5/23/2011 Had HPQ options assigned. I was looking closing this before the SCHEDULED earnings, but HPQ had leak and moved up announcement and stock dropped over $2.50 before getting a chance to close at a profit. Selling CC's against this holding. Rolled the BRK.B May$80 to Sep11 $77.50. Closed 3 positions (EXC, TEVA, TEVA) in taxable account to open up some leverage $ for new PUTs.
5/9/2011 Sold SU PUTs in taxable account for my first energy related PUT in quite a while now that the price per barrel of oil is under $100. High IV allows for higher return with a delta within my investment criteria.
4/21/2011 Sold more TEVA PUTs today in taxable account after $4.00 drop in one day due to results of a BIIB MS Drug appearing better than a TEVA drug. We'll see in a few months if my strategy of selling DOTM PUTs in my taxable account can overcome a mini-black swan in a stock.
4/15/2011 GREED IS BAD!: Had BAC Apr11 $13 PUTs in IRA account set to expire at the close of trading on 4/15. BAC announced earnings that morning with the stock at $13.20. Stock moved up in early trading to $13.30+ so I didn't close the position. I had to leave for several hours and when I returned BAC was down to $12.80-$12.90. I closed the position for $.15, still made money, but could have closed for $.02 in the AM. Greed cost me 30% of my profit on this position. At least closing the position was correct as BAC was down 3-4% on 4/18 when I sold Jun11 $12 PUT.
Tuesday, April 19, 2011
Friday, April 8, 2011
Abbreviations used in Covered Call and PUT posts.
AY: Annualized Yield
CAGR: Compound Annualized Growth Rate.
CACAGR: Call away CAGR. Stock price compound growth rate required before stock is price exceeds strike price.
CC: Covered Call
CD: Current Delta. I treat the "Delta" as a positive whole number.
CSP: Cash Secured PUT
EA: Exposure Amount (PUT strike price * # shares)
SEA: Stististical Exposure Amount (EA * Delta * .01).
WSEA: SEA when option written.
CSEA: Current SEA (EA * CD * .01)
IV: Implied Volatility
RAY: Realized Annual Yield. Used when a PUT is closed.
WD: Delta of option on date written. Delta is always shown as positive number between 1 and 100.
CAGR: Compound Annualized Growth Rate.
CACAGR: Call away CAGR. Stock price compound growth rate required before stock is price exceeds strike price.
CC: Covered Call
CD: Current Delta. I treat the "Delta" as a positive whole number.
CSP: Cash Secured PUT
EA: Exposure Amount (PUT strike price * # shares)
SEA: Stististical Exposure Amount (EA * Delta * .01).
WSEA: SEA when option written.
CSEA: Current SEA (EA * CD * .01)
IV: Implied Volatility
RAY: Realized Annual Yield. Used when a PUT is closed.
WD: Delta of option on date written. Delta is always shown as positive number between 1 and 100.
Thursday, April 7, 2011
Use of PUTs for income in IRA's.
I use PUTs in IRA accounts for income and to maintain at least some conservative investment positions. All PUTs are written out of the money (OTM) (Strike price is lower than the stock price when the PUT option is sold).
Goal with these options is 12%+ annualized return on the option. These options are usually sold 3+ months into the future.
Recent trades
4/18/2011 BAC Jun11 $12 $ .35 AY 16.5% WD: 37 CD: 56
4/6/2011 BRK.B May11 $80 $1.35 AY 13.3% WD: 38 CD: 47 Clsd 5/20 CAY: 8.2%
3/11/2011 BRK.B Jun11 $80 $2.11 AY 9.6% WD: 27 CD: 54
3/11/2011 HPQ May11 $39 $1.09 AY 14.0% WD: 30 CD: 22 Assigned
2/15/2011 SNY Jun11 $32 $1.80 AY 16.4% WD: 30 CD: 6 Clsd:5/9 $.10 RAY:22.6%
1/24/2011 BAC Apr11 $13 $ .49 AY 16.1% WD: 30 CD: 25 Clsd:4/15 $.15 RAY:10.4%
5/20/2011 BRK.B Sep11 $77.50 $2.57 AY: 9.9% WD: 40 CD: 44
CD values updated 5/20/2011 after close.
Goal with these options is 12%+ annualized return on the option. These options are usually sold 3+ months into the future.
