All About Interest

One man's journey to financial independence.

Options Trade – Caterpillar (CAT)

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Caterpillar beat earnings in the last quarter and the stock had a nice pop.  I decided to take advantage and close out my put I had sold.  With the pending debt ceiling and some weakness in the markets, I thought this was a good opportunity to close out.

The original trade:

10/24/13 Sold 1 CAT May 17 ’14 $82.50 Put @ 5.03; posted here

Closing trade:

01/31/14 BTC 1 CAT May 17 ’14 $82.50 Put @ 1.22

I earned $381 in options premiums from this trade in only 3 months.

I currently have 10 open options positions. 

My options page has been updated accordingly.

Options Trades – INTC, ESV, KO

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I’m reporting a few more options trades that executed last Thursday and Friday.  I’ve been out of town in Colorado so I’m trying to catch up.

Many of you may have noticed that Intel decided to keep their next dividend the same.  I was expecting to see a raise and hope to see one by July of this year.  In July, it will be 2 full years since they have raised their dividend.  Now I don’t mind collecting the dividend while I’m waiting but I think I’ve been waiting enough.  Intel is also my largest position so I decided to start selling some calls until there is a dividend raise or my shares are called away.

I also sold puts in both KO and ESV.  I’d like to add more of these companies to my portfolio.

The trades:

A.) I Sold 2 INTC OCT 18 ’14 $25 Calls @ 1.58
B.) I Sold 1 KO Aug 16 ’14 $39 Put @ $2.00
C.) I Sold 1 ESV Sep 20 ’14 $55 Put @ $6.50

These trades could turn out a few ways:

1 a.) I hold shares until expiration and shares are trading below $25.00.  I will get to keep the $316 in options premiums.

1 b.)  I hold shares until expiration and shares are trading above $39.00.  I will get to keep the $200 in options premiums.

1 c.)  I hold shares until expiration and shares are trading above $55.00.  I will get to keep the $650 in options premiums.

2 a.) INTC is trading above $25.00 at or before expiration and shares are assigned.  I will be forced to sell 200 shares of INTC at a price of $25.00/share.

2 b.)  KO is trading below $39.00 at or before expiration and shares are assigned.  I will receive 100 shares of KO at a cost of $37.00/share.  This is currently lower than my cost basis.

2 c.)  ESV is trading below $55.00 at or before expiration and shares are assigned.  I will receive 100 shares of ESV at a cost of $48.50/share.  This is currently over 10% below my cost basis.

3 a.) Shares of INTC drop significantly and I decide to buy back the call early for a profit less than case 1 b.)

3 b.)  Shares of KO go on a run and I decide to buy back the put early for a profit less than case 1 b.)

3 c.) Shares of ESV go on a run and I decide to buy back the put early for a profit less than case 1 c.)

I currently have 11 open options positions and a total options profit of $716 for 2014.  My options page has been updated accordingly.

Options expirations

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I had two options expire worthless on 01/18/14, meaning I got to keep the full premiums. 

Both of these stocks are stocks that I already own.  I had no problem if the prices of the shares were lower and I had been assigned additional shares.  I believes additional shares at these prices would have been a nice discount. 

The original trades:

03/06/13 Sold 2 INTC Jan 18 ’14 $22.00 Puts @ 2.23; posted here

06/23/13 Sold 3 BBVA Jan 18 ’14 $8.00 Puts @ 0.90

This options expired worthless so I get to keep $446 in options premiums from Intel and $270 in options premiums for BBVA.  This marks my first options profit for 2014 bringing the total to $716.

I currently have 8 open options positions.  

My options page has been updated accordingly.

2013 – Year End Options Review

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2013 has been a great year on the options front.  If you caught my 2012 full year options review you will see that I almost doubled my options profits in 2013.

For anyone no that familiar with options or specifically selling puts, I wrote an introduction to options trading – part 1 (puts) in 2013.

