 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
 |
| |
|
Running Total From 2009 |
|
|
|
|
|
|
|
$4638.50 |
| Jan 7 10 |
30.22 |
STO 8 put options Feb 29 @ .60 |
|
|
17.00 |
|
23217.00 |
463.00 |
1.99 |
5101.50 |
| Jan 25 10 |
29.33 |
STO 8 put options Feb 28 @ .65 |
|
|
17.00 |
|
22417.00 |
503.00 |
2.24 |
5604.50 |
| Feb 4 10 |
27.90 |
BTC 10 puts Feb 30 @ 2.30 |
|
|
19.50 |
|
|
(2319.50) |
(7.73) |
3285.00 |
| Feb 4 10 |
27.84 |
STO 10 put options APR 30 @ 2.71
Comments: I am not interested in being assigned yet, so I
have rolled forward for additional premium. |
|
|
19.50 |
|
30019.50 |
2690.50 |
8.96 |
5975.50 |
| Feb 4 10 |
27.90 |
BTC 16 put options FEB 29 @ 1.38 |
|
|
27.00 |
|
|
(2235.00) |
(4.81) |
3740.50 |
| Feb 4 10 |
27.84 |
STO 14 put options APR 29 @ 2.01
Comments: I am not interested in being assigned yet, so I
have rolled forward for additional premium. |
|
|
24.50 |
|
40624.50 |
2789.50 |
6.87 |
6530.00 |
| Feb 19 10 |
28.77 |
Expiry: 8 put options Feb 28 Expired
Comments: This frees up $22,400 for more cash secured puts. |
|
|
|
|
|
|
|
|
| Apr 16 10 |
30.69 |
STO 14 put options May 30 @ .68
Comments: I have sold 14 put options so far and I will hold
off on the remaining 10 contracts, to see if the stock pulls
back |
|
|
24.50 |
|
42024.50 |
927.50 |
2.21 |
7457.50 |
| Apr 16 10 |
30.67 |
Expiry: 10 put options Apr 30 and 14
put options Apr 29
expired |
|
|
|
|
|
|
|
|
| Apr 19 10 |
30.65 |
STO 10 put options MAY 30 @ .58 |
|
|
19.50 |
|
30019.50 |
560.50 |
1.87 |
8018.00 |
| MAY 10 10 |
29.44 |
BTC 24 put options MAY 30 @ 1.18 |
|
|
37.00 |
|
|
(2869.00) |
(3.98) |
5149.00 |
| MAY 10 10 |
28.80 |
STO 10 put options JUN 29 @ 1.19
Comments: With the big rally today I closed all May 30 puts
on the jump in the morning and then sold 10 Jun 29 contracts
in the afternoon. Meanwhile should this stock pull back in
the next couple of days I will add another 10 puts at a
lower strike. |
|
|
19.50 |
|
29019.50 |
1170.50 |
4.03 |
6319.50 |
| May 12 10 |
28.95 |
STO 5 put options JUN 27 @ .30 |
|
|
13.25 |
|
13513.25 |
136.75 |
1.01 |
6456.25 |
| May 21 10 |
26.44 |
STO 5 put options JUN 25 @ .62
Comments: This stock was above 30 just a few weeks earlier.
If I liked it at 30.00, I have to love it at 25.00. It has
fallen 13% in 11 days! If it gets to 25 I may accept
assignment and sell calls. It all depends on the premiums at
that time. |
|
|
13.25 |
|
12513.25 |
296.75 |
2.37 |
6753.00 |
| Jun 2 10 |
26.28 |
BTC 20 Calls 17JUL10 26 @ 1.20 |
|
|
32.00 |
|
|
(2432.00) |
(4.67) |
4321.00 |
| Jun 3 10 |
26.75 |
STO 20 CALLS 17JUL10 26 @ 1.68 |
|
|
32.00 |
|
52,032.00 |
3328.00 |
6.40 |
7649.00 |
| Jun 7 10 |
25.69 |
BTC 10 put options JUN 29 @ 3.35 |
|
|
19.50 |
|
|
(3369.50) |
(11.61) |
4279.50 |
| Jun 7 10 |
25.62 |
STO 9 put options JUL 29 @ 3.55
COMMENTS: I closed 10 put options JUN29 contracts and sold 9
put options JUL
29 contracts for a small loss in order to reduce |
|
|
18.25 |
|
26118.25 |
3176.75 |
12.16 |
7456.25 |
| Jun 7 10 |
25.58 |
BTC 5 put options JUN 27 @ 1.50 |
|
|
13.25 |
|
|
(763.25) |
(5.65) |
6693.00 |
| Jun 7 10 |
25.58 |
STO 4 put options JUN 27 @ 1.94 |
|
|
12.00 |
|
10812.00 |
764.00 |
7.07 |
7457.00 |
| Jun 8 10 |
24.76 |
STO 5 put options JUN 23 @ .19 |
|
|
13.25 |
|
11513.25 |
81.75 |
0.71 |
7538.75 |
| Jun 18 10 |
26.44 |
Expiry: 5 put options JUN 25 expired/ 5
put options JUN
23 expired |
|
|
|
|
|
|
|
|
| Jun 18 10 |
26.44 |
Expiry: BTC 4 put options JUN 27 @ .62 |
|
|
12.00 |
|
|
(260.00) |
(2.40) |
7278.75 |
| Jun 18 10 |
26.44 |
Expiry: STO 5 put options JUL 26 @ .59
Comments: With the JUN 27 in the money, I bought to close
and sold 1 additional put for the JUL 26 to roll down. This
is not a recommended strategy for any investor who does not
want to own stock in the company they have sold the naked
