Category: Stock Picks

After my 100 shares of Tidewater (TDW) closed below my covered call stike on Friday I decided to sell new covered calls while at the same time selling new naked puts at a lower strike.  While TDW was trading at $55.68 I sold one TDW October 55 covered call in the money and received $379.25 after commissions.  I followed that immediately by turning the covered call into a strangle and sold one TDW October 50 naked put out of the money and received $134.25 after commissions.

I debated if I should sell at the same strike or not.  After deciding not to sell at the same strike I had to choose what the two strikes would be.  I decided to sell slightly in the money with the covered call since the premiums are so good and I wanted to increase my chances for having more money in two months than I have now.  I’ll actually take a small loss on the series of trades, but I can’t base my decision on where to set my strike on the emotional tie of wanting a profit.  I have to focus on where I think TDW could be in two months.  I don’t think TDW will be below $50, so I sold the extra naked put there.  The upside could be above $60 again, but the premiums at the $55 strike on the calls …

This is how my August options closed on Friday along with my plans for these same equities moving forward.

AAPL closed at $175.74 leaving my August 155 naked puts out of the money (OTM) and giving me a full profit.  I plan to write a new naked put on AAPL when it takes another dip.  I haven’t picked my strike yet.

BA closed at $64.45 making my August 75 naked calls out of the money and giving me a full profit.  I’m still long on BA in my IRA where I consider it a longer term hold.  I’ll be re-writing covered calls well OTM there and might write more naked calls in my taxable account.

CELG closed at $75.86 leaving my August 60 naked puts out of the money and giving me a full profit.  CELG has been on a good run for a while.  I need to research it again to decide if I should get back in yet.  The chart still looks good.

I bought back my MON naked put on Friday and took a partial profit based on where I sold it originally.  I’ll get back in on MON at a lower strike.

NVDA closed at $12.96 leaving my NVDA August 15 naked calls out of the money and giving me a full profit.  The bad part is involves the whole story - I took a big …

I charted the DJIA (previously $INDU) again today.  I was actually surprised to see the chart show it looks like we have some bullish room to run still.  The latest trading channel shows the DJIA is near its trend line of higher lows.  12,000 is the big question mark for this chart.  It was a floor for the Dow in the first quarter of this year and then was a speed bump on the way down in June.  Now we get to see if it will stop the current upswing.  As luck would have it, the trading channel I mentioned at first shows that the trend line of higher highs could coincide with 12,000 and give it a double reason to take a break.  The question will be if the trading channel holds the power to get through of if 12,000 is too tough to pass.

You can see a change in the DJIA’s price action once it crossed the two month trend line of lower highs.  Once it passed that line (circled twice in July) it gapped up and then fell back to test that same line as a low floor instead of a high ceiling.  That intersection was the second spot that started to make the up trending line of higher lows were coming close to again.

The 10,20 and 50 day moving averages are …

I bought 100 shares of USO (an oil ETF) at $99.00 and sold a September 98 covered call for $6.80 in my IRA a little more than two weeks ago.   I’ve watched the price of oil fall fairly steadily since then.  Around the same time I entered a limit order to sell a naked put on the same ETF if/when it dropped further.  This morning while USO was trading at $90.54 I sold one USO September 90 naked put (UNAUL) and received $499.25 after commissions. 

West Texas Intermediate (WTI) Crude Futures were trading around $112 at the time.  Some analysts think WTI could drop as low as $90-100.  If that’s the case I’ll be assigned the 100 shares of USO and will sell covered calls on it, hopefully at the same strike while I wait for a rebound.  Had I not been sleeping at the wheel I probably would’ve lowered my strike some on this order, but then again I think it’ll be a good long term play and got a good premium for only five weeks out.  I’m not saying that oil’s slide is over, but I think the speed of its decent should slow.  If it does slow or better yet flatten some, my naked puts should lose value quickly since they are still out of the money and their only value is extrinsic.  If USO drops some more I …

Monsanto (MON) has dropped more than $30 in the past two months.  I targeted $115 as a bottom and sold a naked put at the August 115 strike that expires today.  MON fell as low as $103.50 a week ago and I held on thinking I could sell covered calls and still do fine with it if assigned.  It edged up over 115 yesterday and I thought I might get out with a full profit.  That hope was dashed this morning.

While MON was trading at $111.70 this morning I bought back my August 115 naked put (MFPTC) and paid $360.74 after commissions.  I received $499.25 from the original 6/27/08 naked put sale.  I took a profit of $138.51 and will most likely sell a new naked put at a lower strike when I see MON closer to the bottom of its trading channel.  I still like the stock long term, but had no desire to own the shares right now since I could get out with a profit and I think it’ll dip lower and offer me a better entry point.

