I’m reporting an options trade from last week for CAT. I’ve already bought and closed early two previous CAT puts for an options profit of $287.
The trade:
I Sold 1 CAT Nov 16 ’13 $80 Put @ 3.37
This trade could turn out a few ways:
1) I hold shares until expiration and shares are trading above $80.00. I will get to keep the $337 in options premiums.
2) I hold shares until expiration and shares are trading below $80.00. I will get assigned 100 shares of CAT at a cost of $76.63/share. This is a discount almost 8% to where the stock is currently trading and a 12.5% discount to my cost basis of around $87. CAT recently raised their dividend 15% to .60 from .52 for their August payment. This price corresponds to a yield of around 3.1% which I find attractive.
3) Shares of CAT go on a run and I decide to buy back the put early for a profit less than $337.
I currently have 14 open options positions and a total options profit of $3115 for 2013. My options page has been updated accordingly.
Have you ever written an entry about your general put selling strategy? For example, do you have a typical date range or desired premium which you try to lock in?
Also, do you enter market orders or limit orders?
I’d be curious to find out what has worked best for you.
Hi Executioner,
I haven’t outlined my general put selling strategy but I will put that on my list to do, no pun intended. Typically I first select a company I want to buy more of but is valued a little higher than I want to pay. I don’t have a specific premium in mind except that It needs to be over $100 due to commission costs eating into profits. I do consider the cost basis and the YOC of that stock if it gets assigned.
I would say 90% of the time I enter in market orders. I’m able to watch the markets every day and if I see a stock has a big weakness then I’ll place a market order. However , I have placed a few limit orders when I don’t like the bid price and in case I miss a big swing in price.
I’ve done really well selling puts but I think a lot of that has to do with the market steadily going up. I am not assigned much stock. In case of a bear market or any pullbacks I will start to get assigned more stock. I also like to stagger the strike dates so I don’t have more than 2 or 3 in any month in case I get assigned.
Thanks for stopping by and I’ll try to put out an article soon about my strategies. I do have some information I wrote on my yearly options update if you click on the Yearly Update label.