put on. For me, I am quite pleased to hold stock at the 26
level. However I have in the past, done the roll down
through selling additional puts as the stock fell. But it is
important for any investor to realize they are exposing
themselves to more capital at risk by continuing to sell
more put options as the stock falls. Again remember rule #1 -
I sell put options only on stocks I would own at the strike
prices I sell at. |
|
|
13.25 |
|
13013.25 |
281.75 |
2.17 |
7560.50 |
| Jul 16 10 |
24.92 |
Expiry: BTC 9 put options JUL 29 @ 4.05 |
|
|
18.25 |
|
|
(3663.25) |
(14.03) |
3897.25 |
| Jul 16 10 |
24.92 |
Expiry: STO 8 put options JAN 29 @ 4.88
Comments I have rolled out to Jan for a net credit and
reduced the number of contracts from 9 to 8. So far then I
have reduced my contracts from 10 to 8 which releases
$5800.00 in capital. I will continue to do this as often as
I can in order to reduce the number of contracts, each time
releasing more capital to sell against naked calls further
out of the money. |
|
|
17.00 |
|
23217.00 |
3887.00 |
16.74 |
7784.25 |
| Jul 16 10 |
24.92 |
Expiry: BTC 5 put options JUL 26 @ 1.08 |
|
|
13.25 |
|
|
(553.25) |
(4.25) |
7231.00 |
| Jul 16 10 |
24.92 |
Expiry: STO 4 put options AUG 26 @ 1.64
COMMENTS: Another roll out and again I have rolled for a net
credit. Many investors roll down rather than out. I prefer
to roll out for a net credit rather than down for what is
often a break even or a small net debit. By rolling out I
have reduced my contracts to 4 from 5 releasing another
$2600.00. This means that I have now freed up $8400.00 for
writing more put options out of the money. For example today
I could write the 3 August 23 put options for .40 or $120.00
before commission. |
|
|
12.00 |
|
10412.00 |
644.00 |
6.19 |
7875.00 |
| Jul 21 10 |
25.02 |
STO 5 put options AUG 23 @ .30 |
|
|
13.25 |
|
11513.25 |
136.75 |
1.19 |
8011.75 |
JULY 26 2010: THE
IMPORTANCE OF HAVING A PLAN:
Today's continuing move higher for Microsoft
confirms the importance of having a plan and that
has clear goals and objectives. My plan is to
eventually own shares in this technology company. My
goal is to use other people's money to pay for a
substantial portion of those shares. To do this I
will sell put options until I have raised enough
capital to consider being assigned. The objective is
to sell put options out of the money and continue to
roll them following the gyrations of the stock. If
my put options are caught IN THE MONEY, I do not
panic. I will continue to roll them forward but
always for a credit or if unavailable only a very
small debit. I prefer to roll them at the same
strike and reduce my exposure to IN THE MONEY put
options by reducing the quantity of contracts on each
subsequent roll. While most investing books and
traders will advise to always roll down for a net
credit or often a net debit, I find this to be very
counter productive. My goal is to add to my capital
through generating income in order to eventually own
shares but hopefully with other people's capital. In
order to accomplish this, I cannot keep taking net
debits on every roll. The answer is to roll at the
same strike further out and reduce the number of
contracts on each subsequent roll, in order to free
up capital that is being used to secure the put that
is now in the money. That freed up capital can then
be used to sell additional put options, further out
of the money and continue to add additional capital
to my overall plan.
It is important to remember that stocks move
around a great deal. Just because my put options are
suddenly in the money does not mean they will always
be in the money. Continuing to roll the put options
will often mean that the stock will recover and
place the remaining put contracts back out of the
money.
