MyTradingBlog » Daily Journal

RNF: 7.8% return in 17 days (167% annualized)

admin — Sat, 20 Jun 2015 16:18:51 +0000

I posted my research on RNF, a few weeks ago. I wrote a covered call on 6/2/15, with a strike of $15 and expiry on 6/19/15. Funny, RNF traded right at $15 at the closing on 6/19/15. I was on my way to Philly on 6/19/15. I didn’t expect RNF to go up 6.3% on one day. But lucky me, RNF stopped right at $15, 5 pennies shy of being called away (I like this stock and don’t want it called away). As a result, 17 days gave me 7.8% return (annualized to be 167%). The news was that the analysts expect RNF’s dividend to more than double (from .30s to .60s) for this quarter ending 6/30/15. I intend to sell another call against my holdings with an expiry to go beyond the earnings report date (to play safe).

Bull spread to hedge against a Bidu drop

admin — Mon, 27 Apr 2015 18:16:48 +0000

BIDU is reporting earnings on 4/29/15. How to deal with BIDU (and other stocks) earnings report?

I have a BIDU covered call (long BIDU shares and short BIDU options, exp. 5/1/15 strike 215). BIDU is up today and trading at ~222. To protect a downside drop of BIDU, I set up a BIDU calendar spread (I sold BIDU 5/1/15, strike 240 and bought 5/1/15 strike 242.5 for $.25/share). Here are the possible scenarios of BIDU post earnings:

1. BIDU price range, $215-240: My original BIDU covered call is safe and my additional bidi spread will all expire and I’ll keep the spread premium.

2. BIDU price above $240, My original covered call is safe and I’ll buy back BIDU 240 strike and sell a higher premium/higher price option of future expiration.

3. BIDU drops below $215: all options expire. I’ll keep the premiums of all options. I will not sell BIDU shares and will sell more options next week.

Protected: APO

admin — Sat, 22 Mar 2014 16:39:27 +0000

Credit Spreads of FFIV

admin — Mon, 13 Jan 2014 16:30:38 +0000

My FFIV Jan. 18th 2014 short calls (part of the covered call) are expiring in a few days. It’s deep ITM now. I see 2 ways to roll this up.

1. Credit spread of $80 (1/18/14) to $85 (7/19/14): net credit of >$1/sh. 24.7% x 2 = 49%/yr.

2. Credit spread of $80 (1/18/14) to $90 (1/19/15): net credit of >$2/sh. ROI: 49%/yr.

The ROI is very similar, however, the 1st choice is much safer (with a deeper ITM call).

CRM: ITM credit spread, yielding 25% annual return

admin — Mon, 13 Jan 2014 15:45:47 +0000

My CRM (now at $57.17) short call of $43.75 (part of the covered call) contracts are due to expire this Friday. CRM’s 200 day MA is ~$47. Since 43.5 is too deep ITM, I want to raise the strike price to produce more time value but still within safe limits (below $47, the 200 day MA, in this case). So I bought back 43.75 call (Jan. 18th, 2014) and sold equal number of Jan. 17th, 2015 $46.25 for -.78/sh. If CRM stays above $46.25/sh by Jan. 17th, 2015, my gain is 25%/yr for my investment. This trade is also quite safe (see chart below).

AGNC: a great candidate for dividend + option premium strategy

admin — Thu, 19 Sep 2013 16:42:19 +0000

AGNC pays 13.31% dividend. What’s more interesting is this is also a weekly option stock with high liquidity.

I wrote a covered call of AGNC with a net debit of 23.58 for a call strike of 24 (exp. Sept 27th). With 8 days to expire, its annualized return is ~80% [(.42/23.58 x 100% / 8 (days) x 365 (days) = 81.2%]. The actual annualized return is more like 270%, since the margin requirement is only 30% for AGNC.

I plan to keep this stock for longer term (to receive dividend). So I’ll do a credit spread when the option expiration nears.

9/26/13

Most (70%) of my agnc options were exercised today (obviously the call buyer wanted to received dividend, since today is the ex-dividend day), including the calls that expire in Oct which still has a sizable time value. Not surprisingly, AGNC went down about $0.80 at the open today b/c AGNC goes ex-dividend today.

