Thursday, October 21, 2010

LATEST TRADE:

Overnight my CAT (Caterpillar) position was called away. Started in July, 3 months, 1 dividend:
Cost $6564, return $350 after all commissions -annualized return 21.3% (if done 4 times in a year).
Beats Money Markets-MMF.

Wednesday, October 20, 2010

LATEST ACTIVITY:

Having held INTC for some time, I rolled out/down calls to an April 18 strike today. Despite INTC being down over 1 point from where I bought it a year ago, if called away in April at 18, it will return an annualized 6.4% (9.5% over the 1 1/2 years).

Sunday, October 17, 2010

CLOSED TRADES - YTD: 2010:

DATE STOCK No. BUY STOCK DIV'D CALL Stock TOTAL ANN.NET
EntryDate SYMBOL Shrs. PRICE AMOUNT AMT SOLD Called RETURN RETURN
10/13/2009 NM 1000 5 5009 60 802 4991 844 40.40%
10/21/2009 DD 100 34.01 3410 143 435 2991 *173 8.70%
11/23/2009 LEG 300 19.8 5949 78 808 5241 178 12.00%
11/24/2009 LMT 200 77.06 15421 252 520 14991 *870 16.92%
12/7/2009 HUN 500 10.68 5349 50 1011 891 partial100 >>>>>>
12/7/2009 HUN

closed

3591 194 14.50%
12/18/2009 DVY 200 43.78 8765 86 934 7991 246 11.20%
12/22/2009 PM 100 49.46 4955 174 414 4491 *364 9.79%
12/22/2009 DRI 200 35.96 7200 50 810 6591 251 10.50%
12/30/2009 TLT 100 90.37 9046 0 406 8691 51 6.77%
January 2010

56739


January
1/29/2010 BP 100 56.57 5666 84 721 4420 .ls-550 9.70%
2/2/2010 ETN 100 64.97 6506 100 736 5991 321 9.87%
2/26/2010 MRK 200 36.95 7400 152 758 6791 *491 11.40%
3/25/2010 UVV 200 54 10810 94 1250 7991 .ls-1665 15.40%
5/12/2010 DIA 500 108.85 54434 524 4671 50991 1752 9.66%
5/24/2010 CTL 200 33.57 6723 145 182 6991 595 26.60%
5/27/2010 KFT 200 28.79 5767 58 508 5391 190 9.88%
6/1/2010 BP 200 38.05 7617
1218 6945 .ls-546 7.17%
11/13/2009 BX 300 15.27 4590 210 892 rollout

BX




2946 .*loss-156 3.40%
5/7/2009 GDX 200 36.7 7349 22 1468 7991 *1630 20.50%
7/14/2010 PFE 400 14.92 5977 0 881 5191 95 19.07%
2/30/2009 VZ/FTR 400 mltpl. 12800 mltpl. mltpl. 13396 596
  
6.21%
* Add'l Calls sold 

Friday, October 15, 2010

EXELON TRADE:

Today I again rolled out/down my DITM call options to April 2011, from the 42 call to 41. Since buying the stock at $49.87 in Aug. of '09.
To prove that DITM is a "defensive" strategy, the stock is currently down 6 1/2 points - I have received $2042 in call premiums and dividends (4.26%), for a 14.2% gain over the 20 months to April 2011 (if called away at $41, and including 2 more dividends). Annualized, that is 8.5% with a safety net for the price drop of $650 (another 2.2%).

Thursday, October 14, 2010

RESULTS OF ACTUAL 2009 TRADES:ANNUALIZED RETURNS

DATE STOCK NUMBER BUY STOCK DIV'D OPTION CALL TOTAL cld=called ANN.NET

SYMBOL SHARES PRICE AMOUNT AMOUNT SYMBOL SOLD RETURN away-ex-D RETURN
5/7/2009 XLE 100 50.15 5024 50 WGHAS 890 407 12/17/2009 13.9%
5/7/2009 GDX 200 36.7 7349 22 KFWAI 1468
rollout
12/31/2009 GDXcont



GDXFN 1842


5/8/2009 HCN 100 34.09 3418 0 HCNLF 700 273 cld8/6/09 32.0%
5/12/2009 CAT 100 37.69 3778 42 WKTAU 1024 279 cld10/16/9 17.7%
5/15/2009 200 24.98 5005 82 TAR 754 322 cld10/6/9 15.4%
5/18/2009 WMT 100 49.5 4959 27 WWTAI 700 259 cld12/8/9 9.0%
6/18/2009 BWP 200 22.41 4491 98 BWPLX 210 308 cld10/27/9 20.6%
6/11/2009 EP 300 10.8 3219 30 EPJK 765 267 cld10/16/9 19.9%
6/23/2009 BP 200 47.24 9457 168 BPAI 1015 717 cld11/9/9 31.6%
7/24/2009 ETN 100 51.1 5119 50 ETNAI 811 233 cld11/4/9 13.7%
8/7/2009 EXC 100 49.87 4996 106 EXCAI 654


