The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘naked put’

Rollout on UNG

Posted by mounddweller on September 17, 2009

Guys,

First my apologies for not having much to say lately.  With the market up so much I haven’t been trading any CC/NPs.  I’m still waiting on that long overdue pullback.

However, with expiration coming up tomorrow I did go ahead and rollout my NP position in UNG another month.  Specifically I bought back the SEP $13 puts for $1.25 and sold the OCT $13 puts for $1.75.   This generates a 3.85% ROIC.  This is my 3rd month of rolling out for a net credit.   Below is a listing of my transaction history for this trade.  Note, my net cost is now down to $10.93.

UNG - Transaction History

Regards,

Troy

PS.  I’ll be running my VISIONS screen and will post anything that catches my eye.

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Posted in Portfolio Updates | Tagged: , , | 4 Comments »

New NP Trade – O

Posted by mounddweller on July 2, 2009

I have executed yet another NP trade.  Anyone reviewing my trading history in 2009 will find I have been almost exclusively selling NPs this year.  As a matter of fact I’ve only executed one new CC trade in 2009.  To be quite honest, I’m not sure why that is the case.  It’s not for lack of trying.  I run my VISIONS Scout screener every week looking for great CC trades.

Anyway, like I mentioned above I did execute a new NP trade today.  I sold the AUG O $20 puts for $0.50.  My ROIC on this trade is 2.50%. 

Now that I’ve explained what I did let me tell you why I did it.  My reasons for executing this trade is similar to that of my recent NP trade in TK.  I want to own O, Realty Income Corp long-term.  Realty Income Corp is a REIT engaged in the acquisition and ownership of commercial retail real estate properties in the United States. The company leases its retail properties primarily to regional and national retail chain store operators.  It pays dividends monthly.  In fact the company has declared 468 consecutive common stock monthly dividends throughout its 40-year operating history and increased the dividend 54 times since Realty Income’s listing on the New York Stock Exchange in 1994.  Annualized the current dividend is $1.7085.  If assigned at $20 my initial dividend yield will be 8.54%. 

My objective in owning O and TK (as well as some high yield MLPs) is to build a portfolio of stable business which are able to consistently grow their dividends.  By reinvesting those dividends from now until when I retire I plan to have a substantial income stream to supplement my CC/NP trading income.  In the interim I can also generate additional income by selling CCs on these positions as I accumulate shares.

Below is the price chart for O.  You’ll immediately notice this is NOT a good short-term trading candidate based on Ron Groenke’s criteria.  I would not recommend this trade to anyone unless (like me) you intend to hold it for a very long time.  My plan is to sell additional NPs over time if the price continues to fall.  For example, if O trades for less than $20 and the stock is put to me, I’ll probably sell additional NPs at the $17.50 strike price or lower until I have accumulated the total number of shares that I’d like to own.

VISIONS - O price chart

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

Position Update – JEC

Posted by mounddweller on June 5, 2009

I closed out my position in JEC this morning by BTC JUN $35 puts for $0.05.  Why did I do this?  Simply because the risk in the stock falling was higher than the additional return to be gained ($0.05/share) with another two weeks remaining to expiration.  Doing so also releases another $7000 (these were cash secured puts) for any other trading opportunities that present themselves over the next two weeks.

So how did I do on this trade.  Well, let’s look at the numbers.  I sold 2 puts back on 5/11 at $1.25, netting $239.53 after commissions.  I bought them back on 6/5 at $0.05, paying $20.45 total with commissions.  Thus, I ended up making $219.08.  Since this was a CSP transaction my ROIC was ($219.08/$7000.00) or 3.13% in 25 days, yielding an annualized ROIC of 45.69%.  The table below presents these numbers in a more organized fashion.

 JEC transactions

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New February Trade – EWZ

Posted by mounddweller on February 23, 2009

Well, I went and did it.  I sold EWZ Mar 25 puts at $0.65.  Time will tell if I come out looking like a genious or the village idiot.  As I mentioned in earlier posts I originally was interested in either the $26 or $27 puts.  But with the sell-off in the market (again) today the $25 puts caught my eye. 

So why EWZ you ask?  First, some background information for those who might not be familiar with EWZ.  EWZ is the ticker symbol for the iShares MSCI Brazil Fund.  This ETF seeks to provide investment results which approximate the price and yield performance of the MSCI Brazil index.  Consequently, it is full of the largest, most well capitalized companies headquarted in Brazil.  Brazil as many of you already know is a fast growing emerging market and is the ‘B’ in the acronym ‘BRIC’.  So, back to the original question, why EWZ? 

(1) I like the chart.  EWZ bottomed out back on November 20th, closing at $26.64 (intra-day low was $25.55).  Since then it has been range bound hitting $40 no less than 3 times and subsequently falling to around $32.  Prior to today’s debacle it had been in the Groenke V for quite some time.  After the decline today it now has a TAI score of GR, a BR of 6.33 and Gold $ score of 40.  Not exactly stellar, but hey we’re selling puts here that are way out of the money.

(2) I like the risk/reward profile.  First, the risk.   EWZ closed today at $31.95, down $2.50.  To be assigned EWZ must fall another 21% in less than 30 days.  Not impossible, but improbable.  Also, as I mentioned above, the 52-wk low is $26.64.  Our $25 strike price is 6.15% below that; the break-even point is $24.35, 8.6% below the 52-wk low.  What’s the reward?  2.6% ROIC for a holding period of 25 days; an annualized return of 37.96%.

(3) Finally, and probably most important.  If assigned this is an investment I want to own.  EWZ is full of growing companies, trading at very low P/E multiples, and throwing off over 6% in dividends.

Below are the stat’s and chart for EWZ:

2/23
Price
52 Wk
High
52 Wk
Low
50 Day
Average
Buy
Limit
Buy
Rank
TAI Dividend
Yield
 $   31.95  $    102.21  $     26.64  $     35.64  $   43.02 6.33 GR 6.09%

 

TOP 10 HOLDINGS ( 62.21% OF TOTAL ASSETS)  
 
Company Symbol % Assets
BRADESCO PFD N1 BBDC4.SA 5.54
ITAU HOLDING PFD N1 ITAU4.SA 5.4
AMBEV PFD AMBV4.SA 3.11
Companhia Siderurgica Nacional N/A 2.15
COMPANHIA VALE ADS RIO 7.05
Gerdau N/A 2.08
PETROBRAS PETR3.SA 11.3
Petroleo Brasileiro Sa Petrobras N/A 12.89
UNIBANCO UTS UBBR11.SA 3.6
VALE R DOC PFD-A N1 VALE5.SA 9.09
EQUITY HOLDINGS  
 
Ratio EWZ
Average Price/Earnings 6.98
Average Price/Book 1.36
Average Price/Sales 0.97
Average Price/Cashflow 3.50

 

feb-pick-ewz

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