Monsanto Naked Puts

Monsanto (MON) is another of my favorites for selling options on.  I think it has a good long term chance of moving higher and it’s volatile which pushes the premiums higher.

While MON was trading at $117.09 I sold one April 100 naked put (MONPC) and received $299.25 after commissions.  It went above 120 briefly today, but the chart showed it could come down some.  I wasn’t 100% sure it would drop too much so I left some money on the table with my limit. I actually started off with a 105 strike and lowered it to 100 to give myself more cushion.  With $300 earned on $10k in reserves I figured the extra cushion down at 100 would be nice to have if MON declined 15-20%.

That’s generally my target, $300 on $10k in reserves for options written two months out.  3% every two months comes out to 18% annually.  I over-invest so I don’t actually have the full $10k dedicated to just one stock.  I also take losses of course so it’s not always simple, but when I see a chance like MON today where it’s trading $17 above the strike and I can still get $300 I tend to take it, especially when I think the stock could find its legs again soon.  I also don’t have any other Basic Materials stocks so it helps my diversification.

Another note – I updated my holdings summary on my current portfolio page this morning.  It doesn’t have MON listed since that came later.