Tuesday, February 28, 2012

A computer once beat me at chess, but it was no match for me at kick boxing.

SMOKIN': Lorillard (LO)is a tobacco company which I did a DITM ( Do It To Me) last July, by selling a put ATM (at the $$). The stock went virtually nowhere until this month when it screamed upwards. Since July it is now up 18%.
Yesterday my position was called away - it had risen way higher than I could roll it, even if I wanted to. My return (as compared to the 18% if I just owned the stock): 16%, with a high degree of safety! The 105 call.

Thursday, February 16, 2012

If con is the opposite of pro, is Congress the opposite of Progress?

Here is the latest update: Conoco Phillips "called" away , for a nice 12.33% annualized gain over a 4 month period.
Bot 200 COP last October at $68: $13670; sold 2 62 1/2 calls for $1608, plus 1 quarterly dividend,($132); and called away at $12491 - Net $562 over 4 months.
Nice trade, right about my average return.
Some upcoming candidates with Ex-D in Feb.: MAT,LO,WM,TAL - and NVS for the Annual dividend!

Tuesday, February 14, 2012

St. Valentine's Day Massacre:

It seems everyone, both good and bad, seems to be Bullish these days - not the best environment for DITM, but safe! It actually helps build a larger cushion for existing trades when stocks rise. A couple of blogs ago I mentioned Joe Granville and how to handle his Crash scenario with the DIA. I want to expand on that for tyros just getting into DITM. The DIA does not yield too much, but with a little extra effort one can time it so the weak months of dividends (Jan.,Apr., July, Oct.) are excluded - they contains the stocks of the 30 DJIA that pay the least that month.
Example, Do a buy/write in Feb.-sell the May or June call - missing Jan and maybe getting Apr.'s called away. One can also sell a put (?) until that ex-D date arrives, getting money while you wait and buying it cheaper.
One upcoming Annual dividend - Novartis (NVS) goes ex-D Feb.27; selling the July 55 call ITM one can get an annualized 14% return -depending on the Swiss income tax deal with the US.
A couple upcoming candidates: MXIM and MCHP go ex-D on the 17th; KKR, COP and MAT also up shortly - to buy or (in my case) roll over the call, if feasible.
Knowledge is knowing a tomato is a fruit; Wisdom is not putting it in a fruit salad.

Friday, February 10, 2012


The best part of DITM c-calls in this environment is that I get paid for having Insurance, rather than paying for Puts. Today, after SELLING puts on IP for $200, I did a buy/write to July with a $29 safety net. Ex-D is Monday, Feb.13. I also rolled out my KKR calls - it goes ex-D Feb.15 so I did not want it to get called away at $15 - It is at 15 right now, so I sold the June 14 strike. Although earnings disappointed (duh), they increased their dividend to 8% (if it holds through the 2nd dividend)-first one of $.32 is declared! Extrinsic call premium is $.40.
I still think the market is due for a selloff - because of my sentiment indicators: http://mktsentiment.blogspot.com. despite Larry Fink of Blackrock's 100% exposure for everyone statement this week.
DITM is somewhere in between Buy & Hold and Day Trading. I think I may call it the HUMMINGBIRD STRATEGY - get in just before the flower is blossoming, then get out before it dies out.
One more PLUS for the Home Team: I just got a note from my broker that MLPs (Ltd.Ptnrs) are TAXABLE in an IRA - what next?

Friday, February 3, 2012


Today I received notification from my broker (Schwab, for whom I was a Registered Option Principle for a decade), that I was assigned on my INTC stock, well before the option was to expire in April. As I've mentioned before, the desired direction for DITM is slightly down -on the ring finger of the Visible Hand. Slightly up, however, also has its benefits - farther ITM often results in being assigned early, compressing the option duration, and raising the annualized profit. In this case, I bought Intel Nov.1 for $24.18, sold the April 22 call for 4.50, got 1 dividend of $31 - profit was $143 per hundred lot, or 15.75% annualized.
Although most of my accounts are fully invested in DITM, it is probably wise to invest a portion of assets in DITM (the CD or MMF part), so one can take part in market run ups, such as the January climb.
Despite my profligate lifestyle (!) I notice that my total retirement accounts are at a 4-year high (mid-2008), while my smallest IRA - the purest DITM test tube) is at an all time high, adjusted for withdrawals. DITM covered calls seem to get better and better, especially considering the safety net, and only a vicious HFT-driven Flash Crash can imperil it, although much less than with an Index fund, etc.