Wednesday, November 30, 2011

MY BIG, HIP BROTHER:

As my poor brother lies in a hospital with a hip replacement I decided to buy him a get-well present:
Shares of CTL, 37+, with a 8% dividend, going ex-d this Friday, the 2nd. Calls sold ranged from the April 35-strike to the 28-, for between a 9.35% and 14.5% "annualized" returns, depending on one's risk/reward predilection. 28 seems pretty safe. This presupposes receiving the March 2 dividend as well, at $.725.
B-rated by Schwab; 3-star by S&P.

Monday, November 28, 2011

Immediate Trades:

Just back from Holiday, in time to do two trades with ex-D tomorrow (Nov.29). Exceptional returns:
Buy SVU and sell the April 6 call
Buy TAL and sell the Apr. 22 1/2 call
Since I have not been able to connect with a "back office" to handle a DITM fund, despite its promise in this defensive environment, I have bought a surrogate - the GDV Gabelli ETF with similar positions (and a 3+ % management fee).
One of my readers has kindly shared a similar strategist, which warms my heart - please see link below:
tknight@fullyinformed.com

Monday, November 14, 2011

BACK ON TRACK:

As shown in the previous posting, thanks to the recent rally after the downdraft, my small IRA (@$50k) is back on trend via the histogram on my October Schwab statement. As I've mentioned before, although I trade DITM covered calls in most other family accounts, the small IRA is the purest record of DITM, as there are no more annual contributions, nor MRDs (minimum required distributions) from this IRA. It is fully invested.
I looked back 11 years and it is just a few dollars shy of an all time high, versus the DJIA still off 15% from the October 2008 top. Although I did take out $23,500 early in the decade, it was before the DITM was begun, in May of 2009.
The statement shows a YTD (year-to-date) reading of a 9.5% increase, thanks to a rally in October that brought back most of the "under water" positions to parity. Dividends are obviously included in the IRA, although potential profits from the "missing" $23,500 are not.
Considering the Safety Net implicit in the DITM, this return with 2 months to go is quite satisfactory - approximating my "annualized" estimates since its start.
For those readers using DITM for at least a part of their portfolios, here are some suitable candidates ex-dividend in November:
UPS,CVX,CNK,MSFT,NEE,SVU,TAL, AND WHR. Be sure to check the dates for yourself.

Wednesday, November 9, 2011

CURRENT CONDITION:

At the risk of sounding more schadenfreude than sympathetic advisory, I thought I should list all the positions in my personal accounts (fully invested), and how they are performing in relation to their "safety nets" provided by selling Deep-In-The-Money covered calls - especially on this dark day with the Down Jones off over 400 points:

SYM / PRICE /CALL /PTS.ABOVE/BELOW

BMY .. 31 .. 27.... +4
COP .. 70 .. 62 1/2. +7 1/2
CVX .. 104.. 92 1/2.. +11 1/2
DIA .. 118 .. 120 ... -2
EPD.. 44.. 41 ... +3
ERF .. 28.. 29.... -1
GE PUT. 15.9. 16... 0
INTC .. 24... 22 .. +2
KKR .. 13.. 15.... -2
KMB.. 70 ..70 .... 0
LINE.. 36 .. 37 ... -1
LLY .. 38 ... 35.... +3
LO 107 1/2 100 +7 1/2
MAT.. 28 .. 26 ... +2
NEE PUT. 55 . 55... 0
NOC .. 58.3.. 60 .. -1.7
PM ... 70... 70.... 0
SVU .. 6.9... 9... -2.1
TLT .. 118 ... 106.. +12
TOT.. 50.4 ... 50 .. +.4
WM... 31.. . 36 ..... -5

The two Puts were sold to take on the stocks, which were ex-D farther out in time, earning money while waiting to do the Buy/Write. In the case of puts gone bad, such as WM, it is possible to roll them out in time, earning nice premium until recovering - often this equals or exceeds the DITM dividend/extrinsic amount, but is riskier.