TRANSCANADA CORP (TRP - TSX C$) This is a non-retirement account
so I am using a combination of Stock,
Covered Calls and Naked Puts.
TransCanada Corp is a profitable company that trades on
the TSX. It holds all outstanding common shares of
TransCanada PipeLines Limited, a company engaged in natural
gas transmission, energy transmission, electric power
generation and other infrastructure projects in Canada and
the United States. This is a great company to own and has a
strong balance sheet and excellent management team.
Market Capitalization $21.3B
Revenue (FYR) $8.6B
EPS $2.17
P/E Ratio 14.5x
Shares Outstanding 679.0 M
Avg. Daily Share Volume (Last 20 Days) 2.1 M
Dividend $1.52
Above is a 3 year chart
on TRP. If you look at the range of trading it would appear
that unless something dramatic happens, this stock is a good
choice for covered call and naked put writing. With a
trading range from a low of around 30.00 to a high around
41.00, this stock should allow me to be assigned with
confidence and should it fall lower, I should be able to
average down and then sell covered calls to be exercised
back out and start the process again.
TRANSCANADA CORP Strategy
*those trades highlighted in
yellow are active, and all
other trades are completed and closed or expired.
This stock is a slow moving stock with what appears to be a
limited range. Option premiums are small and thinly traded.
How should an investor approach a stock like this one, if
you want to maximize the return each year. What strategy
would be best to employ? Should we just buy and hold the
stock to collect the dividend and see where we are in a few
years, or try out some option strategies?
There are three charts below.
Chart One is trading using
Naked Puts ATM until assigned and then selling covered calls
ATM until exercised. Then I start the strategy over through
selling naked puts. This is a paper trade.
Chart Two shows a combination
of buying the stock, selling covered calls far enough out to
collect the dividend and selling a smaller quantity of naked
puts just slightly OTM. This is the trade I am doing in real
time.
Chart Three shows buying the
stock. Then I am selling covered calls further out in time
to collect the dividend. I am selling the call above my
stock price but still staying with calls that have some
premium. This should allow me to collect the dividend and
possible capital appreciation in the price of the stock.
When I am exercised, I am buying back into the stock and
continuing my pattern. No Naked Puts Are Being Used with
Chart Three. This is a paper trade.
Chart Four shows buying stock
and holding it for the long term to collect the dividend and
for possible capital appreciation on the stock.
This is a paper trade.
Let's see which strategy works best over the next few
months. That should help determine the best choice for
options with this stock.
CHART ONE: Naked Puts Until Assigned
This is a paper trade - ended Mar 19 2010
| Date |
Stock Price |
Action
This trade is in Canadian
dollars and is on the TSX (Toronto Stock Exchange) |
Total
Quantity
Of
Shares
Held |
Average
Share
Value |
