The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘EXC’

Position Update – EXC

Posted by mounddweller on January 2, 2013

Fellow Traders,

Long time readers will recall that I have a long-term holding in EXC.  I initiated my position in EXC back in April 2010 by selling naked puts at the $42.50 strike price.  Since then I have collected dividends, sold calls and puts, been assigned additional shares, and finally began reinvesting my dividends in new shares.  All of this trading activity over the past 32 months has resulted in me now owning approximately 529 shares with a net cost of $32.11.

I was feeling very good about my position in EXC until November when they announced that a dividend cut was a possibility within the next 6 months.  As you would expect the stock nose-dived on that announcement, falling from $37.50 to $28.50 in about a month.  Since bottoming out it has been hovering between $29-30.

Last week I decided there was little likelihood of EXC moving much higher until there is more certainty about if, when, and how much of a dividend cut is going to occur.  Thus, I started looking at the possibility of selling calls at the $30 strike.  While I was thinking about it (read “procrastinating”) EXC fell from the high $29s down to low $29s.  This caused the premium in the JAN $30 calls to totally evaporate.  I felt victimized once again by my inability to reach a decision and take decisive action.

However, the goons in Washington via their mangling of the fiscal cliff gave me a second chance.  The huge market rally today initially lifted all the boats, including EXC.  EXC jumped from a previous close of $29.74 to as high as $30.24 in the first 45 minutes of trading.  This caused the JAN $30 calls to rally as high as $0.60.  My gut told me this couldn’t last.  I felt people would eventually sell into this strength and push the stock back down under $30.  For a while it was a fight between my gut and my brain on deciding whether or not I should sell calls into this strength.  Thankfully my gut won.  Here’s the trade I made, with the stock at $30.18, I sold to open 5 JAN $30 calls at $0.55.  This netted me just over $264 and reduced my cost basis down to $31.61.

My gut instinct proved correct.  After peaking at $30.24 EXC gradually sold off, going as low as $29.66 and finishing the day at $29.82.

My plan going forward is to continue selling calls and/or put to further reduce my net cost.  I’m thinking that even if a dividend cut is announced the stock won’t fall much lower than $27.  At this point I could buy more shares (dollar cost averaging down) and still end up with a dividend yield of 4% or more.

Regards,

Troy

 

Advertisements

Posted in Portfolio Updates | Tagged: , , | Leave a Comment »

Update – EXC

Posted by mounddweller on June 10, 2012

Fellow Traders,

I want to update you on my long held position in EXC.  My frequent readers will recall that I’ve been rolling 3 puts at the $38 strike price since late February.  On Thursday of this past week I closed out that portion of my position in EXC.

EXC has been bouncing around quite a bit of late.  Since January it has been as high as $42 and as low as $36.70.  Since bottoming out around the first of June it had bounced back up to around $39.  Despite only having a week to expiration I decided on Thursday to take advantage of the big up-day and buy back my 3 short puts.  I was able to do so at $0.15.  I originally sold these puts back on May 18th for $0.75.  Thus, I made about 1.5% ROIC in 3 weeks time.

As I mentioned earlier I had been rolling these puts since my original sale back in February.  If we look at this entire series of put sales I made $392.34 net of all commissions on $11,400 in capital over about a 11 week time period.  By my rough calculations that’s just over 1% a month return on my invested capital.

One other thing I wanted to point out was the interesting price action on EXC on Thursday and Friday of last week.  As I mentioned earlier EXC had been rising since the first of the month.  On Thursday the stock gained an amazing 3.98%.  This is a BIG one-day jump for a boring utility.  I decided rather than wait another week to see if the put would expire worthless I would instead buy to close my open puts.  Wow, am I ever glad that I did because the next day EXC gave all those gains back and then some.  It closed Friday at $37.41.

I now am now long 500+ shares.  I intend to continue to monitor EXC closely and possibly begin selling another round of puts at the $37 strike price.

Regards,

Troy

 

 

 

Posted in Portfolio Updates | Tagged: , | Leave a Comment »

Update – EXC

Posted by mounddweller on April 22, 2012

Fellow Traders,

I wanted to give you an update on my position in EXC.   My last update was about 4 months ago.  You can read it here: https://troysmoneytree.wordpress.com/2012/01/03/new-trade-exc/.  I initiated a long-term position in EXC back in April of 2010.  My objective in this position is to over time accumulate enough shares such that the quarterly dividends will provide a portion of the income I need in retirement.

