Monday, February 28, 2011


Baseball season hasn't even started but I've already hit a Foul Ball and a possible Home Run:

Novartis -NVS- was bought for its annual dividend capture on Feb.16 (ex-D on 2/24), but was called away before the div'd! I still got the option premium of 3 months, which covered transaction costs plus $32 net (3.4% annualized), but I should have got more call premium, more time. Still testing the annual dividend concept!

LO -Lorillard Tobacco has the best of both worlds - high call premium and a great dividend - it went ex-D last week (please remember that this blog is for educational purposes, not touting get-rich-quick plays). LO immediately started dropping, but is still above my sold call level.

Friday, February 18, 2011


Although Chairman Bernancke is taking credit for the latest stock market rally, I'd like to posit that it was all my doing!

For almost 2 years I've been espousing the DITM - the optimal strategy for sideways to down markets, averaging an annualized 10%,which happens to be exactly the same return as the S&P 500 since 1926 (dividends included).

Meanwhile the market has rallied the most in several decades: the SPX is up 100% since March of '09 (Nasdaq up 124%); which is why I mention in my talks to use only a Portion of one's assets for DITM. This achieves the safety of diversity as well as the ability to invest elsewhere (like Spiders, Gold, etc.).

Today's trade was a call-away of my DIAs, which are a good entry point for new investors into DITM. With the DJIA at 12,363 (the DIA at 1/100th of it - 123), my March 103.75 Call was exercised early:

Annualizing over 4 months (multiplying the net % by 3), it very safely returned 8.27%. Not quite 10%, but lower down on the Safety pyramid. If/when the market sells off after its record run, I shall re-enter a position.

Next week I'll be giving another talk to the Golden Gate Univ. Learning Program and Finance Club, which is open FREE to the public. It's on the 5th floor of GGU, Wed., Feb.23 at 5:30.

Monday, February 14, 2011


Over the weekend my Chevron -CVX- stock was taken away just before ex-Dividend. I bought it Nov.4 (3 months, 10 days ago - although I calc'd 4 months for the return); selling the March 80 call - CVX is now 97 - the trade had much downside security, but also made it unfavorable to roll out the call.
An early dividend of $72 plus the $646 call price (Intrinsic and extrinsic) netted me a profit of $231 after all commissions, or 8.17% annualized at 4 months. Not bad.

Friday, February 11, 2011


Overnight the 200 Lilly shares were taken away by the ITM 33-strike call being exercised by its owner. Having done the Buy/Write in early November, the duration was 3 months, or a 4 multiplier for the annualized return of 8.52%, presupposing that I could do the same trade four times, or its equivalent. Lilly closed yesterday at 35.13, 2+ points ITM (in-the-money) with the expiry the third week of April!

Friday, February 4, 2011


Welcome readers from my talk last night to the SF - AAII at the Library in beautiful downtown Orinda. Please scroll down to "older posts" to see actual trading results from 2009 - 2010 that were in the presentation, plus recent closed trades.

I actually had two more this week:

INTC (Intel Corp.) was called away the day before ex-D after having held it for 17 months. Lesson learned here is that to hold it too long produces a lower than average (but still fairly good) return in a low-volatility cycle - 6.1% annualized, vs. average of 11%.

300 shares of INTC were purchased on Oct.14, 2009 at $20.94; it is currently at $21.67, although the last call rolled down was the 18-strike. Total return was $543.

Another stock, 100 shares of Eaton (ETN)was bought at $87.65 in Oct.2010, held 4 months, called away this week at $80 (80-strike price) netting, after all commissions, $384 or 13.1% annualized.

My second experiment in annual dividend-selling paid off (after the Mattel trade in Dec.) with Siemens -SI- although foreign taxes of $100 were deducted. I still netted $193 in less than a month for a 20% annualized ROI. Important to note - the "Delta", or relation of the option to the underlying stock, at the money is usually 50. In other words, if the stock is rising after putting on the buy/write, it becomes more profitable, since the stock goes up $1 and the sold call only goes up $.50.

With SI, I bought it Jan.11 at $119/share; sold the 100 shares on Jan.24 at $125 - it actually kept rising to $131.