Comm. |
Share
Purchase
Cost /
(Exercise
Amount) |
Total Value
Invested
In Shares* |
Gain/
Loss |
Total
Income |
| Aug 11 09 |
31.26 |
Sold 5 Naked Puts Sep 30 @ .25 |
|
|
13.25 |
|
|
111.75 |
111.75 |
| Sep 18 09 |
33.17 |
Expiration Day 5 Sep 30 Puts Expired |
|
|
|
|
|
|
|
| Sep 18 09 |
33.17 |
Sold 5 Naked Puts Oct 32 @ .20 |
|
|
13.25 |
|
|
86.75 |
198.50 |
| Oct 16 09 |
33.17 |
Expiration: Oct 32 Puts expired |
|
|
|
|
|
|
|
| Oct 19 09 |
33.14 |
Sold 5 Naked Puts Nov 32 @ .15 |
|
|
13.25 |
|
|
61.75 |
260.25 |
| Nov 20 09 |
33.18 |
Expiry: 5 Naked Puts Nov 32 expired |
|
|
|
|
|
|
|
| Nov 20 09 |
33.18 |
Sold 5 Naked Puts Jan 32 @ .40 |
|
|
13.25 |
|
|
186.75 |
446.75 |
| Jan 15 10 |
34.82 |
Expiration: 5 Naked Puts Jan 32
expired |
|
|
|
|
|
|
|
| Jan 19 10 |
35.30 |
Sold 5 Naked Puts Mar 34 @ .25 |
|
|
13.25 |
|
|
111.75 |
558.50 |
| Mar 19 10 |
37.11 |
Expiry 5 Naked Puts Mar 34 expired |
|
|
|
|
|
|
|
| |
|
I HAVE CONCLUDED THIS
TRADE AS IT IS OBVIOUS THAT THE BETTER TRADE IS CHART TWO
BELOW. |
|
| Date |
Stock Price |
Action
This trade is in Canadian
dollars and is on the TSX (Toronto Stock Exchange) |
%
Position
Return |
Total
Quantity
Of
Shares
Held |
Average
Share
Value |
Comm. |
Share
Purchase
Cost /
(Exercise
Amount) |
Total Value
Invested
In Shares* |
Gain/
Loss |
Total
Income |
| Aug 11 09 |
31.26 |
Bought 500 shares @ 31.26 |
|
500 |
31.27 |
7.00 |
(15637.00) |
(15637.00) |
|
|
| Aug 11 09 |
31.26 |
Sold 5 Covered Calls Oct 32 @ .35 |
1.0 |
|
|
13.25 |
|
|
161.75 |
161.75 |
| Aug 13 09 |
31.27 |
Sold 3 Naked Puts Oct 30 @ .40 |
1.3 |
|
|
10.75 |
|
|
109.25 |
271.00 |
| Sep 28 09 |
|
Dividend 500 X .38 |
1.2 |
|
|
|
|
|
190.00 |
461.00 |
| Oct 16 09 |
33.17 |
Expiration: 3 naked Puts Oct 30 expired |
|
|
|
|
|
|
|
|
| Oct 16 09 |
33.17 |
Expiration: 5 Covered Calls Oct 32 Exercised |
2.1 |
0 |
|
20.00 |
15980.00 |
0.00 |
343.00 |
804.00 |
| Oct 19 09 |
33.14 |
Bought 500 Shares @ 33.14 |
|
500 |
|
7.00 |
(16577.00) |
(16577.00) |
|
|
| Oct 19 09 |
33.14 |
Sold 5 Covered Calls Dec 34 @ .45 |
1.3 |
|
|
13.25 |
|
|
211.75 |
1015.75 |
| Oct 19 09 |
33.14 |
Sold 3 Naked Puts Jan 32 @ .55 |
1.7 |
|
|
10.75 |
|
|
154.25 |
1170.00 |
| Dec 18 09 |
36.17 |
Expiration: 5 Covered Calls Dec 34
exercised |
2.4 |
0 |
|
20.00 |
16980.00 |
0.00 |
403.00 |
1573.00 |
| Dec 21 09 |
35.50 |
Bought 400 shares @ 35.50 |
|
|
|
7.00 |
(14207.00) |
(14207.00) |
|
|
| Dec 21 09 |
35.48 |
Sold 4 Covered calls Feb 36 @ .40 |
1.1 |
400 |
|
12.00 |
|
|
148.00 |
1721.00 |
| Dec 29 09 |
|
Dividend 400 X .38 |
|
|
|
|
|
|
152.00 |
1873.00 |
| |
|
END OF 2009 -
INCOME - $1873.00 |
|
|
|
|
|
|
|
|
| Jan 15 10 |
34.82 |
Expiration: 3 NP Jan 32 Expired |
|
|
|
|
|
|
|
|
| Jan 15 10 |
34.82 |
Sold 3 Naked Puts Apr 34 @ .60 |
1.7 |
400 |
|
10.75 |
|
|
169.25 |
2042.25 |
| Feb 19 10 |
34.79 |
Expiry: 4 CC Feb 36 Expired |
|
|
|
|
|
|
|
|
| Mar 4 10 |
35.84 |
Sold 4 CC Apr 36 @ .33 |
0.9 |
400 |
|
12.00 |
|
|
120.00 |
2162.25 |
| Mar 15 10 |
36.80 |
Sold 1 NP Apr 38 @ 1.58 |
4.1 |
|
|
8.25 |
|
|
149.75 |
2612.00 |
| Mar 29 10 |
37.10 |
Dividend 400 X .40 |
|
|
|
|
|
|
160.00 |
2772.00 |