What’s remarkable about these profits are that I never kept more than $14,000 in cash in my options account.  So do the math, $4583.18/$14,000 is a return of over 32%.  Think of it this way; it took a portfolio of over $200,000 to produce about $5500 in income while it took another account of only $14,000 to produce about $4000 in profits.  Obviously this doesn’t take into account capital gains but I don’t plan on selling any stocks so these are unrealized gains.  We aren’t exactly comparing apples to apples but I just wanted to make a point about diversified strategies being able to boost your income.  

As always, I will keep track of my yearly trades on my options tab:

Closed out (2013):

Total Profit: $4583.18 (before commissions)

12/21/13 Option Assigned – Sold 100 shares x $35/share
08/21/13 Sold 1 DOW Dec 21 ’13 $35 Call @ 3.25
Profit:  {$38.25 – $33.93(basis)}x100 shares + $32 (dividends) – $29.82(commissions) = $434.18

11/02/13 Option Assigned – Bought 100 share x $45/share
05/28/13 Sold 1 SO Nov 16 ’13 $45 Put @ 2.09

10/19/13 Option expired
03/26/13 Sold 3 BBVA Oct 19 ’13 $8 Puts @ 0.75
Profit:  $225

10/14/13 BTC 1 TGH Nov 16 ’13 $35 Put @ .25
05/29/13 Sold 1 TGH Nov 16 ’13 $35 Put @ 1.75
Profit: $150

10/14/13 BTC 1 BBL Dec 21 ’13 $55 Put @ 1.30
05/09/13 Sold 1 BBL Dec 21 ’13 $55 Put @ 3.00
Profit: $170

10/14/13 BTC 1 TEVA Dec 21 ’13 $37.50 Put @ 0.47
05/02/13 Sold 1 TEVA Dec 21 ’13 $37.50 Put @ 2.50
Profit: $203

10/03/13 BTC 1 INTC Oct 19 ’13 $22 Put @ 0.35
04/08/13 Sold 1 INTC Oct 19 ’13 $22 Put @ 2.28
Profit: $193

09/23/13 BTC 1 TWGP Apr 19 ’14 $17.50 Put @ $9.50
08/29/13 Sold 1 TWGP Apr 19 ’14 $17.50 Put @ $4.40
Loss: $510

09/23/13 BTC 1 NSC Mar 22 ’14 $75 Pu @ 3.88
07/24/13 Sold 1 NSC Mar 22 ’14 $75 Put @ 6.50
Profit:  $262

09/23/13 BTC 1 CAT Nov 16 ’13 $80 Put @ 1.21
07/26/13 Sold 1 CAT Nov 16 ’13 $80 Put @ 3.37
Profit: $216

09/21/13 Expired
02/27/13 Sold 1 LO Sep 21 ’13 $37.50 Put @ 2.97
Profit: $297

09/17/13 Executed – Sold 100 shares @ $20/share
01/24/13 Sold 1 SWY Sept 21 ’13 $20 Call @ 1.40
Cost Basis:

08/08/13 Sold 1 TWGP Oct 19 ’13 $20 Put @ $3.00
08/29/13 BTC 1 TWGP OCT 19 ’13 $20 Put @ $6.50
Loss: $350

08/17/13 Expired
02/12/13 Sold 1 KO Aug 17 ’13 $37.50 Put @ 1.71
Profit: $171

08/17/13 Expired
12/27/12 Sold 1 CSX Aug 17 ’13 $20 Put @ 2.00
Profit: $200

07/23/13 BTC 1 PAAS Jan 18 ’14 $13 Put @ 1.75
07/19/13 Sold 1 PAAS Jan 18 ’14 $13 Put @ 2.32
Profit: $57

07/20/13 Assigned 300 shares of BBVA @ $9/share
03/01/13 Sold 3 BBVA July 20 ’13 $9 Puts @ .70
Cost Basis: $8.30/share

07/19/13 BTC 1 PAAS July 20 ’13 $14 Put @ 1.87
04/15/13 Sold 1 PAAS July 20 ’13 $14 Put @ 1.47
Loss: $40