Recent trades
4/18/2011 BAC Jun11 $12 $ .35 AY 16.5% WD: 37 CD: 56
4/6/2011 BRK.B May11 $80 $1.35 AY 13.3% WD: 38 CD: 47 Clsd 5/20 CAY: 8.2%
3/11/2011 BRK.B Jun11 $80 $2.11 AY 9.6% WD: 27 CD: 54
3/11/2011 HPQ May11 $39 $1.09 AY 14.0% WD: 30 CD: 22 Assigned
2/15/2011 SNY Jun11 $32 $1.80 AY 16.4% WD: 30 CD: 6 Clsd:5/9 $.10 RAY:22.6%
1/24/2011 BAC Apr11 $13 $ .49 AY 16.1% WD: 30 CD: 25 Clsd:4/15 $.15 RAY:10.4%
5/20/2011 BRK.B Sep11 $77.50 $2.57 AY: 9.9% WD: 40 CD: 44
CD values updated 5/20/2011 after close.
Wednesday, March 30, 2011
Using Preferred Stocks and PUTs for Income in Taxable Accounts
One of the strategies that I use combines owing preferred stocks that I feel are very secure in their income and value and combine this with selling conservative PUTs to generate a nice income.
The combination should generate near 12% annual income.
Examples:
I own a variety of preferred shares where my current average yield over 7%.
Have sold the following PUTs:
1/27/2011 ABT May11 $44.00 for $.93 AY: 6.5% WD: 30 CD: 3 Expired.
1/27/2011 PG Jul11 $57.50 for $.96 AY: 3.1% WD: 19 CD: 7 Clsd 5/12 CAY 4%
3/10/2011 JNJ Jul11 $55.00 for $.94 AY: 4.7% WD: 22 CD: 4 Clsd 5/12 CAY 8.2%
3/21/2011 WMT Jun11 $47.50 for $.52 AY: 4.2% WD: 19 CD: 3
3/22/2011 MCD Jun11 $67.50 for $.77 AY: 4.5% WD: 19 CD: 1
3/24/2011 INTC Oct11 $17.00 for $.55 AY: 5.3% WD: 20 CD: 7 Clsd 5/12 CAY 14.5%
3/24/2011 MSFT Jun11 $23.00 for $.38 AY: 6.6% WD: 20 CD: 10 Clsd 5/9 $.12 CAY 7.3%
3/25/2011 EXC Oct11 $35.00 for $.95 AY: 4.6% WD: 22 CD: 17 Clsd 5/23 CAY: 8.8%
4/4/2011 BRK.B Jan12 $70.00 for $2.24 AY 3.9% WD: 19 CD: 23
4/7/2011 TGT Jan12 $40.00 for $1.25 AY 3.9% WD: 17 CD: 15
4/11/2011 TEVA Sep11 $42.50 for $1.03 AY 5.4% WD: 20 CD: 25 Clsd 5/19 CAY: 9.3%
4/21/2011 TEVA Jan12 $37.50 for $1.20 AY:4.1% WD: 20 CD: 15 Clsd 5/19 CAY: 19.8%
5/2/2011 BRK.B Sep11 $72.50 for $1.18 AY: 4.2% WD: 24 CD: 22
5/9/2011 MSFT Aug11 $23.00 for $ .44 AY: 6.5% WD: 26 CD: 27
5/9/2011 SU Dec11 $33.00 for $1.46 AY: 7.1% WD: 18 CD: 20
5/12/2011 BTU Dec11 $43.00 for $1.40 AY: 5.3% WD: 13 CD: 12
5/12/2011 COP Nov11 $55.00 for $1.21 AY: 4.1% WD: 13 CD: 11
5/26/2011 PRU Dec11 $50.00 for $1.66 AY: 5.8% WD: 18 CD: 18
CD updated 5/23/2011.
The combination should generate near 12% annual income.
Examples:
I own a variety of preferred shares where my current average yield over 7%.
Have sold the following PUTs:
1/27/2011 ABT May11 $44.00 for $.93 AY: 6.5% WD: 30 CD: 3 Expired.
