Ok, I am finally back. For those of you who didn’t see the Twitter feed and the Facebook posts I had some family business to take care of. Some good – like eldest daughter graduating Air Force Basic Training as an Honor Graduate. Some not so good – I say in jest “It’s hell getting old”, but I found out the hard way that it a truism. On another note the MAX10 class is in the final phase I have only lost about 4 pounds in the class, but the reshaping going on is amazing! I have lost another 2 inches off my waist and am getting some definition that I haven’t had for years.
Youngest daughter is starting volleyball. Two games in her team is 1-1 with a ton of improvement from game 1 to game 2. She loves the game and has a coach that makes it fun for the girls.
Middle boy is back at school as well. He isn’t much into playing sports but does like the bass guitar and will start piano lessons soon.
Ok now on to the trades:
ANALYSIS
3 Month Price Chart for AAPL
1 Month Price Chart for AAPL
Here is last week’s trade:
AAPL 645 Put $0.78
AAPL 640 Put $(0.48) This gave an Net Credit of $0.30 for a 3.00% ROI
This week we put on this trade late since I was getting back from my daughter’s Basic Military Training Graduation. I put this trade on Thursday afternoon. AAPL is going on a great tear right now. Earnings have been great this entire year, the new iphone 5 is coming soon, and they just won a large patent infringement suit against Samsung. This stock could easily see 700 soon. Expect a pullback when the new phone comes out as that has been the pattern with all the other iphone releases.
1. A look at the 3 month chart shows that both the 20 day and the 50 day moving averages are well below the current market price and are uptrending. This is a big clue to use put options.
2. The 3 month chart shows a big uptrend in market price. The 1 month chart shows the same thing. This is another clue to use put options.
3. AAPL is on our list of equities and indexes to use.
4. There is a new product release, and before every new product release AAPL trends up until the release then there is a slight downtrend for 1-3 weeks before the uptrend continues. WE are a couple of weeks out from the Iphone 5 release so the uptrend pattern is repeating itself
5. Our ROI is a little light due primarily to the lateness of the timing of the trade. If I had been available to do my work and get a trade on earlier in the week the ROI would have been a little higher. BUT we still hit our 3% minimum.
PAPER TRADE
There was no paper trade last week due to my travel arrangements
COVERED CALLS
We have been doing covered calls on Vivus and McDonald’s. We are continuing with these two stocks in our covered call adventure.
Symbol Company Stock Option Option Initial Annualized
VVUS Vivus 22.90 Sept 25 .27 2,676.00 12.1%
MCD McDonalds 89.54 Sept 92.5 .16 9,174.00 2.09%
VVUS still is throwing off good returns but MCD is lowering from our initial 7.8% when we started. But a couple of things to keep in mind:
1. We get a 3.15% dividend with MCD. The next dividend will be paid on 9/18/2012.
2. The quarterly dividend will be $0.705/share or $70.50 for our 100 shares we hold.
3. We have collected 2 months of options premium for $104.
4. Going into the September options expirations we will collect $104 + $16 + $70.5 = $190.5 for a 2.07$ ROI so far. Our MCD shares are close to a 10yr Treasury Note value of $10,000. The current rate for a 10 year treasury is 1.68% at the end of the day Monday 08/27/2012. So we are doing ok with this vehicle.
5. AND we will keep getting returns on this as long as we want!
DIVIDEND STOCKS
This is a new feature. I have gotten lots of requests for something like this and I do have some high yielding dividend stocks in my retirement account. Here are the beginnings of a dividend generating portfolio:
Ticker Name Recent Price Date Div Yield
KO Coke 38.17 08/27/2012 2.65%
AGD Alpine Global Dynamic Fund 5.76 08/27/2012 12.52%
AOD Alpine Total Dynamic Fund 4.37 08/27/2012 15.10%
MO Altria 34.26 08/27/2012 5.16%
KO and MO are great stocks that have great “moats” – they have huge market shares and will hold those market shares for a LONG time to come. They have each increased their dividends for years and years. I am looking for others like that and will put them to you soon.
AOD and AGD are closed end funds that push out monthly dividends. I like these because the compounding effect is greater because I am getting dividends each month.
With this strategy you need to tell your broker that you want to reinvest the dividend in the stock.
I have 100 shares of the AOD and AGD. This gives me more than a share in dividends each month. I also have 100 shares of KO and Altria. This will push off approximately 5 shares of each stock each year.
Now with each of these stocks I plan on holding them for a long time in my retirement account. All are good dividend payers with long histories of stable price patterns. However; I always put on stop losses on any stock pick I choose. I can always get out of a stock and reset. I use a 15% trailing stop for my stock picks. For example MO (Altria) closed @ 34.26, so the trailing stop would come in at: 34.26 – (34.26*.15) = 34.26 – 5.14 = 29.12.
Remember the idea with these dividend stocks is to let the dividends reinvest and grow over time. This compounding will increase the earnings and build the position. Our time horizon here is 10, 20 or 30 years. This type of strategy is like a safety net to cache away the big gains we get from the weekly options and covered calls.
I have lots of questions piled up in the queue and will be getting to them in the coming weeks, so if you sent one in please be patient. I will get to them soon.
DISCLAIMER: Hashley Capital Management, LLC; as well as I are not giving any trading advice. All data is historical in nature and is intended for use as an educational tool. Trading in options is risky and can result in loss of capital. There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC. Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC and are the opinion of Hashley Capital Management only. If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence, that is your decision and yours alone.
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TTFN
Ash