Today (July 26 2010) is a
good example. At the time of writing this,
Microsoft has recovered to 26.06 and now my
remaining Aug 26 put options are working their
way out of the money and watching the option
premium decrease as we near August expiration.
Below in the spreadsheet are some samples of how
the puts are presently trading. I could buy to
close my 4 August puts now at .65, thereby
netting .99 cents from the previous roll (see
Jul 16 in the above action chart which shows STO
4 put options AUG 26 @ 1.64). The cost to close the 4 Aug
26 puts at .65 is - $260.00 I now have a variety
of strategies I could employ:
1) I could roll out and down to Oct 25 for a net
credit - if I do 4 contracts I would
net credit $76.00 - If I do 3 contracts I would
net debit ($8.00)
2) I could roll out to the same strike for Sep
26 and pick up another .32 cents X 4 contracts =
$128.00 or 1.2% for 1 more month roll but I am
still exposed to 4 contracts.
3) I could roll out to the same strike for Oct
26 and do just 3 contracts for a net credit of
$112.00. This frees up another $2600 of capital
that is being used to secure my put contract and
I have effectively reduced my $26 strike put
contracts from the originally sold 5 to 4 and
now to 3. Another roll will see me reduce the
put contracts to 2. At that stage it becomes
very difficult to roll out to just 1 contract
for a net credit.
4) I can wait longer and see if the stock climbs
more and the naked put premium will evaporate
further.
5) I could just close the Aug 26 puts for
$260.00 and then restart my naked put strategy
at a lower strike all together, knowing that I
have made quite a profit by originally rolling
for $1.64 from July to August.
That's the great thing about naked put options.
There are so many "options" available it is often
hard to decide. However by having a clear goal and
objective on how to get there, it makes it easy to
make the decision. In the end, probably NONE of the
above decisions is wrong. So what would I do? Simple
- go to the charts. Let's look below. Microsoft fell
to below 23 just a few weeks ago and it had not been
that low since July-August of 2009. The last little
rally took the stock to just shy of 27.00. Drawing
that line out I can see that $27.00 has been touched
or been close a few times. I have a circle where I
think the stock could head in the short run. Right
around the $27.00 mark and there it will probably
meet resistance. However that would put my Aug 26
put options out of the money. Looking at the 10-20-30
moving averages the 10 day is back up and has
crossed the 20 and the 30. Today the stock is back
above the 50 day EMA. I will wait to see if the
stock can climb more and watch for the put premium
to evaporate before making my roll.
This is a terrific
example of the importance of having a plan with
clear goals and objectives, which helps in not
panicking when naked put options fall into the
money. Because of my plan, I know where I am
heading with the stock and what I want from it. I
know how I am going to get it and the weekly or even
monthly movements are to be welcomed as it increases
volatility and allows me to roll my put options for
larger options. Those who sell put options strictly
for income on stocks that they would never own are
often asking for trouble. A large decline can end up
placing naked put sellers in a tough spot - they
either end up owning more shares than they wanted on
stocks they know nothing about OR they buy to close
their trades for large losses. Selling a naked put
for .35 cents and buying it back for 1.00 may not
seem like much when doing perhaps 2 or 3 contracts,
but the losses are actually staggering. The above
example of buying back for $1.00 is a loss of 185%!
Once more and more of these occur they will result
in a substantial decline in portfolio value. Having
a plan with clear goals and objectives is paramount
when selling put options.
|
| Aug 20 10 |
24.23 |
Expiry 5 put options Aug 23 expired |
|
|
|
|
|
|
|
|
| Aug 20 10 |
24.23 |
BTC 4 put options AUG 26 @ 1.72 |
|
|
12.00 |
|
|
(700.00) |
(6.72) |
7311.75 |
| Aug 20 10 |
24.23 |
STO 3 put options JAN 26 @ 2.87
Comments: This is the continuation of the roll from July.
Now I am down to 3 put options and unless the stock recovers,
I will be rolling these and reducing by 1 the number of put
contracts. |
|
|
10.75 |
|
7810.75 |
850.25 |
10.89 |
8162.00 |
| Aug 20 10 |
24.23 |
STO 4 put options SEP 23 @ .25 |
|
|
12.00 |
|
9212.00 |
88.00 |
0.96 |
8250.00 |
| Sep 17 10 |
25.22 |
Expiry 4 put options SEP 23 expired |
|
|
|
|
|
|
|
|
| Sep 24 10 |
24.70 |
STO 4 put options NOV 22 @ .28 |
|
|
12.00 |
|
8812.00 |
100.00 |
1.13 |
8350.00 |
Sep 24 2010: THE RALLY
Today saw a major rally on all the indexes,
but it only moved Microsoft back toward the
mid-point of the bollinger band. I want to
continue to bring in more income but I would
like to avoid assignment as I already have quite
a few shares, in the money. Therefore I looked
at the past year and the low point was June 30
2010 at 22.95 so I feel fairly comfortable
selling puts for the 22 strike. I believe with
the increase in dividend and the somewhat
bullish outlook I have for stocks this fall that
MSFT should perform well and stay above my
strike.