| Apr 18 10 |
37.28 |
Expiry: 4 CC Apr 36 exercised
3 Naked Puts Apr 34 expired |
|
0 |
|
20.00 |
14380.00 |
0.00 |
173.00 |
2945.00 |
| Apr 16 10 |
37.12 |
Bought 400 shares @ 37.12 |
|
|
|
7.00 |
(14,855.00) |
(14855.00) |
|
|
| Apr 16 10 |
37.28 |
Expiry: BTC 1 NP Apr 38 @ .90 |
|
|
|
8.25 |
|
|
(98.25) |
2846.75 |
| Apr 16 10 |
37.12 |
STO 1 NP Jul 38 @ 1.49 |
3.9 |
|
|
8.25 |
|
|
140.75 |
2987.50 |
| Apr 19 10 |
37.38 |
STO 4 CC May 38 @ .30 |
0.70 |
|
|
12.00 |
|
|
108.00 |
3095.50 |
| Apr 19 10 |
37.38 |
IF SOLD AT 38.00 THIS POSITION WOULD
RETURN: $3440.50 or 23% |
|
|
|
|
|
|
|
|
| May 21 10 |
34.65 |
Expiry: 4 CC May 38 expired |
|
|
|
|
|
|
|
|
| May 21 10 |
34.65 |
STO 1 NP Jan 2011 28 @ .58 |
1.8 |
|
|
8.25 |
|
|
49.75 |
3145.25 |
| May 31 10 |
35.40 |
STO 4 CC Oct 38 @ .33 |
0.8 |
|
|
12.00 |
|
|
120.00 |
3265.25 |
| Jun 28 10 |
|
Dividend 400 X .40 |
|
|
|
|
|
|
160.00 |
3425.25 |
| Jul 16 10 |
36.19 |
Expiry: BTC 1 NP JUL 38 @ 2.00 |
(5.2) |
|
|
8.25 |
|
|
(208.25) |
3217.00 |
| Jul 16 10 |
36.19 |
Expiry STO 1 NP OCT 38 @ 2.38 |
6.2 |
|
|
8.25 |
|
|
229.75 |
3446.75 |
| Date |
Stock Price |
Action
This trade is in Canadian
dollars and is on the TSX (Toronto Stock Exchange) |
Total
Quantity
Of
Shares
Held |
Average
Share
Value |
Comm. |
Share
Purchase
Cost /
(Exercise
Amount) |
Total Value
Invested
In Shares* |
Gain/
Loss |
Total
Income |
| Aug 11 09 |
31.26 |
Bought 500 shares @ 31.26 |
500 |
31.27 |
7.00 |
(15637.00) |
(15637.00) |
|
|
| Aug 11 09 |
31.26 |
Sold 5 Covered Calls Oct 32 @ .35 |
|
|
13.25 |
|
|
161.75 |
161.75 |
| Sep 28 09 |
|
Dividend 500 X .38 |
|
|
|
|
|
190.00 |
351.00 |
| Oct 16 09 |
33.17 |
Expiration: 5 Covered Calls Oct 32 Exercised |
0 |
|
20.00 |
15980.00 |
0.00 |
343.00 |
694.00 |
| Oct 19 09 |
33.14 |
Bought 500 Shares @ 33.14 |
500 |
|
7.00 |
(16577.00) |
(16577.00) |
|
|
| Oct 19 09 |
33.14 |
Sold 5 Covered Calls Dec 34 @ .45 |
|
|
13.25 |
|
|
211.75 |
905.75 |
| Dec 18 09 |
35.50 |
Expiration: 5 Dec 34 Calls Exercised |
0 |
|
20.00 |
16980.00 |
|
403.00 |
1308.75 |
| Dec 21 09 |
35.50 |
Bought 400 shares @ 35.50 |
|
|
7.00 |
(14207.00) |
(14207.00) |
|
|
| Dec 21 09 |
35.48 |
Sold 4 Covered calls Feb 36 @ .40 |
400 |
|
12.00 |
|
|
148.00 |
1456.75 |
| Dec 29 09 |
|
Dividend 400 X .38 |
|
|
|
|
|
152.00 |
1608.75 |
| Feb 19 10 |
34.79 |
Expiry: 4 CC Feb 36 expired |
|
|
|
|
|
|
|
| Mar 4 10 |
35.84 |
Sold 4 CC Apr 36 @ .33 |
400 |
|
12.00 |
|
|
120.00 |
1728.75 |
| Mar 29 10 |
37.10 |
Dividend 400 X .40 |
|
|
|
|
|
160.00 |
1888.75 |
| Apr 16 10 |
37.28 |
Expiry: 4 CC Apr 36 exercised |
0 |
|
20.00 |
14,380.00 |
0.00 |
173.00 |
2061.75 |
| Apr 16 10 |
37.12 |
Bought 400 shares @ 37.12 |
400 |
|
7.00 |
(14855.00) |
(14855.00) |
|
|
| Apr 19 10 |
37.38 |
STO 4 CC May 38 @ .30 |
0.7 |
|
12.00 |
|
|
108.00 |
2169.75 |
| APR 19 10 |
37.38 |
IF SOLD AT 38.00 THIS POSITION WOULD
RETURN: $2514.75 or 17% |
|
|
|
|
|
|
|
| May 21 10 |
34.65 |
Expiry: 4 CC May 38 expired |
|
|
|
|
|
|
|
| May 31 10 |
35.40 |
STO 4 CC Oct 38 @ .33 |
0.8 |
|
12.00 |
|
|
120.00 |
2289.75 |
| Jun 28 10 |
|
Dividend 400 X .40 |
|
|
|
|
|
160.00 |
2449.75 |
