loser.  Let’s now look at my winners.

My four winning trades were in INTC, MAT, QCOM, and TGT.

Last month I told you about being called out of my long-term position in INTC with deep ITM covered calls at $27.  The other part of that original trade included more covered calls at the AUG $26 strike.  I got called away at $26 and ended up making 9.88% on the trade.  I still have some INTC left in my account that I hadn’t sold covered calls against.  I will look to add to that position in the coming months once INTC falls back into my buy range which is just under $30.

Now, let’s look at MAT.  You’ll recall I originally sold the AUG $35 puts at $0.35 and my plan was to take assignment if they closed ITM and then turn around and sell SEP covered calls and try to collect the $0.38 dividend, the ex-date of which was 8/25.  Well, at AUG expiration MAT closed at $35.08, thus my AUG puts expired worthless.  On the following Monday with the dividend ex-date only one week away I took another look at my options.  As it turned out premiums were far better for the SEP puts than they were for the calls even after accounting for the $0.38 dividend.  Thus, I decided to sell the SEP $35 puts for $0.70.  After going ex-dividend on 8/25 MAT fell through support at $35 and got to as low as $34.46 on 8/26.  On 8/27 it bounced so I decided to buy back the SEP $35 puts at $0.55.  Doing so got me out of the trade with a profit of 1.24% in 41 days.  I’m now looking for a good time to re-enter the position as I feel MAT is a true bargain at these levels.  I’m currently tracking the SEP and OCT $34 puts.  MAT closed today at $34.46.

Next up is QCOM.  Last month I mentioned that QCOM was taking me for a wild ride.  Thankfully the ride, while exciting, ended profitably.  I entered this position back on July 24th by selling the AUG $74.50 puts.  A week later I had to role these down to the AUG29 $74 puts.  Then just one day later I had to roll down yet again, this time to the SEP $72.50 puts.  I also had to increase the number of contracts to keep the trade in a net credit status.  It bottomed at $72.49 on August 7th and has been rising nicely ever since.  On 8/26 I bought back my SEP $72.50 puts at $0.13.  I ended up closing the trade with a net gain of 0.79% (about $180).

My last ‘closed’ trade is in TGT.  I have closed in quotation marks it isn’t officially closed yet.  I’m actually waiting on the dividend I captured to hit my account on 9/10.  On 8/15 I bought TGT at $58.06 and sold the AUG22 $58 calls for $0.61.  I had the stock called away from me on 8/22.  However, I still earned the $0.52 dividend.  My net gain on the trade will be 1.68% with a 26 day holding period.

That’s it for my closed positions.  However, I also opened some new positions this month as well.  I currently have open positions in KMI, MCD, TROW, and VALE.  All but VALE are on my long-term hold list.  With KMI I already have a small position that I’m hoping to expand by having sold the SEP $37.50 puts at $0.63.  I initiated a small position in MCD by just buying the stock outright.  I couldn’t find a decent covered call trade I liked to try to capture the dividend so I just bought it straight out.  With TROW I’ve been selling the $80 puts for a couple months now.  It goes ex-dividend on 9/10 so I’ll need to make a decision on it in the next week or so.  Last up is my brand new trade that I just entered today in VALE.  On the Yahoo message board I frequent they’ve been talking about VALE for quite some time.  It’s not on my list of tracking stocks but after hearing about all of the successful trades everyone was making in it I decided to give it a try.  Today I sold 10 VALE SEP $12.50 puts at $0.15.  We’ll see how everything turns out in about 3 weeks.  My plan is if assigned at $12.50 is to sell covered calls and try to capture the large, semi-annual dividend of $0.4075 dividend in October.  If the puts stay OTM I may go ahead and do a separate buy/write trade later in the month to try to capture the dividend.

Well that’s it for another month.  Happy trading.

