One of the complaints of DITM is that it works less well in upwardly moving stocks - au contraire!
I bot MCD in Feb. for $62 and sold the Sept.72 1/2 call. After getting 1 dividend, since it had risen to 81, it was called away in May (3 months later). Annualized profit: 10.35%.
Since I am constantly tweaking DITM ( it's now on a 12% course for 2011), I was reading Steven Sears option column in Barron's this weekend about naked puts on stocks you wish to own. I got to thinking -what if you find a stock you like but the ex-D date is 2-3 months away? Why not sell a put past the ex-D date? If it is put to you, fine - you own the stock and get the dividend; if called away, it is done in a compressed timeframe embellishing your premium.
I'm considering the DIA for Aug. ; since the dividend varies due to 30 components, some months are better than other - Aug., Nov., Jan., May -so why not capture them? Also , it pays a special yearend dividend in Dec. (At least it has done so recently).
Tuesday, May 31, 2011
Thursday, May 26, 2011
JNJ position
Just got word from my broker that my JNJ position was called away early (I had rolled out the initial call to July, but it was deep-itm (10 points) with ex-d today. Here is the math:
Bot 100 JNJ Dec. 17, 2010 for $6389 (incl. commission); sold April call for 455; bot back and resold 57 1/2 call for net 234 (264 less 30 buyback); got 2 div. for $108 - stock called away at $5741. Net profit was $450, or 7+%; annualized was double that. 14.09%
Not bad for almost the same safety as a CD.
Bot 100 JNJ Dec. 17, 2010 for $6389 (incl. commission); sold April call for 455; bot back and resold 57 1/2 call for net 234 (264 less 30 buyback); got 2 div. for $108 - stock called away at $5741. Net profit was $450, or 7+%; annualized was double that. 14.09%
Not bad for almost the same safety as a CD.
Friday, May 6, 2011
SPRING TRADES:
While on Easter vacation I had NI (Nisource) called away before ex-Dividend after 3 months holding. Results were $172 net of commissions on 300 shares at $5600 cost, or 12.27% annualized.
After returning, I decided to keep my 200 COP (Conoco), rolling out May calls before the May 17 next ex-D date (there's a trade here!!), to Aug., netting me another $322, or 8.7%. With the 67 1/2 call well below the current $73 stock price, there is a nice "safety net" for 3 months.
These are my basic DITM trades, while still playing other trades (gold, silver, etc.) with other money.
After returning, I decided to keep my 200 COP (Conoco), rolling out May calls before the May 17 next ex-D date (there's a trade here!!), to Aug., netting me another $322, or 8.7%. With the 67 1/2 call well below the current $73 stock price, there is a nice "safety net" for 3 months.
These are my basic DITM trades, while still playing other trades (gold, silver, etc.) with other money.
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