07/12/13 BTC 1 BBL Dec 21 ’13 $50 Put @ 3.2
07/05/13 Sold 1 BBL Dec 21 ’13 $50 Put @ 4.5
Profit: $130

07/08/13 BTC 1 COP Nov 16 ’13 $55 Put @ .78
04/25/13 Sold 1 COP Nov 16 ’13 $55 Put @ 2.52
Profit: $174

06/27/13 Options Assignment (assigned early)
 Assigned 100 Shares of PAAS @ $14/share
 04/15/13 Sold 1 PAAS July 20 ’13 $14 Put @ 1.47

06/22/13 Expired
12/26/12 Sold 1 MO Jun 22 ’13 $30 Put @ 1.32
Profit: $132

06/22/13 Expired
12/19/12 Sold 1 KMI June 22 ’13 $32.50 Put @ 1.18
Profit: $118

05/07/13 BTC 1 CAT Nov 16 ’13 $70 Put @ .88
04/17/13 Sold 1 CAT Nov 16 ’13 $70 Put @ 2.65
Profit:  $177

05/06/13 Bought-to-Close 1 CAT Aug 17 ’13 $85 Put @ 2.9
02/21/13 Sold 1 CAT Aug 17 ’13 $85 Put @ 4.00
Profit: $110

04/24/13 Bought-To-Close 1 RTN Aug 17 ’13 $50 Put @ .50
02/04/13 Sold 1 RTN Aug 17 ’13 $50 Put @ 2.05
Profit:  $155

04/21/13 Expired 1 WM Apr 20 ’13 $30 Put @ 1.35
10/02/12 Sold 1 WM Apr 20 ’13 $30 Put @ 1.35
Profit:  $135

04/17/13 Bought-To-Close 1 INTC July 20 ’13 $21 Put @ .75
11/08/12 Sold 1 INTC July 20 ’13 $21 Put @ 1.96
Profit:  $121

04/04/13 Bought-To-Close 1 LO June 22 ’13 $38.33 Put @ .90
01/16/13 Sold 1 LO June 22 ’13 $38.33 Put @ 2.72
Profit:  $182

04/03/13 Bought-To-Close 1 DRI July 20 ’13 $44 Put @ 0.45
02/13/13 Sold 1 DRI July 20 ’13 $44 Put @ 2.31
Profit:  $186

03/27/13 Bought-To-Close 1 LO Jan 18 ’14 $40 Put @ $3.75
03/06/13 Sold 1 LO Jan 18 ’14 $40 Put @ 5.35
Profit:  $160

03/25/13 Bought-To-Close 2 BBVA Jan 18 ’14 $10 Calls @ .70
01/11/13 Sold 2 BBVA Jan 18 ’14 $10 Calls @ 1.40
Profit: $140

03/07/13 100 shares called away
01/07/13 Sold 1 WM July 20 ’13 $34 Call @ 1.3
Cost Basis:

03/06/13 Bought-To-Close 2 INTC Oct 19 ’13 $22 Puts @ 1.79
01/08/13 Sold 2 INTC Oct 19 ’13 $22 Puts @ 2.53
Profit: $148

02/27/13 Bought-To-Close 1 SWY Jun 22 ’13 $17 Put @ .25
12/27/12 Sold 1 SWY Jun 22 ’13 $17 Put @ 1.55
Profit:  $130

02/21/13 Bought-To-Close 1 PM Sept 21 ’13 $85 Put @ 2.46
01/30/13 Sold 1 PM Sept 21 ’13 $85 Put @ 4.23
Profit: $177

02/16/13 Expired
09/14/12 Sold 1 TGH Feb 16 ’13 $30 Put @ 2.10
Profit: $210

01/19/13 100 shares called away
09/13/12 Sold 1 TSM Jan 19 ’13 $15 Call @ .91
Cost Basis: $11.22/share