 

Best Regards,

Troy

 

 

 

 

 

 

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May 2014 – Results

Posted by mounddweller on June 1, 2014

Fellow Traders,

My results in May were kind of a mixed bag.  I had some trades that worked well and others that didn’t.  The frequency of my trading was impacted by several factors:

(1) responsibilities at my day job increased and so I have less time to follow my trades during the day,

(2) my personal life has also become more hectic, and

(3) the seemingly irrational movement down in volatility means premiums are very low and thus the risk/reward ratio does not seem favorable to me.

With that as a back-drop let’s look at the results of the trades I did make this month.  First, let’s look at the closed trades.

(1) Coca Cola (KO) – I am building a long-term position in KO.  While accumulating shares using dividend reinvestment I also want to be opportunistic in selling CCs against my existing shares and selling NPs until assigned to acquire additional shares.  On 4/16 I sold MAY $40 calls at $0.82 believing that KO had peaked and was destined to head back down for a short period of time.  Unfortunately, this was not the case and so on 5/14 I had to buy back my MAY $40 calls at $1.14 to avoid having them called away.  This resulted in a loss on the trade.  I am planning on re-entering the trade again when it appears KO has peaked and is ripe for a short-term fall.

(2) Kinder Morgan (KMI) – Like KO, I want to build a long-term position in KMI.  I feel KMI is a bargain at current price levels.  Consequently, for the past several months each time KMI approaches $32.50 I sell puts at this strike price.  On  4/25 I sold MAY $32.50 puts at $0.50.  These puts expired OTM on 5/14.  Thus, net of commissions my ROIC was 1.45% with a holding period of 22 days.

(3) Family Dollar (FDO) – I have made a couple of trades in FDO in the past 3 months.  Both were profitable.  My latest trade was initiated on 3/21 when I sold the APR $57.50 puts for $0.96.  As many of you are aware FDO has been volatile these past several months due to lackluster performance and rumors of them being bought.  Consequently, I had to roll my position down and out to the MAY $55 puts.  These MAY $55 puts expired OTM on 5/17.  My ROIC on this trade in FDO, net of commissions, was 1.38% with a holding period of 57 days.

(4) Franklin-Templeton (BEN) – Like FDO, I have made a couple of trades in BEN these past few months.  Both were profitable.  My latest trade was initiated on 4/7 when I sold the MAY $50 puts at $0.70.  These puts were never in danger of becoming ITM and expired OTM on 5/17.  Net of commissions, my ROIC was 1.32% over a holding period of 40 days.

(5) Lowe’s (LOW) – I initiated my trade in LOW back on 4/7, selling the MAY $46 puts at $0.75.  On 5/6 I had to buy back the MAY $46 puts and ended up selling a higher quantity of JUN $44 for a net credit.  On 5/23 I was able to buy back the JUN $44 puts for $0.19, thus closing out the trade early.  My ROIC, net of commissions, was 1.99% with a holding period of 46 days.

(6) Procter & Gamble (PG) – This was my very first Bollinger Band (BB) strategy trade.  The basic premise of the strategy is to buy stock and/or sell NPs as a stock is bouncing off it’s lower BB.  PG seemed like the perfect set-up and a low risk trade for my first attempt at mastering this strategy.  PG hit and bounced off it’s lower BB on 5/21.  On 5/22 I bought shares of PG at $80.20.  Looking at the chart I believed PG would be able to make it back up to the middle of the BBs (essentially the 20-day MA).  Alas, this was not the case.  The stock’s rise stalled out before even hitting $81.  Not wanting to risk large losses I sold my shares as soon as it became apparent to me that the trade wasn’t going to work out.  On 5/27 I sold my shares in PG at $80.27.  Net of commissions I lost about $10 on the trade.