The rest of my options aren’t as close to being in the money.  I’ll detail my final results when the day’s prices are final.

Vimpel Communications (VIP ) has been down for a while and I’ve actually been surprised that my latest naked puts had not been assigned earlier.  This morning my two VIP August 30 naked puts options (VIQTF) were assigned and I bought 200 shares of VIP at $30.00 and I paid $6019.99 with commissions.  A couple of days ago I wrote about selling new VIP calls, this is why I did it early.  I set my limit high enough to only hit in a spike and then assumed I’d own the shares soon enough to cover the calls.  Now I own the shares and those naked calls are now covered calls.

I’ve taken in a lot of premiums on VIP over the past few of months and even with the share price down more than $10 I’m still sitting around break even on the series of trades.  Here are the trades I’ve made on VIP for this series.  I had earlier trades that ended in full profit.  I’m not counting those here since I had a chance to stay out completely.

2/19 Sold two April 35 naked puts  VIQPG @ 2.1, +408.50
3/3 Sold three April 40 calls VIQDH @ 1.2, +347.75
3/19 Sold two April 30 naked puts VIQPF @ 1.9, +368.50
3/25 Bought two April 40 calls VIQDH @ 0.1, -31.49, one expired worthless
4/21 Bought 200 shares at 35, -7,019.99
4/21 Sold two June 30 covered calls VIQFF …

I mentioned my plans for Chesapeake Energy Corp (CHK) in my post yesterday and today I acted on it.  While CHK was trading at $45.16 I sold two CHK September 50 covered calls (CHKIJ) and received $318.50 after commissions.

I saw CHK was up again this morning, but hit resistance at the 10 day moving average.  On the other hand, it broke the trend line of lower highs and the low of today hit that line and used it as support.  That showed a bullish picture to me, but I decided the 10 day moving average could be more important and decided not to wait any longer to see how it played out.  As CHK moved closer to break even for the day I entered my limit order between the bid/ask and it hit three minutes later.  It’s now three hours since my order hit and CHK is up to $47.39 so far.  That’s $2.23 higher than where it was when my order hit. 

I still have $500 in potential profit from the stock’s gain up to the strike and also have the $318.50 in extrensic value of the option’s premium to disolve.  If all goes well, I’ll have $800 more in a month than I do now and that’s not counting the $280 in premiums I have left to disolve from the September $42.50 naked puts I sold earlier.

I was able to check the market yesterday before we walked down to the beach and again after closing.  I had a couple of trades while away for two days.  The first was a limit order I entered a few days earlier on VIP naked calls.  While VIP was trading somewhere near $25.40 on Monday morning my limit order hit and I sold four VIP September 25 naked calls (VIQIE) and received $987.00 after commissions.  That was the high trade of the day for that strike.  VIP cut its gains before lunchtime and I had a quick profit. 

If only the picture was really that pretty.  I’m long 200 shares of VIP that with August 30 covered calls on those shares.  I also have 200 shares I’ll be assigned in a few days from two August 30 naked puts I sold a while ago.  While I called these latest call options “naked”, they’ll turn to “covered calls” as soon as options expiration rolls around at the end of the week.  I won’t be selling any new naked puts on VIP until I’m out of this position.  400 shares is plenty for a stock that is down for no other reason that political uncertainty in Russia.  If my shares are called away in September, I’ll be somewhere close to breakeven on the whole series of trades I think.  …

I charted USO this morning to get an idea of where the price of oil might find support.  Don’t get too excited when you see these numbers, USO and the price of oil are not equal and do not move dollar for dollar.

USO is down more than 20% from its high, making it a technical bear market for oil now.  How quickly the tides turn.  (I’m leaving for the beach in two hours, so I had to figure out a way to mention the tides.)  The 90 range was somewhat of a ceiling and then a floor in March and April.  USO is edging closer to it now and could hold support.  What could help that range offer support is the year long trend line of higher lows that started last August and touched again in January and February.  The longer trend lines tend to have more “power” for support than the shorter ones like the current down trend of lower lows that started six weeks ago. 

If the 90 range (not pegging an exact price because the floor/ceiling in the springtime wasn’t exact) does not hold, we could see another 9-10% drop taking USO down closer to 80 where it was a ceiling in November and December 2007 and again in February 2008 before using it as a floor three weeks in a row in …