Since I initiated the position I have periodically sold covered calls and naked puts to generate income off the position and to accumulate additional shares when EXC falls to a favorable price.  Initially I was taking the dividends in cash but recently I’ve began to reinvest them in additional shares.  This should allow me to acquire a substantial number of additional shares over the next 10 years.  Currently, I own 507 shares.

Last month I sold 3 APR $38 puts for $0.45.  EXC for the first time in quite a while fell below $38.  Thus, I chose to roll my puts out into MAY.  I did this by buying to close (BTC) the APR puts for $0.30 and selling to open (STO) the MAY puts for $0.85.  This resulted in a net credit of $153.43 further reducing my average cost in EXC to $35.65.

To date I have had my position in EXC for just over two years.   During that time my total cash returns have been $2,691.28 (net of commisions). This gives me a ROIC of 28.31%.  Annualized this comes out to 14.06%.

I hope to be able to replicate this strategy with other blue-chip, high dividend companies once they come into my buying range.  Other companies I’d like to implement this strategy with include AT&T (T), Intel (INTC), and Wal-Mart (WMT).

Regards,

Troy

Posted in Portfolio Updates | Tagged: , , | 1 Comment »

New Trade – EXC

Posted by mounddweller on January 3, 2012

Fellow Traders,

I entered a new trade in Exelon (EXC) today.  Actually, I entered two trades but only one got filled.  Many of my long-time readers know that I have had a position in EXC since April 2010.  I started out by selling naked puts at the $42.50 strike price.  I had the stock put to me at that price.  Since then I have sold covered calls and collected dividends on those original 200 shares.  I have also sold naked puts from time to time in an effort to acquire another 300 shares.

Today, EXC along with a whole host of other utility stocks took a substantial hit despite the overall market rising strongly.  I took advantage of this by deciding to sell another round of naked puts.  Specifically, I did the following:

STO 3 FEB $40 puts at $0.65.

I wavered between selling the JAN $41 puts at $0.40 and the FEB $40 at $0.65.  In the end I decided to go with the FEB $40 strike because it was closer to a stronger line of support.

Today, I also tried to BTC my JAN $44 calls.  However, this trade went unfilled as I had a limit order in to buy at $0.05.  Had I been willing to pay $0.10 I most likely would have been able to close out that trade.

Including my latest NP trade today I have been able to reduce my net cost over the past 21 months from $42.50 to $32.31.  That is a 23.98% ROIC.  My goal in this trade is to eventually own 500-800 shares of EXC with a ZERO net cost.  Granted I have a long way to go to accomplish that goal but I feel I’ve gotten a good start.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , | 3 Comments »

New Trades – Part Two

Posted by mounddweller on November 11, 2011

Fellow Traders,

Let’s get right to it.  Yesterday, I told you I recently entered 4 new trades and discussed one of them, Waste Management, with you.  In this post I’m going to tell you about my other three trades, one with Cameco (CCJ) and two with the Royal Bank of Canada (RY).

First, let’s look at Cameco Corporation (CCJ).  Cameco Corporation operates as a uranium producer, supplier of conversion services, and fuel manufacturer.  The company was founded in 1987 and is headquartered in Saskatoon, Canada.  This is not the first time I have traded CCJ.  I sold puts on CCJ back in March of this year.  You can read about that trade here: https://troysmoneytree.wordpress.com/2011/03/24/new-np-trade-ccj/.

Here’s my most recent trade.  On November 9th I sold 5 DEC $16 puts at $0.25.  At the time CCJ was trading at $19.44. Thus the $16 strike gave me 17.7% of DSP.  My ROIC, net of commissions on this trade is 1.43% with 38 days to expiration.  Annualized my return is 13.69%.  This is slightly under the 15% targeted return I referenced in my message yesterday but is still far better than money market or bank CD is paying.

Let’s look at the chart for CCJ and see why this trade caught my eye.

As you can see the price chart for CCJ is similar in many respects to that of WM which we discussed yesterday.  CCJ hit a 52-wk high of $44.81 back in February and then fell precipitously after the earthquake and tsunami in Japan.  Last month it hit bottom with a 52-wk low of $16.68.  It then bounced back up to around $23 before retreating again.  Yesterday, it closed at $19.38.