(7) Exelon (EXC) – Yes, believe it or not I am out of EXC with a profit!  Long time readers of my blog will know that I’ve been working my way out of this position for a very long time.  This trade actually started in APR 2010 by selling puts at the $42.50 strike.  A lot has happened since then.  I’ve collected four years of dividends, sold CCs and NPs numerous time and have had stock put to me and called away at least once each.  Through all of this I was able to reduce my net cost.  Finally last month, prior to EXC going ex-dividend, I sold CCs at the $35 and $36 strikes.  A portion of my shares were called away from me at $35 by someone wanting to capture the dividend.  The $36 CCs expired OTM.  I will be receiving the dividend on these shares.  It should hit my account later this month.  Then, this past week, I sold all of my remaining shares at $36.10.  The final result will be a ROIC of around 12% but the holding period is just over 4 years so the annualized return while beating US Treasuries is nothing to brag about.  What I will brag about though is that I refused to give in and exit the position at a loss.  By selling NPs and CCs when the opportunity presented itself and collecting the dividends over time I was able to successfully exit the trade.

(8) Microsoft (MSFT) – On 5/6 with MSFT at $39.06, I sold the 30MAY $38 puts at $40.  This past Friday those puts expired OTM.  My ROIC was 0.98% with a 24-day holding period.

Now let’s look at the new trades I opened this month.

(1) Back on 5/12 I expanded my long position in $VIX JUL $14 calls.  I bought 2 more calls at $1.95.  Thus far this trade isn’t looking very good.  The market continues to defy gravity by going higher while driving the VIX lower and lower.  The long expected summer slump has yet to occur.

(2) Lastly, I sold more puts on EXC.  I know, I’m stupid.  I can just hear you saying, didn’t you just get yourself out of a long-term losing trade in EXC.  Yes, I did.  However, in this case the market is moving in my direction.  When I originally opened my trade in EXC back in 2010, I thought the stock was bottoming out.  Alas, it continued to fall much further than I thought possible.  This time, I waited until I was sure the market was moving in my favor.  Back on 5/20 I sold the JUN $33 puts at $0.35.  EXC was trading at $34.04.  Friday, it closed at $36.83.  Thus, I should be able to buy to close my puts for pennies on the dollar in the coming week.

Well, that’s it for this month.  As I mentioned at the beginning of this post, I have slowed the pace of my trading substantially.  Put premiums are extremely low right now.  I’m keeping my ‘powder dry’ until things pick back up again.

Best of luck to all my trading friends in the coming month!

Regards,

Troy

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April 2014 Results

Posted by mounddweller on May 4, 2014

Fellow Traders,

My reportable results for April are kind of sparse.  I only closed 3 positions, netting a whopping $337.95.  The total capital employed in these trades was $35,750 with an average holding period of 62 days.  Needless to say the ROIC was anemic and well below my desired annualized return of 15%.  I closed trades in KMI, NKE, and TGT.

During the month of April I opened several new trades, all but one of which were on stocks that I’ve traded before.  I sold naked puts on four stocks BEN, FDO, KMI, and LOW.  Details are provided below:

(1)  BEN – STO 2 MAY $50 Puts at $0.70

(2) FDO – STO 3 MAY $55 Puts at $0.80 (after BTC 2 APR $57.50 puts at a small profit)

(3) KMI – STO 3 MAY $32.50 Puts at $0.50 (after my APR $32.50 puts expired OTM)

(4) LOW – STO 2 MAY $46 Puts at $0.75 (new trade, have never traded LOW before, hence modest amount of capital placed at risk)

I also opened covered call trades on EXC, INTC, and KO.  Long time readers will recall my long-held position and saga in EXC.  Barring a collapse in the market it appears I may finally be able to exit my position in EXC not only with all my capital in hand but with a small profit as well.  I also sold covered calls against my long-term holdings in INTC and KO.  This was done with the expectation that the market is entering a period of near-term weakness and that INTC and KO will drift lower with the market.  To date that has not been the case, however, with INTC I have until August to be proven correct and in the case of KO I am prepared to roll out my MAY calls as needed to prevent the shares from being called away from me.  Here are the specifics of the covered call trades I placed in April:

(1) EXC – STO 3 MAY $36 Calls at $0.50

(2) EXC – STO 2 MAY $35 Calls at $1.00

(3) INTC – STO 1 AUG $26 Call at $1.45

(4) INTC – STO 2 JUL $27 Call at $0.80

(5) KO – STO 2 MAY $40 Calls at $0.82

With both INTC and KO I purposely did not sell calls against all of my shares.  Doing so allows me room to generate additional income and exit the trade profitably without risking the loss of my shares due to assignment.

