Sold PCU Naked Put

I’ve traded options on Southern Copper Corp (PCU) a couple of other times this year and even owned it for a little while before it was assigned from my covered calls.  I got out when it was in the 80s and I was nervous the run had slowed too much and would come back down some.  Now PCU is over 105 and I’m back in.  I sold one October 95 naked put (PCUVS) while PCU was trading at 105.97 and received $299.25 after commissions.

I changed my order a few times this morning as I flipped between the 90 and 95 strike.  I thought PCU might come down from its high from this morning and it did some, but not as much as I thought it would.  That’s good I decided and stopped the waiting and dove in at the 95 strike.  I’m still $11 out-of-the-money (OTM) and also have the $3 cushion from the premium.  PCU could drop some more and that’s when someone less aggressive should get in.  I don’t think it’ll drop below 100 and I’ve more confident of the 95 range which is why I raised my strike back up to 95 instead of 90.  Throw in PCU’s 5+% dividend and its not one to be upset about being assigned to write covered calls on.

This trade pulls me within $10,000 (approx one trade) from being 200% invested if all my puts are assigned and no calls are.  That’s about the range I like to hang in if it’s a bull market and with the fed saying they are ready to react, I’m not as gun shy as I was before the brief correction.  I read that 25,000 people in the financial sector have lost their jobs and have to think that will trickle through the economy, but maybe not just yet.  Just because I’m sitting close to 200% invested now, doesn’t mean I’ve taken on dangerous risk yet.  A lot of my puts are climbing comfortably away from their strikes.  If I find more than one good opportunity that I don’t want to miss out on, I might have to consider buying back some of my previous puts that are now only worth $20-30.

On top of that, I received a dividend payment today of $98.85.  This is from the money market I’m stashing my cash in while the naked puts do the work without requiring my actual cash be used.  I’m going to increase this money market balance soon as I continue to grow more comfortable with how the ebbs and flows of my potential margin moves.  Even with only $25,000 in the money market I’m looking at an extra $1,200 dollars over a year that I wouldn’t have had without it.  That’s only going to improve as I add to it.

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