Here’s why I like this trade.  I think CCJ is oversold due to fallout from the Japanese earthquake.  CCJ mines uranium.  Nuclear power is not going the way of the dodo bird.  It will be around for a long time.  As a matter of fact CCJ is so confident of this it plans to double production by 2018.  If I have CCJ put to me at $16 I will own it below the current 52-wk low and very near the 2008 market lows.  It pays a modest dividend that has been steadily increasing for years.  CCJ currently yields 2%.  At my $16 strike it will have a dividend yield of 2.4%.  Not great, but again higher than short-term bond yields.

Last, but certainly not least, I’d like to tell you about my two recent trades in the Royal Bank of Canada (RY).  I have had my eye on RY for several months now.  RY is a favorite of my friend Teddi over at http://www.fullyinformed.com/.  Teddi has written about RY many times.  One of her most recent postings can be found here: http://www.fullyinformed.com/royal-bank-stock-learn-bear/.

As I mentioned I have entered two separte trades on RY.  First, on November 1st I sold 2 NOV $45 puts at $0.80.  With 18 days to expiration net of commissions my ROIC is 1.68%.  Annualized that comes out to a return of 33.99%.  Then, with the stock continuing to exhibit further weakness, on November 9th I sold 2 DEC $40 puts at $0.75.  My ROIC, net of commissions, on this trade is 1.76% (16.91% annualized).

Looking at the chart you can see why I like these trades.  RY is a blue-chip Canadian bank.  It has fallen significantly due to the sovereign debt crisis in Europe.  However, todate there has been no indication that they have much exposure to this problem.  The stock is trading at 2 year lows.  Does that mean it can’t fall further.  No, certainly not.  During the financial crisis in 2008/2009 it did fall much lower.  However, what is important to note is that it quickly rebounded.

RY is a slightly different trade from my normal NP trades in that I want to own RY long-term.  It pays a large ($2.15 / 4.70%)and increasing dividend.   I would eventually like to own several hundred shares against which I can collect dividends and sell covered calls.  My strategy with RY will be very similar to that of my position in Exelon (EXC).

Well, that’s all I’ve got time for this time around.  I hope you will take time to do your own DD on these trades.  I especially like the WM and RY trades.  You may find them suitable for your trading portfolio as well.

Regards,

Troy

Posted in Troy's New Picks! | Tagged: , , , , | 2 Comments »

EXC – An Update

Posted by mounddweller on July 7, 2011

Fellow Traders,

Last week I posted a message outlining my plan for EXC.  You can read that post here: https://troysmoneytree.wordpress.com/2011/07/03/exc-whats-the-plan/.  In that message I said I would be watching EXC closely as the JUL options expiration approached on 7/16.  Mid-morning today with EXC trading around $43.36 I decided to take action.  After weighing my options between rolling to either the OCT $43 or $44 strike I went with the $43.  Why, you ask?  Well, two reasons.  First, while I could have gotten a net credit rolling out to the OCT $44, it would have been small and a significant portion of it would have been chewed up by commissions.  Second, while EXC may certainly go higher over the next several days, after looking at the money flow (which is very close to 80), I decided EXC is due to sell-off or at least take a breather.  Also, I think the overall market will undergo a serious correction between now and October so I wanted to lock-in the additional premium offered by the $43 strike.

Here are the details for the trade I executed today.

I originally sold the JUL $43 calls back on May 10th at $0.65.  So, closing out that trade was essentially a wash.  However, by selling the OCT $43 at $1.40 I ended up with a net credit of $0.75.  The net effect of all this is I’ll end up with a ROIC of about 3% for a 5 month holding period.  Now some folks would say that isn’t too great.  But annualized that is about 7.34%.  Then, if you add in the 4.94% dividend yield I am getting at my original cost basis of $42.50, you’ll see my annual total ROIC is over 12%.

But wait!  It gets even better because my cost basis no longer is $42.50 but is now $34.83.   At $34.83 my annualized ROIC is 15%.  At that rate I’m doubling my money every 5 years in a boring utility stock!

Regards,

Troy

 

Posted in Portfolio Updates | Tagged: , | Leave a Comment »

EXC – What’s the Plan?

