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Posts Tagged ‘WFR’

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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New NP Trades

Posted by mounddweller on May 24, 2011

Fellow Traders,

Wanted to update y’all on my recent trades.  Thus far this week I have established two new positions.

First up is Petroleo Brasileiro (PBR).  Yesterday I STO 3 JUN $32 puts at $0.65.   After loosely following its gyrations for the past several weeks (mainly down) I decided the time was right to sell some puts.  Like the proverbial broken clock which is guaranteed to be correct at least twice a day, my timing was actually correct this time.  Today, PBR bounced back up and the puts I sold for $0.65 yesterday, closed today at $0.39.  Of course tomorrow could be a down day and they could be back at $0.65 or more.  Anyway, a one-year chart on PBR shows why I like this trade.

PBR has bounced off support at $32 multiple times in the past year.  Barring a complete collapse in equities I believe it will do so again.  If I’m wrong I can roll the puts out further in time until I’m ready to have it put to me or I can accept assignment on June 18th and begin selling CCs.  Regardless, I will be happy to own PBR at $32.  It is one of the world’s great energy exploration and refining companies.   At $32 I would own it at less than 8x trailing earnings and a fraction over its current book value of $29.80.

Next up is MEMC Electronic Materials Inc. (WFR).  MEMC is a large manufacturer of polysilicon wafers.  It sells into both the semiconductor market as well as the solar energy market.  Therein lies part of the problem or opportunity depending upon your point of view.  Like PBR, WFR has sold off sharply over the past few months.  This is primarily attributable to the selloff of all solar related stocks.  WFR has fallen from $15 to just under $10 since mid-February.  It has now reached value territory, selling for < 7x prospective forward earnings and < book value ($10.11).  Here’s the chart for WFR:

I’ll be the first one to admit I may be a tad early on this one.  The stock has support around $10 but has previously fallen as low as $9.50 before bouncing back.  Time will tell if I should have waited a few more days but over the long haul I feel WFR will recover and this will prove to be good trade.  Here’s the trade I executed; with the stock trading around $10.10 I STO 5 JUN $10 puts at $0.43.

Before ending this post I want to point out one thing.  I opened both of these trades with half of the amount of capital I ultimately would be comfortable investing in either one.  Doing so gives me flexibility in case I’m wrong.  I did this because the market is clearly trying to decide where it wants to go next.  If it decides down is the way to go I want to be able to have capital in reserve should I need it to assist me in working my way out of a hole.

Regards,

Troy

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Deep OTM NP Strategy – APR Week 4

Posted by mounddweller on March 20, 2011

Fellow Traders,

We have a total of 38 selections meeting our Week 4 criteria.  However, I don’t think all 38 are worthy of our risk capital.  As I mentioned in my MAR results post I think it is imperative, given the current market volatility, that we become more selective in what we choose to trade.  So, while I am posting the entire list of 38, I would like to highlight a few that caught my eye as having a good risk/reward profile.

Running down the list the first stock that caught my attention was Interdigital Communications (IDCC).  It closed Friday at $42.01.  The put I’m interested in is the $35 strike.  It has a bid price of $0.60 giving us a ROIC of 1.71% with 18.11% DSP.  Some will take one look at the chart and immediately wonder if I am out of my mind.  The stock had a strong run up from $25 to 57.50 and has since fallen sharply back to the low $40s.   But if you look closely you can see the stock is trying to find a bottom and that the money flow has bottomed out and is beginning to recover.  That technical indicator coupled with the stocks excellent fundamentals makes it a worthy candidate for an NP trade.  IDCC has a net margin of almost 40%!  Yes, you read that correctly, 40%.  It also boasts almost $12/share of cash sitting on its balance sheet.    It currently trades at about 12x trailing earnings.

The second stock that caught my eye was LDK Solar (LDK).  This is a stock I successfully traded under similar circumstances back in late November.  Friday, the stock closed at $11.47.  The APR put at the $9 strike closed at $0.15.  This gives us a 1.67% ROIC with 22.84% DSP. 