CYS

admin — Wed, 18 Sep 2013 15:46:52 +0000

CYS is a high dividend paying stock ($0.34/sh with a dividend yield of 16.77%). It’s ex-dividend date for this quarter is Sept. 20th. I wrote a covered call for CYS today, with the option to expire on Sept 21st. The strike is 7. Current stock price is 8.09. The stock may fall 0.34 at the open on the ex-dividend day which is why I chose $7 as the strike. The concept is to capture the $0.34/sh dividend, while limiting the downside risk.

This is a test of my short term, high dividend and optionable stock strategy. The dividend is paid on Oct. 16th.

Weekly Summary and Next Week Condition: Cautiously Bullish

admin — Sat, 19 Nov 2011 18:05:52 +0000

Schaeffersresearch.com: Cautiously bullish. This week’s market action was driven mostly by the negative headlines from Europe, ignoring all the better than expected economic news from US. The market appears to be trading in a new range: SP500 1220 – 1280. From Aug to Oct low, SP500 was 1120- 1220. Their advice remains the same as the last week: Technical speed bumps remain overhead, and headline risks linger, suggesting hedging is still a prudent strategy. But a breakout above resistance levels could be very rewarding for bulls, as short-covering activity and an abundance of sideline cash could provide the fuel to drive equities during a seasonal period that favors the bulls.

Chartadvisor.com: Cautiously bullish. The markets appear to be trading a the bottom of the new range.

VIX (32): 24, 30 and 36 remain important levels. The fact that VIX did not penetrate through 40 the last week is good news.

My trade: I, again, took advantage of last week’s weakness to correct my negatively biased portfolio.

CRM is an interesting case to study. As I confessed earlier here that I got scared early October when the markets bottomed. By Oct. 4th (Tuesday), CRM crashed down to ~$113. I have a large position in CRM with strike of $130. Although on the chart, CRM reached a bottom level not seen in a long time, I worried that the markets may further deteriorate and that there isn’t much time value left in my $130 call expiring in 4 days, I traded a call spread: bought back 130 call and sold 110 call expiring in 4 days, for a net credit of $3.5/sh. Part reason of this trade is greed: thinking I could make more on time value. But, as markets can and will surprise us from time to time, I was equally surprised how fast CRM recovered back to 120-130 level. Other than CRM, I also sold more naked calls (as a hedge). Through out the remainder of October and first part of November, the markets zoomed up like a rocket and everyday the market goes up, the margin requirement (for the naked short calls), went up and I was missing all the gains that could have been mine if I didn’t panic and went bearish. But luckily, this time I didn’t cover those positions for a loss. I hang on tough and worked to correct my short positions every change I got. From Oct. 7th, I have been rolling up CRM 110 calls. All of a sudden, Nov. 17th, post CRM earrings report, CRM went back down to 110 levels. From Oct. 4th to Nov. 18th, I rolled up CRM calls several times (weeklys to monthly options). Eventually, I was able to reap all the profits totaling $16/sh, while my CRM shares didn’t change at all.

The CRM story highlights the beauty of my Covered Call + Call Spread strategy in dealing with fluctuating markets.

I wrote a covered call of SLW today

admin — Wed, 07 Sep 2011 15:37:26 +0000

Today’s trade:

Bought SLW at $39.58/sh, sold SLW calls, expiring Sept 9th, strike 39, for $1.19. Net cost to me: $39.58 – $1.19 = $38.39/sh. If SLW price is above $39 by close this Friday (3 days), my profit is $39 – $38.39 = $0.61/sh. Or 0.61/38.39 x 100% = 1.59% (in 3 days).

Rolling up MCP option due to expire tomorrow.

admin — Thu, 18 Aug 2011 13:52:38 +0000

Along with the global weakness again, MCP dropped more than 5% this morning. In one account, I have MCP ($50 strike) expiring tomorrow. I rolled it up (bought MCP $50 Aug 20 and sold Sept. 17 $50) with a credit of $290/contract, or 19.33% return in one month (premium sold or the money in the account / margin requirement).

I did this trade for 2 reasons:

1. Taking advantage of this weakness.

2. I sold a monthly instead of a weekly. This is a more conservative approach.