01/19/13 Expired
09/04/12 Sold 4 BBVA Jan 19 ’13 $6 Puts @ .40
Profit: $160

01/19/13 Expired
10/25/12 Sold 1 NSC Jan 19 ’13 $60 Put @ 2.10
Profit: $210

01/07/13  Call assignment – 200 shares of BBVA called away @ $8
09/04/12 Sold 2 BBVA Jan 19 ’13 $8 Calls @ .60

01/04/13 Bought to Close 1 NSC March 16 ’13 $67.50 Put @ 3.74
09/20/12 Sold 1 NSC March 16 ’13 $67.50 Put @ 5.17
Profit: $143

The Trades

I made a total profit before commission of $4583.18.  There were a few call assignments that I didn’t tally up my profits on so this number would be a little higher.  I only included my recent profits of the DOW assignment since I actually moved my 100 shares of DOW into my speculative options account and considered the shares like cash.  I only plan to sell calls on positions that are either speculative or extremely overvalued.

I came up with total commissions of roughly $600.00.  Although my commissions were higher they only amounted to 13% of my earnings versus 17.3% of my earnings last year.  I was able to reduce my commissions by selling longer dated puts and puts that were deeper in-the-money.  I will try my best to reduce commission further in 2014.

My total profit after commissions was $3983.18 versus $2249.74 for 2012.  While I didn’t make more profit from options than I did in dividend income this year, I think the options portfolio did extremely well!  I don’t know if this streak will continue but I do plan to keep my strategy of selling naked puts on companies I want to own anyways.

As I mentioned, I was assigned shares 3 times at expiration due to selling puts.  Let’s look at how those turned out.  Since I’ve already counted the income from selling the puts and subtracted the commissions from my profit I won’t use an adjusted cost basis for a simple calculation of capital gains from these shares.

The list below came from last year’s update on how I’d reduce commissions:

Going forward, I would like to reduce the % of profits lost through commissions.  I’ve outlined 6 ways in which I can accomplish this:

1.)  selling multiple puts at once –   While I could sell more than 1 put at a time, this one will be tough because I’m committing to 100 shares per contract that is sold.
I did this on a few occasions this year when I could.  It’s tough to commit to more than 100 shares with a relatively small options account.  This should get better as my options portfolio gets larger.  

2.) request better pricing – I’ve called E*trade and requested lower fees that are comparable to another brokerage firm.  This is in process and I will post the results when it happens.
I tried this with the promise of moving another 100k over to my E*Trade account throughout the year.  They wanted me to move the money immediately in order to get lowered commissions.  I plan to try again to work something out with them.  

3.) use another brokerage firm –  I’ve actually already signed up at sharebuilder and plan to start contributing by February using that account.  They do allow options and I’ll be looking into pricing.
I opened a Sharebuilder account and love it!  However, I haven’t used it for options yet due to not being able to get margin right away.  

4.) wait for puts to expire – If I sell less puts that are speculative in nature then I would be more willing to ride out the put until expiration.  When the put expires worthless there is no additional fee involving like when I have to buy back the put to close out the position.
I let several puts expire worthless so I didn’t have to pay a commission to close them out.

5.) sell in-the-money puts – Basically this is selling a put priced around the current market value or less.  While this strategy has a much higher change of getting put shares, the premiums paid are also much higher.
I did this as well and it worked out so I saw larger profits.  

6.) sell longer dated puts –  The longer until expiration, the higher the premiums you can earn.  I do plan on selling some longer dated puts.
I tried to sell puts at least 6 months out and this also helped me bring in larger premiums.

I still believe selling puts is a great way to generate extra income or reduce the cost basis on companies for DG investors.  This strategy compliments my overall DG strategy (see My Business Plan) since I’m mostly selling puts against companies I want to buy more of anyways.  It’s like getting paid a premium to place a limit order.  I’m ok with that!  