8/17/2009 BKS 300 20.05 6024 75 BKSAW 1090 434 cld11/23/09 28.8%
8/20/2009 TLT 100 95.1 9519 93 ILTAL 660 225 cld12/1/09 8.8%
9/10/2009 VZ 100 31.15 3124 48 VZAB 355 70 cld12/29/9 7.0%
9/10/2009 SLX 100 50.21 5030 0 EZNLV 593 354 cld12/2/09 28.2%
9/14/2009 DIA 100 96.13 9622 27 DAVAL 837 233 cld11/19/09 14.5%
10/1/2009 CTL 200 33.6 6729 0 CTLAF 788 50 cld11/27/9 4.5%
10/13/2009 NM 1000 5 5009
NMCA 802


10/14/2009 INTC 300 20.94 6291 42 NQAD 520


10/21/2009 PWE 300 17.08 5133 72 PWECC 652 82 cld12/28/9 9.6%
10/21/2009 DD 100 34.01 3410 41 DXTAF 435


10/28/2009 MO 200 18.26 3661 0 MOCR 310 40 cld12/24/9 6.6%
11/11/2009 NLY 300 17.8 5349
NLYAW 241 133 cld12/21/9 44.8%
11/13/2009 BX 300 15.27 4590 90 BXAV 892
rollout
1/4/2010 Bxcont



BXFG 742


11/23/2009 LEG 300 19.8 5949
LEGCW 808


11/24/2009 LMT 200 77.06 15421 126 LMTLO 520


12/11/2009 LMTcont



LMTCO 1088


12/7/2009 HUN 500 10.68 5349
HUNBI 1011


12/11/2009 XLU 200 31.64 6337
XLUCD 396


12/18/2009 DVY 200 43.78 8765
DYVFN 934


12/22/2009 PM 100 49.46 4955
PFYFA 414


12/22/2009 DRI 200 35.96 7200
DRIDM 810


12/30/2009 VZ 200 33.39 6687
Jul.31 586


12/30/2009 VZ 200 33.39 6687
Apr.31 506


12/30/2009 TLT 100 90.37 9046
Mar.87 406
















TOTAL: 98661 1289
12395       6200

























6200/98661
7mo: 6.29%    (10.77ann.%)



closed trades only rollout calls not incl.



















DATE STOCK NUMBER BUY STOCK DIV'D DIV'D ANN Q$.

SYMBOL SHARES PRICE AMOUNT Ex-Date PayDate DIVD% DIVD
5/7/2009 XLE 100 50.15 5024 19-Dec Jan.1 1.85 0.25
5/7/2009 GDX 200 36.7 7349
0  
12/31/2009 GDXcont






5/8/2009 HCN 100 34.09 3418 closed 20-Aug 8.00
5/12/2009 CAT 100 37.69 3778 16-Oct 20-Nov 3.72
5/15/2009 T  200 24.98 5005 8-Oct 3-Nov 6.46
5/18/2009 WMT 100 49.5 4959 9-Dec 2-Jan 2.11 0.27
6/18/2009 BWP 200 22.41 4491 30-Oct 10-Nov 8.50
6/11/2009 EP 300 10.8 3219 3-Oct 3-Nov 2.15
6/23/2009 BP 200 47.24 9457 12-Nov 8-Dec 6.64
7/24/2009 ETN 100 51.1 5119 20-Oct 21-Nov 3.75
8/7/2009 EXC 100 49.87 4996 12-Nov 10-Dec 4.26 0.53
8/17/2009 BKS 300 20.05 6024 5-Dec 30-Dec 4.77
8/20/2009 TLT 100 95.1 9519 M3rd M7th .32m 0.32
9/10/2009 VZ 100 31.15 3124 7-Oct 2-Nov 6.15 0.48
9/10/2009 SLX 100 50.21 5030 26-Dec 31-Dec 2.77An Ann
9/14/2009 DIA 100 96.13 9622 M15-21 M11-17 4.00 Var
10/1/2009 CTL 200 33.6 6729 3-Dec 21-Dec 8.60 0.70
10/13/2009 NM 1000 5 5009 16-Dec 2-Jan 5.40 0.06
10/14/2009 INTC 300 20.94 6291 4-Nov 1-Dec 2.73 0.14
10/21/2009 PWE 300 17.08 5133 M28 M13 8.4fgn .14mo
10/21/2009 DD 100 34.01 3410 12-Nov 14-Dec 4.84 0.41
10/28/2009 MO 200 18.26 3661 28-Dec 11-Jan 7.50 0.34
11/11/2009 NLY 300 17.8 5349 29-Dec 29-Jan 15.00 0.69
11/13/2009 BX 300 15.27 4590 25-Nov 11-Dec 7.88 0.30
1/4/2010 Bxcont






11/23/2009 LEG 300 19.8 5949 11-Dec 15-Jan 5.33 0.26
11/24/2009 LMT 200 77.06 15421 27-Nov 31-Dec 3.26 0.62
12/11/2009 LMTcont