The third stock I noticed is one that was on our list last month as well, Rambus (RMBS).  We all know the technology stocks have been taking a beating of late.  Rambus is no exception.  In the past few weeks it has fallen from just over $22 to almost $18.  Friday it closed at $19.06.  The $16 put is at $0.36 bid.  This yields an ROIC of 2.25% and 17.94% DSP.  The $16 stike is below the 52-wk low of $16.94.

I also found three other stocks on the list which I feel are worthy of your consideration.  They are AGO, TSL, and WFR.  AGO insures bonds, while TSL and WFR are solar related stocks.

Best of luck to everyone this month.  I think we are in for quite a ride. 

Regards,

Troy

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March Expiration

Posted by mounddweller on March 23, 2010

All,

Sorry for the delay in posting a message. This past Saturday my PC crashed and I’m slowly trying to recover lost data. Every day something else I need comes up missing.

Enough about that, please recall I only had two open position in March. My WFR position was called away. I originally set-up this trade in December and over the past 3 months sold a series of calls and naked puts. My total return for the 3 month period was a little over 14%. Not bad.

My other open position is in GME. You’ll recall I sold APR $21 calls on it back in February after it had taken quite a tumble falling from around $22 down to around $18. It it now back up above $22. If the market holds I will be called away at APR expiration.

Best of luck to everyone this month. I hope to be back in a few days with some new trades.

Regards,
Troy

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WFR – An Update

Posted by mounddweller on February 16, 2010

All,

It appears I may be rather busy towards the end of this week so I went ahead and rolled out my calls on WFR.  I BTC the FEB $14 calls for $0.03 and STO the MAR $13 calls for $0.57.  This certainly was not the best price of the day but one I’m happy with.  I had to run some errands this morning so I put in a trade well above the current market price but one that I’d be happy with if the market did move before I got home.  It moved!  The MAR $13 calls were trading at about $0.65 when I got home.  They’ve since come back down and currently are trading at $0.59 bid.  Anyway, like I said I’m pleased with the trade.  At $0.54 (net) the return on my original cost of $12.57 is 4.3%.  My cost basis is now down to $11.29.  If assigned on 3/20 my ROIC will be 15.8%, unassigned return will  be 12.4%.  Not bad for a 90-day holding period!

Best of luck to all this expiration week.

Troy

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An Update on WFR

Posted by mounddweller on December 23, 2009

I sold a new round of calls this morning on WFR.  As I mentioned in an earlier post I was looking to sell either the JAN $12.5s or the FEB $14s depending on which direction WFR decided to take.  Well, over the past couple of days the direction has been up.  Thus, this morning I sold the FEB $14 calls for $0.80.  Some of you might be curious as to why I chose the FEB $14s instead of the JAN $14s.  My regular readers know I usually sell the near month calls and puts.  With WFR right now, that strategy just didn’t make sense.  The JAN $14s were only selling for $0.30-0.35.  Meanwhile the FEB $14s were at $0.75-0.85. 

Usually calls and puts with a strike price two months out trade at a multiple of less than double the price of the near month options.  That clearly isn’t the case with WFR right now.  I suspect traders believe WFR is going to continue trending higher but that they don’t have much faith that it will get above $14 by January expiration.  However, they are much more confident this will occur by February expiration, thus they are willing to pay a premium price for those options.

Below is a log of my WFR transactions.  As you can see my cost (net of commissions) is now down to $11.80.   If assigned at $14 in February my ROIC will be better than 17% in just 9 weeks.  Not bad.  If unassigned my ROIC will be around 8%. 

Merry Christmas,

Troy

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Two New Trades

Posted by mounddweller on December 21, 2009

Today I did buy/writes on both GME and NITE.  You’ll recall in the post from yesterday I said “Its a toss-up right now between GME and NITE.”  Well, instead of choosing between the two I decided to spread my risk and invest a little in both.  Below are the details of my transactions:

Gamestop (GME) – Bought 200 shares at $22.65.  Sold two JAN $22.50 calls at $0.96.  This makes my break-even point $21.69.  If assigned at expiration my return will be 3.58%.  If unassigned it will be 4.27%.