Options Trade – Target (TGT)

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It’s no secret that I’m a big fan of Target.  I’ve been adding shares now for months and have finally brought TGT up to a full weight (2.5% of my 40 position portfolio).  Shares have been under weakness lately in the midst of a broader market rally.  I decided to take advantage of this fact and sell a TGT put.  If you did any holiday shopping here, you would have seen how busy the store is.  Actually, TGT is always busy where I live any time that I go in.  I think the company has a bright future and I like the recent dividend growth.  I wouldn’t be surprised to see the quarterly payment rise to .50 with the next increase.  
Here’s the trade:
I sold 1 TGT July 19 ’14 $60.00 Put @ 2.83
This trade could turn out a few ways:

1) I hold shares until expiration and shares are trading above the strike.  I will get to keep the $283 in options premiums.

2) I hold shares until expiration and shares are trading below the strike.  I will get assigned 100 shares of TGT at a cost of $57.17/share  This is more than a 10% discount to my cost basis!  Who doesn’t love getting a discount?

3) Shares of TGT go on a run and I decide to buy back the put early for a profit less than $283.
I currently have 10 open options positions and a total options profit of $4149 for 2013.  My options page has been updated accordingly.

Options Trade – Kinder Morgan, Inc. (KMI)

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It’s no secret that KMI is on the radar of a lot of DG investors.  I added shares this week and prices of KMI are still retracting.  Instead of going too much overweight right away, I’ve decided to sell some puts.  I haven’t had a lot of options activity the last couple of months but expect to pick it up in order to get better prices on shares.
Here’s the trades:
I sold 1 KMI June 21 ’14 $32.50 Put @ 2.40
I simultaneously sold 2 KMI Jan 17 ’15 $27.50 Puts @ $1.6
KMI has projected a payout of $1.72/share next year, that’s an average of $0.43/quarter.  The cost basis on the first trade would be $30.10/share and the cost basis on the longer dated put would be $25.90/share.  At $0.43/quarter then the yields on cost (YOC) on these shares if assigned are 5.7% and 6.6% respectively!  These are huge yields and I don’t see KMI having any problems paying out their projected amounts.
If all 300 of these shares are assigned, this would double my position to 600 shares and reduce my total cost basis from $34.63 to $30.97 or a reduced cost basis of 10.6%.  

This trade could turn out a few ways:

1) I hold shares until expiration and shares are trading above the strike.  I will get to keep the $560 in options premiums.

2) I hold shares until expiration and shares are trading below the strike.  I will get assigned 100 shares of KMI in June and another 200 shares next January.  I mentioned above the outcome if this happens.

3) Shares of KMI go on a run and I decide to buy back the put early for a profit less than $560.

I currently have 10 open options positions and a total options profit of $4149 for 2013.  My options page has been updated accordingly.

Options Assignment – Southern Company (SO)

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I’m reporting an options assignment with SO.  I originally posted back on May 28th about selling 1 SO Nov 16 ’13 $45 Put @ 2.09.

On 11/01/13 someone exercised their put early and I was assigned 100 shares of SO @ $45/share with a cost basis of $42.91 not counting commissions.  I was able to slightly lower my cost basis on a company I’d like to hold long-term as a core utility position.

The Southern Company has a dividend yield of 4.9% at todays prices.  SO is a Dividend Contender having increased their dividends for the last 12 years.  They have a 5-year CAGR of 4% which is pretty typical for a utility holding.

I’m now slightly overweight SO but that will change over time as my portfolio grows.

From Etrade:

The Southern Company (Southern Company)is a holding company, which owns all of the common stock of the traditional operating companies, including Alabama Power Company (Alabama Power), Georgia Power Company (Georgia Power), Gulf Power Company (Gulf Power), and Mississippi Power Company (Mississippi Power) ,and Southern Power Company (Southern Power), and other direct and indirect subsidiaries (together, the Southern Company system). The primary business of the Southern Company system is electricity sales by the traditional operating companies and Southern Power. The four traditional operating companies are vertically integrated utilities providing electric service in four Southeastern states. Southern Power constructs, acquires, owns, and manages generation assets. In July 2012, the Company and Turner Renewable Energy acquired a 20 megawatts solar photovoltaic power plant in Nevada from SunEdison, a subsidiary of MEMC Electronic Materials, Inc.