Last, but not least, I executed a trade on the $VIX calls.  I am following a strategy I learned from my good friend and fellow online trader, Teddi Knight at http://www.fullyinformed.com/.

(1) $VIX – BTO 3 JUL $14 Calls at $2.70

I may expand the size of this position if the VIX continues to drift lower and gets to the lower Bollinger Band.  However, depending on the timing I may make future trades against the AUG calls.  The plan is to sell these calls when the $VIX jumps and then begins to fall back.

Well, that’s it for this month.  I have been very selective in my trading of late because I am finding it harder and harder to find trades with a good risk/reward profile.  I think we may have a bumpy summer period and that may open up a lot of trading opportunities.

Regards,

Troy

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March 2014 Results

Posted by mounddweller on April 3, 2014

Fellow Traders,

Better late than never I always say.  Other responsibilities have kept me from compiling and communicating the results of my trading during the month of March.

In March I closed out 6 trades with a net profit of $1,084.20.  The 6 trades required $72,835 in capital which means my ROIC was 1.488%.  The average holding period was 42 days.

I closed out NP trades in 5 stocks and 1 CC.  The NPs were:

(1) BEN MAR $50 puts expired OTM,

(2) KO MAR $37 puts expired OTM,

(3) WMT MAR $7.50 puts expired OTM,

(4) FDO MAR $60 puts expired OTM, and

(5) PG MAR $75 puts expired OTM.

My CC trade was in AT&T (T).  Back in January I had purchased 500 shares at $34.97 and sold CCs to capture the dividend.  The calls expired OTM and I received the dividend.  I then sold another round of calls and also sold puts at $33 and $32.  I closed the position last week after both my puts and calls expired OTM by selling my stock at $34.86.  All in all, it turned out to be a good trade.

I also have a few trades that rolled over into April.  I rolled my KMI $32.50 puts out from MAR into APR.  I also have pen NP trades in CSCO and TGT.  I am short the APR $21 and $57.50 puts respectively.

My only new trades in MAR that remain open are FDO APR $57.50 puts and my most recent trade which occurred back on 3/27 where I STO NKE APR $72.50 puts at $0.75.

With just over two weeks left before APR expiration I am keeping an eye on a couple possible trades:

(1) STO ABT APR $37 puts at $0.30 or better, and

(2) STO KO APR $37 puts.

 

Well, that’s it for the month of March.  Unless something big happens in the next couple of weeks it looks like I’m not going to have much to write about in April.

Best of luck to all my trading friends.

Regards,

Troy

 

 

 

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Portfolio Update – September 2013 Results

Posted by mounddweller on September 30, 2013

Fellow Traders,

The 3rd quarter is officially history.  Given the impact of a so-so economy and the political antics in Washington it should be interesting to see how we finish out the year.  Most of what I’m currently reading says to look for a big run-up to the end of the year after Congress gets done trying to get our attention on the budget debate and the debt ceiling.  Stay tuned it should be interesting!

Enough of that, let’s take a look at how The Money Tree made out this month.

Number of Closed Positions: 9

Profit on Closed Trades: $1,418.22

Total Capital Used on Closed Trades: $91,073.63

Average Number of Days Trades Were Open: 124.7*

Return on Invested Capital: 1.56%

You’ll note the average number of days trades were open is much higher than usual.  That’s because I finally closed out my position in SUNE (formerly WFR).  I had that position for well over 2 years.  We’ll talk more about SUNE later in this article.  Excluding SUNE, the remaining 8 closed trades had an average holding period of 33 days.