1/27/2011 PG Jul11 $57.50 for $.96 AY: 3.1% WD: 19 CD: 7 Clsd 5/12 CAY 4%
3/10/2011 JNJ Jul11 $55.00 for $.94 AY: 4.7% WD: 22 CD: 4 Clsd 5/12 CAY 8.2%
3/21/2011 WMT Jun11 $47.50 for $.52 AY: 4.2% WD: 19 CD: 3
3/22/2011 MCD Jun11 $67.50 for $.77 AY: 4.5% WD: 19 CD: 1
3/24/2011 INTC Oct11 $17.00 for $.55 AY: 5.3% WD: 20 CD: 7 Clsd 5/12 CAY 14.5%
3/24/2011 MSFT Jun11 $23.00 for $.38 AY: 6.6% WD: 20 CD: 10 Clsd 5/9 $.12 CAY 7.3%
3/25/2011 EXC Oct11 $35.00 for $.95 AY: 4.6% WD: 22 CD: 17 Clsd 5/23 CAY: 8.8%
4/4/2011 BRK.B Jan12 $70.00 for $2.24 AY 3.9% WD: 19 CD: 23
4/7/2011 TGT Jan12 $40.00 for $1.25 AY 3.9% WD: 17 CD: 15
4/11/2011 TEVA Sep11 $42.50 for $1.03 AY 5.4% WD: 20 CD: 25 Clsd 5/19 CAY: 9.3%
4/21/2011 TEVA Jan12 $37.50 for $1.20 AY:4.1% WD: 20 CD: 15 Clsd 5/19 CAY: 19.8%
5/2/2011 BRK.B Sep11 $72.50 for $1.18 AY: 4.2% WD: 24 CD: 22
5/9/2011 MSFT Aug11 $23.00 for $ .44 AY: 6.5% WD: 26 CD: 27
5/9/2011 SU Dec11 $33.00 for $1.46 AY: 7.1% WD: 18 CD: 20
5/12/2011 BTU Dec11 $43.00 for $1.40 AY: 5.3% WD: 13 CD: 12
5/12/2011 COP Nov11 $55.00 for $1.21 AY: 4.1% WD: 13 CD: 11
5/26/2011 PRU Dec11 $50.00 for $1.66 AY: 5.8% WD: 18 CD: 18
CD updated 5/23/2011.
Saturday, January 15, 2011
Seeking Alpha comment by Double Dividend Stock 1/14/2011: VZ Calls
http://seekingalpha.com/user/191203/comment/1407670
Reply to Double Dividend Stock article posted on 1/14/2011.
Your scenarios provide for no up-side. I wonder if in the long term you'd be better off with a more balanced approach.
Example: VZ at $35.46 (Friday's close).
Sell Jul2011 $39 covered call for $.52.
You collect 2 dividends ($.975) so your annualized income with option premium is 8.5%. Stock needs a 21% CAGR to reach $39 by 7/16/2011.
Total return if called is 14.2% (31% annualized).
Nice thing about VZ is that with dollar interval options you can chose your balance between income and upside.
John
No position in VZ
-----
Additional note:
Using VZ $38 you'd get a little more upside potential than income.
Using VZ $37 you'd get a little more income that upside potential.
Reply to Double Dividend Stock article posted on 1/14/2011.
Your scenarios provide for no up-side. I wonder if in the long term you'd be better off with a more balanced approach.
Example: VZ at $35.46 (Friday's close).
Sell Jul2011 $39 covered call for $.52.
You collect 2 dividends ($.975) so your annualized income with option premium is 8.5%. Stock needs a 21% CAGR to reach $39 by 7/16/2011.
Total return if called is 14.2% (31% annualized).
Nice thing about VZ is that with dollar interval options you can chose your balance between income and upside.
John
No position in VZ
-----
Additional note:
Using VZ $38 you'd get a little more upside potential than income.
Using VZ $37 you'd get a little more income that upside potential.
Wednesday, January 5, 2011
Some historical examples of long term covered calls for income
Fields: Symbol, Date Option Sold, Stock price when option sold, Expected Dividends, Strike Price, Premium received, Annualized return if called.
Syb DtOptSld SPwos Divi. Exp Date StrPrc OptPr ARIC
ABT 11/23/09 53.80 $1.60 1/22/2011 $65.00 $1.42 22.9%
DEO 10/19/10 72.93 $ .95 4/16/2011 $80.00 $1.10 27.6%
JNJ 12/ 4/09 64.90 $1.96 1/22/2011 $75.00 $1.26 18.2%
MSFT 10/23/09 29.00 $.65 1/22/2011 $35.00 $1.00 21.3%
USB 10/22/09 25.05 $.45 1/21/2012 $35.00 $2.64* 20.9%
* NOTE: Originally sold 1/22/2011 $30 for $2.12 (closed for $.07) but rolled this to 1/21/2012 on 12/16/2010. New option for $.69 with $35 strike.
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