 |
| Oct 27 10 |
25.81 |
STO 5 put options NOV 24 @ .22 |
|
|
13.25 |
|
12013.25 |
96.75 |
0.81 |
8446.75 |
| Nov 5 10 |
26.87 |
BTC 4 put options NOV 22 @ .01 |
|
|
12.00 |
|
|
(16.00) |
(0.18) |
8430.75 |
| Nov 5 10 |
26.87 |
BTC 5 put options NOV 24 @ .04 |
|
|
13.25 |
|
|
(33.25) |
(0.28) |
8397.50 |
| Nov 5 10 |
26.87 |
STO 10 put options DEC 25 @ .30 |
|
|
19.50 |
|
25019.50 |
280.50 |
1.12 |
8678.00 |
| Nov 5 10 - DOUBLE
DIPPING!! - The continuation of the rally is presenting me
with the opportunity to close my Nov 22 and 24 strike put
options and sell the Dec 25 for another 1% gain without waiting
for November options to expire. I believe the rally in
Microsoft will move it higher into the year end. |
| Dec 9 10 |
27.06 |
STO 8 put options FEB 25 @ .50 |
|
|
17.00 |
|
20017.00 |
383.00 |
1.91 |
9061.00 |
|
Dec 9 10 Below is
the past 3 months. With the recent news about Microsoft's
Kinect for X-Box, its iphone challenger, Windows 7 release
and cloud computing, Microsoft is regaining some height.
However the last rise to $27.00 saw a bit of a stumble and
finally it sold off to the low end of the Bollinger bank. It
held around the 25.00 strike and now we are back challenging
$27 again. Will it be dejavu again or can we move higher
this time?
The strategy though has to be to
continue to generate income as risk free as possible. The 25
strike looks very promising and the 26 is sort of mid
stream. To understand better I have to go out a full year.
Looking out I can see that Microsoft has actually had a
pretty tough year. I know this because I am still holding
put options at the $29 strike. Overall though when I look out
for a year, the 26 strike really does look promising. The 25
obviously has lots of support and any move of the stock back
to $25.00 should be considered an opportunity to buy stock
for a bounce back up OR a chance to sell put options at the
$26 strike to again take advantage of a bounce. So until I
see the stock stay above the 27 strike and gather some
support, I believe it is better to stay with the strategy of
trying to remain as risk free as possible. After all, with
all the great news about Microsoft, wouldn't it make more
sense for it to be higher than 27.00? Perhaps if earnings
from Christmas are stronger than expected, then the stock
will create a new support level. Meanwhile it's time to
review my current positions:
REVIEW: STILL HOLDING 8 put options JAN $29
and 3 JAN $26. The chance of the Dec 25 put options
being assigned is so low I see not point in closing
them with just 1 week to go. BUT IF I DID NOT HAVE
CASH AVAILABLE TO SUPPORT ME, I would definitely buy
and close the Dec 25 puts before moving to my next
position. I am now selling the FEB $25 strike for
.50 cents. 2% for about 2 months still works out to
12% for the year AND keeps me at the support area of
$25.00. You can see why looking at the charts is
important. I am only going to sell 8 put options
rather than 10 as this will free up 2 put options and
I may end up with the Jan 26 puts expiring
worthless. This will then free up 5 put contracts
which helps with commission costs. For obvious
reasons I would rather sell 5 put contracts than 1
to save on my commissions. The trick for 2011 will
be to continue to reduce the 8 put options at the $29
strike and keep rolling with the stock. If the stock
sells off back to $25.00, it may make a lot of sense
to sell the $26 naked put for a larger premium and
then wait for the stock to bounce back up as it has
done throughout this year.
SO THE STRATEGY NOW:
Sell naked put contracts at 25.00 and try to stay there
until there is proof the stock has support above 25.00
Reduce through rolling the number of put contracts at the
$29 strike
If the stock
sells back below 26.00 sell the 26 put strike in the hopes
of a bounce. |
|
Dec 17 10 |
27.90 |
Expiry: 10 put options Dec 25 expired |
|
|
|
|
|
|
|
|
|
|
|
2010 Year End |
|
|
|
|
|
$4422.50 |
34.69% |
$9061.00 |