Let’s dig a little deeper into these 9 closed trades.  Seven of the nine closed trades involved naked puts.  The remaining two were covered calls.  All nine closed positions were the result of the options expiring OTM.  I had puts expire in ABT, CAT, CCJ, EXC, LNCO, MSFT, and TEVA.

I sold the ABT SEP $34 puts when the underlying was trading at $35.29.  ABT continued to fall and was ITM for some time before recovering and finishing OTM.

I sold the CAT $80 puts for $0.72 when the underlying was at $82.38.  At expiration CAT was at $84.75.

While CCJ was at $19.54 I sold the SEP $19 puts for $0.50.  At expiration CCJ was at $19.38.

I sold the EXC SEP $30 puts at $0.60 when Exelon was at $30.20.  The puts expired OTM with EXC closing at $30.13.

LNCO was at $25.55 when I sold the SEP $24 puts for $1.30.  At expiration LNCO closed at $29.04.

My trade in MSFT also turned out well, I sold the SEP $30 puts at $0.25 when MSFT was at $31.42.  They expired OTM with Microsoft trading at $32.79.

My final NP trade involved TEVA.  As regular readers know, I’ve been trading this one for several months now.  Once again I sold the SEP $37.50 puts; this time for $0.50.  At the time TEVA was trading at $38.81.  At expiration it closed at $37.72.  If you haven’t taken an opportunity to look at TEVA before, I highly encourage you to do so.  I’ve been trading it since late April and it has treated me very well.

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.

Last, but certainly not least is my covered call trade in SUNE (previously WFR).  Long time readers know I’ve been in this position for quite some time.  NO MORE!  I closed out my SUNE trade on 9/25.  Over the course of 2+ years I had managed to work my net cost basis in SUNE down from $10 (the strike price of my original puts) to $7.74.  After my SEP $9 calls expired OTM I decided to keep a close eye on SUNE and sell my shares at $8 or better.  Last Wednesday, I got my chance and sold SUNE for $8.10.  My annualized ROIC was a laughable 1.91%.   However, I’m still proud of this trade because I stuck with it, didn’t give up, and worked on it until I was able to exit with a profit.  With more experience under my belt and better stock selection I hope to avoid a repeat performance.

 

Now let’s look at my open trades.

Number of Open Positions: 7; 4 naked puts, 2 covered calls, and 1 call purchase

Net Cash Flow in September from 4 new naked put Open Positions: $591.70

Cash Flow from 2 covered calls: $288.50

Capital Used on Open Cash Secured Naked Put Trades: $36,350.00

Capital Used on Open Covered Call Trades: $24,313.90

Capital Used on $VIX call option purchase: $760.00

Net Cash Flow on Invested Capital: 1.43%

I have previously opened positions in GDX, and KO.  My new open positions are in ABT (OCT $33 puts), CCJ (OCT $19 Puts), EXC (OCT $30 puts), TEVA (OCT $37.50 puts), SYY (CC OCT $32), and $VIX (DEC $13 calls).

Going into October I am considering an additional trade in CCJ (OCT $18 puts), and new trades in CAT (OCT $80 puts), CLX (OCT $80 puts), GIS (OCT CC trade, stock goes ex-dividend on 10/8), T  (OCT CC trade, stock also goes ex-dividend on 10/8), DE (OCT $80 puts), and PG (OCT $75 puts).

Regards,

Troy

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Results – August 2013

Posted by mounddweller on August 30, 2013

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

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Results – July 2013

Posted by mounddweller on July 31, 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

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Results – June 2013

Posted by mounddweller on June 29, 2013

Fellow Traders,

Another month has flown by exceedingly fast.  It has been a bumpy ride what with the mini-correction.  Let’s take a look and see how I did.