Knight Capital (NITE) – Bought 300 shares at $15.17.  Sold three JAN $15.00 calls at $0.65.  This makes my break-even point $14.52.  If assigned at expiration my return will be 3.16%.  If unassigned it will be 4.33%.

Also wanted to give everyone a quick update on MEMC Electronic Materials (WFR).  You’ll recall I executed a buy/write on it last week.  I bought 500 shares at $12.77 and sold the DEC $13.00 for $0.22.  These calls expired OTM.  My original plan for this month was to sell the JAN $12.50 calls.  However, a fellow trader and friend (thanks Ed!) persuaded me to wait as he believes it is going to continue moving higher.  Thus, my plan now is to sell either the JAN or FEB $14 calls if WFR moves higher.  If it stalls out I will sell the JAN $12.50 and capture some ITM premium.

Merry Christmas to all,

Troy

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Can You Believe It – Choices!

Posted by mounddweller on December 19, 2009

Yes, it is true.  For the first time in months I feel like I have multiple stocks from which to pick my next trade.  As all of my regular readers know I haven’t been trading much of late.  Quite simply, I couldn’t find stocks that both met my VISIONS criteria AND had what I considered to be an acceptable risk/return ratio.

This month that has changed.  I have four, yes FOUR, stocks that I feel are worthy of consideration.  They are Gamestop (GME), Illumina (ILMN), Knight Capital (NITE), and MEMC Electronics (WFR).  Let me give you a brief description of each:

GameStop operates as a retailer of video game products and personal computer (PC) entertainment software. It sells new and used video game hardware; video game software; video game accessories, including controllers, memory cards, and other add-ons; PC entertainment software; and strategy guides and trading cards. The company sells its products through its 6200+ stores, as well as through an electronic commerce Website gamestop.com.

This is the second time I have considered a trade in GME.  Earlier this year (July/August) I executed a very successful CC and NP trade on GME. 

Illumina, Inc. engages in the development, manufacture, and marketing of integrated systems for the analysis of genetic variation and biological function.  It also is a stock I’ve traded previously.  However, in this case it was a trade I entered before I began using Ron’s VISIONS methodology and software.

Knight Capital Group, Inc., a financial services company, provides electronic and voice access to the capital markets across multiple asset classes for buy-side, sell-side, and corporate clients; and asset management for institutions and private clients in the United States. It operates in two segments, Global Markets and Asset Management.

And last, but not least there is MEMC Electronics.   MEMC Electronic Materials, Inc. designs, manufactures, and sells silicon wafers for the semiconductor industry worldwide. Its products include prime polished wafers, such as OPTIA and annealed products; epitaxial wafers consisting of thin silicon layer grown on the polished surface of the wafer; test/monitor wafers for testing semiconductor fabrication lines and processes; and silicon-on-insulator wafers used for the chip making process. The company’s products are used in the manufacture of various semiconductor devices, including microprocessor, memory, logic, and power devices, as well as the starting material for solar cells.

As you know I entered a trade in MEMC just a week or so ago.  My December calls expired worthless so I hopefully will be selling a second round of calls on it this coming week.  I am including it again in this analysis because I feel it is still at a good entry point for folks who didn’t join me in the trade last week.

Below is a spreadsheet showing the key metrics for each of the stocks under consideration.  Cells shaded in green are the best value among the four stocks for that particular metric.

As you can see NITE is the clear choice based simply on having the best metrics in 5 categories.  At 92, it has the best Gold$ score.  It also trades at closest to it’s book value, has an exceptional amount of net cash on its books, and has the best TAI score.  However, let’s not make a hasty decision.  Let’s have a look at the stock charts.

In my opinion, of the four stocks under consideration, ILMN has the best looking chart.  After selling off sharply late in October it has since stabilized and is now trending back up right in the middle of the V.