12/7/2009 HUN 500 10.68 5349 11-Dec 31-Dec 3.78 0.10
12/11/2009 XLU 200 31.64 6337 18-Dec 31-Dec 3.90 0.31
12/18/2009 DVY 200 43.78 8765 22-Dec 28-Dec 4.16 0.40
12/22/2009 PM 100 49.46 4955 23-Dec 11-Jan 4.71 0.58
12/22/2009 DRI 200 35.96 7200 7-Jan 1-Feb 2.81 0.25
12/30/2009 VZ 200 33.39 6687 6-Jan 1-Feb 5.68 0.48
12/30/2009 VZ 200 33.39 6687 6-Jan 1-Feb 5.68 0.48
12/30/2009 TLT 100 90.37  9046 29-Jan 5-Feb 3.91 0.32                                   

"FED" UP WITH ZERO INTEREST RATES!


                                   

                  "FED UP WITH LOW RATES?" 
                                         by Brent L. Leonard

"FED" up with zero interest rates on CDs, Money Market accounts?

My name is Brent Leonard; I have been a professional and private investor for 25 years, and, having retired recently, was very disadvantaged by the Fed's zero interest rate policy, mostly to help big banks, which greatly impacted my retirement income. Say a person such as myself retires when rates were 6%. If they had $1 Million in savings, they would receive only $10,000 a year at the current CD or T-Bill rate of below 1%; at 6% that amount would have been $60,000.

Over a year ago I happened onto an unconventional and neglected investment strategy that provided me with surprisingly high return while also offering a safety net for the stock market. It is quite simple and requires very little monitoring or investment knowledge.

 This strategy involves finding high quality, dividend paying stocks and writing covered call options BELOW the Buy-in price, combining to produce historic annualized double-digit income, while "pre-selling" the stock around 6 months out. Those of you who are familiar with covered calls understand that the usual procedure is to sell a call option ABOVE the Buy price of the stock, and then hope that the stock rises! After the biggest Bull market in history from 1982 to 2000 and the most recent 80% rally of 2009, I do not feel this can continue, especially when you consider the global economic condition.

If the stock does not rise, you keep the option premium, but can lose money if the stock falls, just as if you had only bought the stock. With the DITM (Deep-In-The-Money) Call plan, you have already sold the top part of the stock months out, so a small loss is not possible.

For example, let us say you buy ABC at $50 and sell a $45-strike Call on it for $6 (1 dollar more than the difference of 50 and the price it will get "called away" from you in 6 months).  I found through extensive testing that this return on an annualized basis was 10% or higher. While 10% is not an impressive number, when made consistently it is slightly above what the 100-year average of Blue Chip stocks has gained - in the first decade of the new millennium the return was actually negative.
There is also the possibility that someone on the other side of the Call (who bought the one you sold) will "exercise" it prematurely just before it goes ex-dividend. While this prevents you from getting that dividend, I've found that the annualized return was closer to 20%, since it compressed the time that you held the stock. Commissions are a factor, but they are much lower now than they have ever been in the past.

What is especially nice about this plan is that it works well in almost all market scenarios. Markets that rise sharply or gradually put an extra cushion of safety above your Loss price! A sideways market lets you buy back the call near expiration and resell another 6 months out without losing the stock, if it still appeals to you.

A market that slowly declines is even better, if your stock does not go down much below your Sell price - because, your stock and others you might like, will get cheaper to buy - the decline causes a spike in volatility, which raises the price of the Call option you are selling, and the dividend percentage goes higher!

So, the only real drawback to this strategy is a full blown Bear market  - by definition, one that falls 20% or more. Over the past 100 years or so, we have seen 1 or 2 of these per decade - we saw 2 in the first decade of the 21st Century. Usually they occur in stages, so one should be able to recognize the danger, and adjust - maybe even "step down" the Calls as the stock descends for no loss.

As a veteran of the stock market who has seen all types, it is especially gratifying to have stocks tank and not have to worry about whether I should hedge it, ride it out every day- or sell it and watch it turn around and run back up without you.

If there is a sudden drop in either the market or an individual stock, such as BP after the oil spill, a diverse group of stocks should be very profitable over time. One can even diversify further by using some ETFs that pay dividends and have liquid options, and even the Spider ETFs, such as the DIA ( one hundredth of the Dow 30).

What was initially a solution to the nearly $9 Trillion of "dead" money that was sitting in 1% Money Market funds for an "extended period", became a defensive answer to a volatile stock market - relying on secure income rather than the "hope" of possible appreciation.

In today's markets where around 70% of daily volume is done by the High Frequency Trading Quants - MIT Ph.Ds with a huge technology advantage, the average investor is like the "patsy" at the World Series of Poker table, which most of the Quants were successful at in Vegas!
The current market environment is optimal for this strategy since we have just come off a good correction which lowered stock prices and more than doubled the Volatility of options to be sold.

Finally, for those wanting to pursue this concept, there is more information available at www.brentleonard.com, including my new book - Zero InTolerance - on Amazon.