The Money Tree

Safely Generating Income in Retirement

Posts Tagged ‘NLY’

Recent Trades

Posted by mounddweller on October 1, 2011

Fellow Traders,

I want to update you on some of my recent trades.  Since I last provided an update I have added to one position and opened three more positions.  First, let me update you on my NP position in Petroleo Brasileiro (PBR).  You’ll recall I initiated this position back in May by selling JUN $32 puts.  You can read my write-up about why I entered the trade here: https://troysmoneytree.wordpress.com/2011/05/24/new-np-trades-2/.  From May through July this trade was working wonderfully.  My puts would expire OTM and I would then rewrite them the following month.  Since August the trade has not been working so well.  PBR has declined steadily and I have been rolling my puts at the $31 strike price.  I am now short the JAN $31 puts.  I will continue to roll these puts as long as possible until the price of PBR recovers.

Because PBR has declined substantially and I still believe it is a compelling value I have chosen to sell additional puts at the $20 strike price.   On 9/22 I sold OCT $20 puts at $0.33.  At the time PBR was trading around $23.45.  Yesterday, it closed at $22.45.  The 5-year chart below will show you while I chose the $20 strike price.

Even during the financial crisis in late 2008 PBR didn’t fall much below $20.  Also, at $20 PBR would be trading at 74% of its book value.  My plan is to continue to sell puts at the $20 strike price until PBR begins to recover.  If it should continue to fall below $20 I will begin rolling the $20 strike price puts as well.  I will then commit the last of my planned capital for this trade at a new lower strike price, perhaps at the $17 strike price.

OK, let’s move on to my new positions.  My new positions are in Corning (GLW), Annaly (NLY), and Microsoft (MSFT).  GLW was brought to my attention by an investing buddy of mine.  He is very conservative so when he thinks a trade is nice, I listen.   On 9/22 I sold OCT $10 puts at $0.13.  At the time GLW was trading at $12.25.  This trade gives me a 1.16% ROIC (net of commissions) with almost 20% DSP.  Below is the 5-year chart for Corning.  The $10 strike price is very near the bear market lows.  Other factors leading me to make this trade are GLW’s over $2.60/share in cash (net of all long-term debt) on its balance sheet, its book value of $13.56, and its P/E ratio of 6.

This week I made my two other new trades.  I sold NLY NOV $16 puts for $0.38.  I sold these puts after NLY went ex-dividend.

My last trade was in MSFT.  I sold OCT $23 puts at $0.32.  Net of commissions my ROIC for this trade is 1.3%.  The following 2-year chart shows why I like this trade.

Well, now you are all caught up.  As you can see I am always on the look out for good trades outside of those generated by my two NP strategies.  As the current market volatility continues I will be on the look-out for other good trades.

Best of luck to you in the weeks ahead.

Regards,

Troy

 

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SEP Closed Positions

Posted by mounddweller on September 18, 2011

Fellow Traders,

I finally was able to catch up and update the Historical Results and Open Positions pages of my blog.  I encourage you to take a look.  Also, I wanted to take a moment to post the trades I closed between the AUG and SEP expiration.

As you can see I closed 7 trades this month.  All were cash secured naked put trades.  Premiums received (net of commissions) totalled $1,040.82.  My maximum amount of capital at risk during the month was $73,500.  This equates to a ROIC of 1.42%.

I’m hopeful I will be able to take advantage of similar opportunities as they present themselves between now and OCT expiration in 5 weeks.

Regards,

Troy

 

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Two New NP Trades

Posted by mounddweller on September 1, 2011

Fellow Traders,

I want to update you on two trades I made earlier this week.  Yesterday, I took advantage of the US Justice Department’s decision to attempt to block AT&T proposed merger with T-Mobile.  AT&T (T) sold off hard on the news falling from $29.90 to as low as $28.00 (6.4%).  Believing the market had over-reacted I executed the following trade:

STO 5 T SEP $27 puts at $0.37

This gives me a 1.29% ROIC (net of commissions) with 17 days to expiration (DTE).  Annualized my ROIC is 27.68%

Today, I placed a trade in Annaly (NLY).  I’ve never traded NLY before.  My objective in this trade is very different from almost all of my other naked put trades.  In this case I want to have NLY put to me at $17.   You see NLY goes ex-dividend towards the end of this month (after SEP expiration).  If I have the stock put to me at $17 I will be eligible to receive the $0.65 quarterly dividend.   Here’s the trade I executed:

STO 5 NLY SEP $17 puts at $0.30

Excluding the potential for collecting a dividend this trade gives me a 1.64% ROIC (net of commissions) with 16 days to expiration (DTE).  Annualized my ROIC is 37.32%.

My return gets even better if NLY closes below $17 and I have the stock put to me.  In this case I will hold the stock at least until the ex-dividend date of 9/29.  Doing so will give me a cost basis of $16.05.  At that point I can either sell the stock immediately or sell OCT or NOV calls against my position.  My ROIC including the dividend is a juicy 5.6% with a minimum holding period of 29 days.

Well, that’s it for this evening.  Best of luck to everyone in this new month of September.  I have a feeling it is going to be a wild month.

Regards,

Troy

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