OK, now let’s see what our ATM call options look like.  Below is a list of the near month ATM options for each of the four stocks being considered.  None jump out at me as being far superior to the others.  The disadvantage with the ILMN stock price is that it is right in the middle between the next available strike prices.  The other three stocks all trade at or within mere pennies of the ATM strike price.  Thus, with ILMN you have to make a decision as to whether to write the ITM or OTM call.  WFR offers the best uncalled and second best called return, followed by GME.  NITE offers the least return but is by far the safest pick with the huge pile of net cash sitting on its balance sheet.

 

What to do, what to do? For me, it comes down to choosing either GME or NITE.  Why?  Well, I already have a position in WFR that I need to sell a second round of calls on so I don’t want to pick it and end up with too large a position in one company.  With GME I get a company I’m very familiar with and which I have successfully traded before.  With NITE I get a company selling for less than its net cash.  In this market, that ‘safety net’ is very appealing.  While I like ILMN’s chart I don’t like its fundamentals.  It sells for over 28 times earnings and almost 3.5 times book value.  I also don’t like having to choose between the ITM or OTM call.

So what am I going to do?  Well, I’m going to wait and see what Monday brings.  Its a toss-up right now between GME and NITE.  Perhaps the market will make the decision for me on Monday with one or the other moving sharply one way or the other.

What do you think?  Reply to this post and let me know which one you like and why.

Merry Christmas,

Troy

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A New CC Trade – WFR

Posted by mounddweller on December 11, 2009

I executed a new CC trade today in MEMC Electronic Materials, Inc.  (ticker symbol: WFR). 

MEMC designs, manufactures, and sells silicon wafers for the semiconductor industry worldwide.  Its customers comprise semiconductor device manufacturers, including the memory, microprocessor, and applications specific integrated circuit manufacturers, foundries, and solar cell and module manufacturers.  It was founded in 1984 and has annual revenues of around $1.23B.

Before I explains my reasons for executing the trade, let me give you the key metrics from my trade:

Bought to Open (BTO) 500 shares of WFR at $12.77

Sold to Open (STO) 5 DEC $13 calls at $0.22

Thus, my net cost and break-even point is $12.55.

Uncalled ROIC:  1.72% with only 8 days remaining to expiration.  Annualized this equates to an ROI of 78.60%.

Called ROIC: 3.52%, 160.77% annualized.

If you’ve skipped ahead and looked at the chart and the KPIs  you undoubtedly are wondering why I did this trade.  At first glance it doesn’t seem to have much positive going for it.  The stock is trading below the Vision V and it has a very low Gold Score.  Mr. Groenke would probably groan and shake his head if he saw this trade.  So, why did I go ahead and do it?  Well, primarily for two reasons, one fundamental and the other technical.  First, the fundamental reason is the strong balance sheet.  WFR is sitting on almost $1B in cash and very little debt (< $30M).  Thus, if I’m wrong about the trade I don’t have to worry about the company going bankrupt on me.  Second, the technical reason is the proximity of the stock price to its 52-wk low and a strong support level ($12.00).  I have been watching WFR for several weeks now.  It has strong support at $12.  Multiple times it has fallen to around $12 and bounced back.  Thus, again if I’m wrong about the trade I can take comfort in knowing I’m buying in at a good price and need not worry about it falling a great deal further.

As I mentioned earlier I have been following WFR for several weeks.  My original intent was to sell naked puts at $12 as WFR bounced off support at that price.  However, everytime the set-up for the NPs looked good I couldn’t pull the trigger or was busy and missed the opportunity.  However, after logging in today and looking at the returns I could generate for an 8-day holding period, I decided to change my tactics and sell the $13 CCs instead.

Below are the charts and KPIs:

So, what’s my plan?  Well, if uncalled, depending upon the price of the stock, I intend to sell the JAN $12.50 calls which are currently trading around $0.75.  If my DEC calls are ITM next Friday I intend to let myself be called away, take my 3.52%, and be happy.

Best of luck to y’all in your trades as you close out 2009 and may you have a very prosperous 2010!

Regards,

Troy

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