The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘GDX’

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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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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Monthly Results – March 2013

Posted by mounddweller on March 29, 2013

Fellow Traders,

You’ll recall a couple months ago I started a new series of posts summarizing my monthly trading results.   The last trading day of the month being behind us let’s take a look and see how I did.

Number of Closed Positions: 5

Profit on Closed Trades: $1,041.80

Total Capital Used on Closed Trades: $69,790.00

Average Number of Days Trades Were Open: 30

Return on Invested Capital: 1.49%

OK, before I move on to the stats for my open trades, let me tell you a little more about these closed trades.  Of the 5 closed trades, 3 were naked puts and 2 were covered calls.  2 of the 3 naked puts trades (CAT and INTC) expired OTM.  The third, EXC I bought to close after 25 days (out of a total of 36 DTE) when I had captured 75% of the total premium.  One of the two covered call trades (COH) started out as what one of my friend and  investing mentors, Ron Groenke calls the “Double Up” strategy.  This is where you do a covered call and sell naked puts on the same stock with the same expiration date.  The other covered call trade (GLW) was a straight buy/write.  All 5 trades were closed for a profit.

Now let’s look at my open trades.

Number of Open Positions: 5

Net Cash Flow in March from Open Positions: $440.15

Total Capital Used on Open Trades: $76.050.00

Net Cash Flow on Invested Capital: 0.58%

The return on invested capital for my open positions is lower than normal this month because 2 of my 5 positions were initiated in prior months and did not generate any new income.  One of the two (POT) was initiated in late February and the other is GDX which I have been trying to profitably work myself out of for a few months now.  The return on invested capital for new open positions is a more normal 1.09%.

Best of luck to all my readers as we head into April.

Regards,

Troy

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Update – FEB Expiration

Posted by mounddweller on February 18, 2013

Fellow Traders,

Just a short post tonight to update you on my trading activity this past week leading up to FEB expiration.

GDX – I thoroughly messed this trade up.  As you may recall I was short both the FEB $44 and $41 puts.  Earlier in the week GDX was trading above $42 and I could have bought back my $44 puts at a small profit.  The $41 puts could have been bought back for pennies.  However, with only a few days to expiration I decided to let both of them ride.  BIG MISTAKE!  Gold fell through support and the Gold Miners Index fell right along with it.  GDX closed Friday $39.89.  Thus, not wanting to accept assignment, I had to move quickly to roll my puts out.  Here’s what I decided to do:

(1) I rolled my FEB $44 puts out to the SEP $41.50 strike for a net credit of $0.05.  The small net credit essentially covered my commissions.  I did this because I expect we’ll get a bounce soon and by now having puts at the $41.50 strike I should be able to extract myself from this trade for a small profit.

(2) I rolled my FEB $41 puts out to the 22FEB $41 strike for a net credit of $0.22.  I thought $0.22 for one week was a fair trade.  If GDX doesn’t bounce by Friday I’ll roll out again and likely down to the $40 strike.

COH – Very strange transaction occurred with Coach.  Recall I was long 100 shares of COH and had sold a FEB $52.50 call.  In addition, I had sold 2 FEB $50 puts.  On Friday (the day BEFORE expiration) I had 200 shares of COH put to me at $50.  The owner of my puts put the stock to me!  Why I have no clue.  He/she could just as easily have sold to close and made a sizeable profit.  Oh well, it didn’t matter to me because I wanted to acquire the additional 200 shares anyway.  Now, I own 300 shares at a net cost of $49.94 share.  Tomorrow, I will sell OTM covered calls against my 300 shares and thereby set myself up to receive the $0.28 dividend in early March.

EXC – I had another embarassing gaff with Exelon.   Long-time readers will remember I have been holding EXC shares and trading puts and calls against them for three years.  My most recent trades had been to write covered calls at the $30 strike in anticipation of the stock going down after the dividend cut was finally announced.  Well, much to my chagrin EXC initially increased after the dividend cut announcement.  My calls were now deep in the money.  Long story short, someone called away my stock earlier this week so they could capture the hefty $0.525 dividend.  I waited too long to roll my calls.

Since I want to own EXC long-term I immediately sold another round of APR puts at the $30 strike for $0.60.

YUM – Last, but not least, I need to update you on my YUM trade.  The lesson to be learned in this trade is not to panic and to be patient.  Many of you know YUM is facing a strong headwind in their largest market, China.  The rumors of tainted chicken have caused sales to fall significantly.  The stock responded accordingly by falling to $60 earlier this month.  At that time my puts were $2.50 in the money and YUM looked like it could fall further.  Rather than panic, I heeded the sage advice of my friend Teddi over at www.fullyinformed.com.  By staying the course I was able to watch YUM recover, closing Friday at $63.99.

This trade resulted in a ROIC of 1.14% in 25 days or 16.7% annualized.

Best of luck to everyone trading this week.

Regards,

Troy

 

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New Trade – GDX

Posted by mounddweller on January 10, 2013

Fellow Traders,

Today I executed a new trade in GDX.  GDX is the Market Vectors Gold Miners ETF.  This ETF holds positions in large-cap gold mining companies.  Below is a list of their current top 10 holdings (courtesy of Yahoo Finance).

BLOG - GDX Top 10 Holdings

While I have previously traded individual gold mining company stocks, this is the first time I have traded GDX.  Here’s what brought GDX to my attention.  I have been reading various stories about the recent weakness in the price of gold.  I also have read several articles about gold mining stocks being at record lows relative to the price of gold.  This got me to thinking that now would be a fairly good time, relative to down-side risk, to sell puts on gold mining companies.  I checked the charts for several gold mining companies and didn’t see any that jumped out at me.  However, I then decided to check GDX and its small cap sister ETF, GDXJ.

The GDX chart appeared to best fit what I was looking for.    GDX over the past 3 years has not traded below $40 and has traded as high as $65.  In the past few days it has traded around $45.  Thus, it is within 10-12% of its multi-year lows.  That limits down side risk.  Below is the one year chart for GDX (again courtesy of Yahoo Finance), showing the $40 lows.

BLOG - GDX 1 Year Chart

In this next chart which shows the past 3 months I have included the slow and fast stochastics.  Both indicate the ETF is extremely oversold.   What you can’t tell in the chart is that today the %K moved back up over %D indicating the sell-off might be over and a rally might be right around the corner.

BLOG - GDX 3 Month Chart

So, anticipating a rally might be about to occur I executed the following trade:  STO 3 GDX JAN25 $44 puts at $0.42.  GDX was trading at $45.20 when I sold my puts.  This gives me about 2.6% downside protection and a 0.95% ROIC with only 10 days to expiration.

Note, my expiration date on these puts is only two weeks out.  When looking at available expiration dates for selling GDX puts I stumbled across something new.  Previously I had never seen weekly options available with more than 8 days to expiration.  GDX had weekly options available for the next several weeks.  In fact they had weekly option expiration dates all the way out into February!  This is a put sellers dream!  Not only are GDX puts available in $1 strikes they are also available with multiple weekly expiration dates.  Talk about flexibility in both the set-up and management of your trade.  This is nirvana!

Has anyone found any other stocks or ETFs with this many available expiration dates?  If so, submit a commit and let me and my other readers know.

Regards,

Troy

Posted in Troy's New Picks! | Tagged: , , , | 4 Comments »