These 100 shares will increase my yearly dividends by $203/year and bring my forward dividends to $8206.41.

I still have 8 open options positions that can be found on my options page.

Options Trade – TEVA Pharmaceutical (TEVA)

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Teva Pharmaceutical Industries-Logo

I’m reporting an options trade from this week for TEVA.  I’ve already bought and closed one previous TEVA put for a profit of $203.

TEVA’s CEO resigned yesterday and this is why the stock is down big.  I decided to take advantage of this and sell a put.  I may also add to my position next Tuesday if the stock stays depressed.

What I like about TEVA:
1.) They are the largest generic drug manufacturer in the world and this business isn’t going anywhere.
2.) They have increased their dividend every year for 13 straight years right through the Great Recession.
3.) They have announced a 2-billion dollar cost savings program by 2017
4.) They have a 5-Year CAGR of 21.8% (Although most recent raise was 15% it’s still respectible)
5.) At current prices TEVA is yielding 3.25%

What I don’t like:
1.) They are losing patent protection on their blockbuster drug, Copaxone.
2.) Their CEO resigned and it’s unsure who will be running the company
3.) They slightly narrowed their outlook for 2013
4.) The stock has been depressed the last 5 years, with a high of over $60 to current prices
5.) TEVA is based in Israel and there is a 15% withholding tax on dividends

The trade:

I Sold 1 TEVA June 21 ’14 $37.5 Put @ 3.00

This trade could turn out a few ways:

1) I hold shares until expiration and shares are trading above $37.50.  I will get to keep the $300 in options premiums.

2) I hold shares until expiration and shares are trading below $37.50.  I will get assigned 100 shares of TEVA at a cost of $34.50/share.  This is a discount of almost 7% from where the stock is currently trading and a 10% discount to my cost basis of  $38.26.

3) Shares of TEVA go on a run and I decide to buy back the put early for a profit less than $300.

I currently have 9 open options positions and a total options profit of $4149 for 2013.  My options page has been updated accordingly.

Options Trade – Caterpillar (CAT)

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I’m reporting an options trade from this week for CAT.  I’ve already bought and closed early three previous CAT puts this year for an options profit of ironically, $503.  This will be the exact amount I’ll collect if this one expires.

The trade:

I Sold 1 CAT May 17 ’14 $82.5 Put @ 5.03

This trade could turn out a few ways:

1) I hold shares until expiration and shares are trading above $82.50.  I will get to keep the $503 in options premiums.

2) I hold shares until expiration and shares are trading below $82.50.  I will get assigned 100 shares of CAT at a cost of $77.47/share.  This is a discount of almost 8% from where the stock is currently trading and a 12.5% discount to my cost basis of around $87.  CAT recently issued a lower guidance and their stock dropped by $5/share.  I used this temporary weakness to sell a put.

3) Shares of CAT go on a run and I decide to buy back the put early for a profit less than $503.

I currently have 8 open options positions and a total options profit of $4149 for 2013.  My options page has been updated accordingly.

Options Expiration – BBVA

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I’m long BBVA and have been selling puts for over a year.  The stock has rallied since the Spanish banking crisis that was going on around last summer.  They are one of my top performing stocks and they keep hitting 52-week highs.  I’m currently keeping BBVA as a longer term holding.  I am a little biased as I bank with them and they financed my mortgage.  They do still pay a nice dividend.

The original trade:

03/26/13 Sold 3 BBVA Oct 19 ’13 $8 Puts @ 0.75; posted here

I would have been happy however this trade turned out.  Since BBVA went on a huge run, the option expired over the weekend worthless and I kept the full premium of $225.

I currently have 7 open options positions and have a total YTD options profit of $4149 before commissions. I have closed out 41 options so far this year.

My options page has been updated accordingly.

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