Posted by mounddweller on July 3, 2011

Fellow Traders,

A friend, who also has a position in EXC, recently sent me an email asking about my plans for EXC as we approach July expiration.  I currently own 200 shares of EXC and am short the JUL $43 calls.  Given some of my other readers may also have a position in EXC I thought I’d share my response to him with you.  Here’s my plan…

I have been trying to get into a rhythm with EXC for almost a year now.  Just when I think I’ve got it figured out it does something unexpected.  My strategy for EXC is based on my observation that the stock tends to run up immediately prior to each ex-dividend date and then sell-off for a couple weeks after the ex-dividend date (see chart below).   Consequently, what I’ve been trying to do is sell calls immediately prior to the ex-dividend date and then follow-up a few weeks later after the ex-date and either sell puts after it appears to have hit bottom and/or buy back my calls.   That didn’t quite work out this last time.  I managed to sell JUL $43 calls near the top of the range before the ex-dividend date but didn’t sell any puts after the ex-date.  The stock didn’t sell-off quite as hard as it had previously.


In looking at the chart I think EXC could top out around $44 between now and the ex-date of August 11th.  Unfortunately, with my JUL $43 calls being ITM I can’t wait around that long.  My plan is to keep a close eye on it between now and JUL expiration.  If it keeps going up and gets at or above $44 I will roll out and up to the OCT $44 calls which closed Friday at $1.00 bid.  If it stalls out but stays above $43 I will roll out to the OCT $43 calls which closed at $1.45 bid.  If it falls and my JUL $43 calls expire OTM I will probably wait until closer to the August ex-date before selling the next round.  However, I will still be looking to sell OCT calls at either the $43 or $44 strike.  Then, towards the end of August I’ll look to sell NPs.  I only want to sell NPs when I can get a decent premium at the $40 or less strike price  (I would like to own more EXC if I can buy it for $40 or less). Like the calls I am interested in the OCT puts because they are the closest to the next ex-date which occurs in early/mid November.

Regards,

Troy

Posted in Portfolio Updates, Potential Trades | Tagged: , , | 1 Comment »

Shaking the Money Tree

Posted by mounddweller on April 17, 2011

Fellow Traders,

Before I jump into the purpose of this post I want to let you know that I have updated the Historical Results and Open Positions tabs on my blog to reflect activity through expiration on April 16th.

In updating my records to reflect trading activity this month I noticed it had been exactly one year since I first initiated my position in Exelon (EXC).   Exelon is a nuclear utility which operates primarily in Pennsylvania and Illinios.  It pays a quarterly dividend of $0.525 or $2.10 annually for a current yield of 5.2%.

Like a lot of other stocks EXC has gone nowhere in the past 12 months.  However, between collecting 3 quarterly dividends and shaking the money tree every few months I have been able to generate a decent return.  Specifically, I have generated an annualized ROIC of 13.57%.   Below is a “scorecard” of my transactions which shows how I did it.

Exelon tends to drift up in price in the week or two immediately prior to going ex-dividend.  Then, like alot of high dividend stocks, it tends to fall for a couple of weeks after the ex-date.  My strategy with Exelon has been to try to exploit these tendancies by selling calls immediately prior to the ex-date and selling puts after the stock has appeared to bottom out.  As you can see in the scorecard this doesn’t always work out.  However, my goal is that over time I will gain more experience and get better at timing these events.

As you can see my most recent trade, selling the APR $40 puts, expired OTM.  I had hoped to have the stock put to me at that price thereby increasing my position from 200 to 500 shares.  However, I am in no hurry.  Thus, since the APR puts expired OTM, I will wait for the next down day to sell the JUN puts.  The strike price I choose will be dependent upon the stock price at that time and the premiums available at the various strike prices. 

Exelon should be declaring it’s next dividend very shortly.  The 2nd quarter ex-date is generally around the 10th-12th of May.  If you like the strategy I just layed out now could be a good time to start a position in EXC.  I would start by buying  Exelon stock at the current price, then as we get closer to the second week of May I would look to sell CCs three months out. 

One last comment, often it is possible to buy back the puts and calls at a substantial profit well before their expiration date.  Doing so frees up capital while also giving you the possible opportunity to do the trade again later if the stock  moves up or down fairly quickly.

Regards,

Troy

Posted in Portfolio Updates | Tagged: , , | Leave a Comment »