Monday, March 21, 2011


The latest trade was a close-out on HCN, a Healthcare REIT which I had done previously. This time, however, I struggled with the fact that because of option difficulty, I had to do an ATM (at-the-money) Call, so had to delete it from my track record portfolio (but I'm keeping the money!).
Bot 200 HCN on Oct. 18, 2010 at $49.76 (average price); sold two March 50 Calls (sic) for $400; stock called away on Friday's expiry $9991 (net of commission): return $706 over 5 months = 17% annualized (divided % by 5, multiply by 12).

Friday, March 18, 2011


Here's an interesting DITM trade. A month ago, on Feb.23, I bot 200 LO at $79.71 (as I recounted awhile back) for $15951, sold the June 75 calls for $1686, got the $260 div'd. Would you hold onto the trade, hoping for the May div'd, or exit the position for a $620 profit ? That's 46.6% ITB (in the bank) after 1 month. There is still some extrinsic (OTM) value in the option since the IV ran to 47 on the 7 point runup today. Remember, ATM calls usually only move up 50% (Delta) to the stocks 100%; but the higher it goes DITM, the closer it moves with the stock.
Your call.
It is, after all, a tobacco stock - legislation is pending on menthol now. My BTI dropped 7 points from where I bought it, but due to the Call, div'd, I do not have a loss in it!

Wednesday, March 16, 2011


As Ronnie Reagan used to say - There you go again. Just as I bought BTI, Brit.Amer Tobacco, a few days later it started tanking - from 82 to74 (9.8%) as the SPX dropped 6% so far. I should have known, having had this happen a year ago with UVV -Univ.Leaf, another tobacco company (can be hazardous to your fiscal health).
I sold way less than my 10% lower Call, the 80-strike, because it was a test of the semi-annual dividend strategy (my bad, not DITM's).
Still, I hang on to it - down 6 points, I locked in 2.6 pts. dividend and 2.2 pts Call, so I'm basically only down 1+ pts., which I'll try to ride out, hoping it'll improve.
So far, of my 17 DITM positions, only 5 now are barely under water, needing no action yet.

Tuesday, March 15, 2011


As the NCAA basketball March Madness begins, DITM focuses on the defensive part of the strategy. So far the S&P 500 (SPX) is down 6% from its Feb. 18 closing high. As of today, only 4 of my 17 positions are even under water, let alone in a losing - net of call premium and dividends - position. They are barely below the pre-selling price, so far in no danger of being stopped out.

In a couple weeks I shall update 2011's first Quarter results - should be pretty good.

A couple of Behavioral Finance thoughts: although the market has doubled from its March 2009 low, how many folks got in at the very bottom and sold at the very top?

Also, when I say that DITM protects all but BEAR markets (20% or more), due to the Calls safety net and income, how many got in at the very top and got stopped out at the very bottom, without waiting out the Call premium decay and future dividends? That is the benefit of monthly "laddering", safety as well as steady, monthly income from dividends.

Tuesday, March 8, 2011

And the Beat goes on!

My Rayonier (RYN) got called away after 1 dividend and 3 months (before the 2nd D); right on schedule:
Cost $5024, Div'd 54, Call 612, stock sold 4991= $133 profit, or 10.6% annualized (done 4 X).
DITM is getting contagious - see Option Maestro at

Monday, March 7, 2011


Although I believe in "laddering" positions monthly to not only receive continuous dividends but ameliorate risk as well ( having cash for buying opportunities), if one wants to fine-tune DITM, they could wait out corrections until a bottom seems to be in, to take new positions. That is what I am doing right now.

That way, stock prices are lower, dividend % are higher, and IV (implied volatility) of Calls sold is more. Conventional wisdom says that this is a minor correction, with a major one coming after the stimulus is over in June.

Right now the farthest I am out is July, hoping to get them called away early.

BTW - With the Wisconsin congressmen leaving the state to avoid a decision, is there some way we can get the Federal Congress to do the same?