Over the last couple of days, the market has seen a pull back, creating some extra volatility. In addition to that volatility, Safeway saw a big jump in share price with a very positive earnings announcement. Simultaneously, the markets continue to punish INTC, keeping their price just above 52-week lows. With that, I made a few transactions yesterday and today:
Safeway (SWY) – Bought-to-Close Put
With the market price of my March 16, 2013 SWY put down to $0.09 per share, I decided to close this option and lock in my profits yesterday. With a total repurchase of $14.64, including $5.64 in trade commissions, my net profit on my SWY put was $36.70. Given that I sold this option on 2/11/13, held it for 10 days, I earned a 70.5% return on the $1,900 at risk with this transaction.
Intel Corporation (INTC) – Sold-to-Open Put
With an expiration date of January 18, 2014, I sold a $22 put for $3.15 per share, resulting in a net premium of $309.34 with total trading costs of $5.66. I believe that INTC will remain some volatile over the next year, giving me the option to profit from closing the put early, or having a reduced basis in the underlying stock.
With this trade, my possible outcomes will be:
INTC trades for less than $22: I will be assigned the stock and will keep the option premium. Based on this outcome, I will have a net cost basis of $18.96 per share, giving me a yield on cost of 4.85%.
INTC trades for more than $22: I will keep the option premium, and re-evaluate selling another put. Given a 331 day window on the option, annualized, this transaction for the entire year would net a 15.5% return.
Intel Corporation (INTC) – Sold-to-Open Covered Call
With an expiration date of October 19, 2013, today I sold a $22 covered call for $0.65 per share, resulting in a net premium of $59.35 with total trading costs of $5.65. Like I said above, I believe that INTC will remain some volatile over the next year, giving me the option to profit from closing the covered call early, or eliminating part of my current position with set gain.
With this trade, my possible outcomes will be:
INTC trades for less than $22: I will keep the stock and option premium. Based on this outcome, I will have picked up an additional 4.2% return on holding for holding stock. This is in addition to any dividends received.
INTC trades for more than $22: My shares will get called away, providing me with an annualized 13.2% return, including the capital gain, dividends received, and option premium.
I’ve updated my investments page with these transactions.
You’ve been quite busy recently. I heard about the SWY jump and was wondering what you had done with that. I love when a company I just sold a put on takes a big jump up in price. Of course they aren’t usually as quick or as large as SWY’s.
As far as being busy, it is timing more than anything. Certainly won’t have this much trading activity for a little while. And I got totally lucky (no other way to say it!) with SWY’s big jump! I’ll happily close a position if I can lock in a nice return on my money!
Thanks for commenting!
You are indeed very active, keep it up! I like seeing all of the options action. It looks like you have learned quite a lot and are doing great with your new trading account with lower fees. Just curious, what do you pay in the event your shares are called away? I was curious because E*Trade charges $19.99. Good luck !
AAI, my activity level has been artificially inflated because of timing. With a couple options expiring right at February 16th, it just facilitated the freeing up of cash to sell more options. Because I haven’t reached the level of naked put writing, I would surmise my activity will stay relatively low in an ongoing basis until that happens. However if I see an opportunity, I will not hesitate to take it! As far as the costs with TradeKing go, a share assignment is $4.95 and exercise is $9.95 per trade. Certainly cheaper than E*TRADE. Thanks for the encouragement!
Great job on selling that put on INTC, that’s a 14% return that is VERY low risk in my opinion. Hope it works out for you.
Thanks Marvin! I agree it is a pretty low risk considering what I think INTC will do/won’t do.