Number of Closed Positions: 2

Profit on Closed Trades: $235.10

Total Capital Used on Closed Trades: $20,050.00

Average Number of Days Trades Were Open: 31.5

Return on Invested Capital: 1.17%

OK, before I move on to the stats for my open trades, let me tell you a little more about these closed trades.  Both of the closed trades were naked puts.   Both expired OTM.  My first trade was Merck (MRK).  I sold the JUN $44 puts back on May 9 for $0.64.  At the time MRK was trading at $45.33.  It peaked at over $49 in early June and is now heading back down and approaching resistance.  I’ve got it on my radar screen and will definitely trade it again once it gets a little lower.  Friday it closed at $46.45.  My other closed trade was in TEVA.  On June 3 I sold the JUN $37.50 puts for $0.42.  At the time TEVA was trading at $37.97.  I have been trading the TEVA naked puts at the $37.50 strike price for 3 months now.  It is trading at multi-year lows and I’d like to establish a long-term position in it.

Now let’s look at my open trades.

Number of Open Positions: 11 (in 8 stocks)

Net Cash Flow in June from Open Positions: $1,104.00

Total Capital Used on Open Trades: $112,012.93

Net Cash Flow on Invested Capital: 0.99%

This month I opened five new positions in CAT, CHRW, KO, OKE, and TEVA.   All are naked put trades.  I’m short CAT with the JUL $80 puts, CHRW at JUL $55, and KO at JUL $38 (first time I’ve ever traded KO!).  I opened a second position in OKE at JUL $42.50.  You’ll recall last month I sold the JUN $47.50 puts.  More about that later.  And last but not least I opened another round of TEVA JUL $37.50 puts.

Now let’s look at the 6 open positions I have that were carried over from prior months.  I still have my two deep ITM positions with GDX.  I’ve dug myself quite a hole in this one.  It will take quite some time to get back to even on these.  I’m short the SEP $41.50 puts and long stock which was put to me a couple months ago at $40.  I also have a previously opened position in OKE.  I originally sold the JUN $47.50 puts back in May.  I have since rolled these down to $45 and out to JAN.  I’ve also had to roll my two positions in EXC.  I rolled my JUN $34 out to JAN $33 and my JUN $32 out to JUL $31.  My last open position is a very old one.  Way back in May 2011 I initiated a trade in WFR.  Eventually I had the stock put to me at $10.  My position has laid dormant for quite some time as I was way under water.  Well, patience is a virtue.  The stock has now come back into favor with the boys on Wall Street and I was able to sell a JUL covered call at the $10 strike price.  By the way, WFR recently changed their name and their ticker symbol is now SUNE.

Going into July I am considering new trades in IBM and a repeat trade in MRK (as I mentioned above).

Regards,

Troy

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April 2013 Results

Posted by mounddweller on April 30, 2013

Fellow Traders,

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

Number of Closed Positions: 4

Profit on Closed Trades: $447.50

Total Capital Used on Closed Trades: $46,600.00

Average Number of Days Trades Were Open: 27

Return on Invested Capital: 0.96%

OK, before I move on to the stats for my open trades, let me tell you a little more about these closed trades.  All 4 closed trades were naked puts.   Half expired OTM and half I bought back before expiration at a profit.  I had CSCO puts at the $20 strike and POT puts at the $37 strike expire OTM.  ITW and KSS I bought back early, both for $0.05.

Now let’s look at my open trades.

Number of Open Positions: 6

Net Cash Flow in April from Open Positions: $355.05

Total Capital Used on Open Trades: $71,050

Net Cash Flow on Invested Capital: 0.50%

The return on invested capital for my open positions is much lower than normal because I did a poor job of managing them.  I waited too long to roll out my GDX position.  This resulted in having 300 shares put to me at $40.  Because of this I was not able to generate any cash flow by rolling out my NPs.  Neither was I reasonably able to sell covered calls on my new long position unless I wanted to sell them far, far out in time or way ITM.  I also did a poor job of rolling out my open positions in CAT and NUE.  While I was able to roll-out for net credits in both cases, they were small net credits.   My other open positions are as follows:  CSCO MAY $19, TEVA MAY $37.50, and CCJ MAY $19.

I am cautiously optimistic heading into May.  Best of luck to all my readers!

Regards,

Troy

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