Monthly Option Trade Log

[mslk 10]

oct 2011 expiry update

 

just noticed i never inputted these trades that expired so here is a summary:

 

EXC

- oct $41, $1.06 puts expired and made 13%

 

INTC

- sold oct $19, $0.87 puts expired and made 23%

 

JNJ

- sold oct $62.5, $2.23 puts expired and made 18%

 

-mslk

[Josh7 10]

Hello. I had a question about covered calls. I was approved for level 2 option trading on sharebuilder(the highest level they have). The only things that I am allowed to do are buy calls/puts and covered calls. I am interested in possibly doing a covered call on QCOM buying it at around 57 and selling a Dec.17 $60 call for ~ .91 which would give me a 6.8% return in one month if assigned. The call would just be extra revenue on the stock that I expect to climb. Either that or merely purchase a call option on QCOM. 3 or 4 Jan 55 calls for 4.10/4.20 each. Any suggestions?

 

After reading mslk's comment and assuming I can sell call's/puts. I could sell a Dec. $55 put for about $1.50 since I have no problem buying at $55 if it is excercised.

 

  mslk said:

new trades - oct 2011

 

XOM

- sell, to open, jan $65 puts for at $2.45, stock is ~ $73.5

- if options expire worthless, i get 18.8% return on my margin in three months ($12.45 / (20% of $65 strike) == 18.8%)

- XOM would have to drop from $73.5 all the way to $62.5 before I'm losing this trade. most recent time XOM was that low was back in oct 2010.

 

MCD

- sell, to open, jan $72.5 puts for at $1.13, stock is ~ $87

- if options expire worthless, i get 7.8% return on my margin in three months ($1.13 / (20% of $72.5 strike) == 7.8%)

- MCD would have to drop from $87 all the way to $71.5 before I'm losing this trade. most recent time MCD was that low was back in aug 2010.

 

KO

- sell, to open, nov $65 puts for at $1.29, stock is ~ $67

- if options expire worthless, i get 9.9% return on my margin in *one* months ($1.29 / (20% of $65 strike) == 9.9%)

 

 

and all of these trades, i would be *happy* to purchase these shares at the strike prices ... so the strategy is simple, collect put premiums until you can buy your shares at fire-sale prices

 

- mslk

[mslk 10]

  Josh7 said:

Hello. I had a question about covered calls. I was approved for level 2 option trading on sharebuilder(the highest level they have). The only things that I am allowed to do are buy calls/puts and covered calls. I am interested in possibly doing a covered call on QCOM buying it at around 57 and selling a Dec.17 $60 call for ~ .91 which would give me a 6.8% return in one month if assigned. The call would just be extra revenue on the stock that I expect to climb. Either that or merely purchase a call option on QCOM. 3 or 4 Jan 55 calls for 4.10/4.20 each. Any suggestions?

 

After reading mslk's comment and assuming I can sell call's/puts. I could sell a Dec. $55 put for about $1.50 since I have no problem buying at $55 if it is excercised.

 

hi - you are allowed to sell calls\puts with level 2 on sharebuilder. link here

 

  Quote

What is the difference between Level 1 and Level 2 option trading?

Basically, Level 2 allows you to own long call and put option contracts:

Level 1

A Level 1 options trader has the ability to place the following types of trades:

 

Write a Covered Call

Close a Covered Call

Perform a Buy / Write (Buy a stock position and write a covered call)

Perform an Unwind (Close a covered call and sell a stock position)

 

Level 2

For more experienced traders, Level 2 gives you more options (pun intended) to choose from:

 

All Level 1 strategies above, plus:

Buy a call (to open)

Buy a put (to open)

Sell a call (to close)

Sell a put (to close)

 

and yes you could sell the Dec $55 put for $1.5 ... but only do this on stocks you *want* to keep and are not too volatile. also, because you are dealing with 100 shares per option, the price of the stock matters as 1 contract for QCOM means a potential outlay of $5500 where i can sell 2 contracts on INTC (~$23) with the same potential outlay. just something to think about. i've been able to make ~$2-3k a month using this strategy.

 

i'll post another update this friday after expiration. good luck.

 

-mslk

[Josh7 10]

:missy: It must be the lack of sleep but I went to the same location on Sharebuilder.What I meant was that I can not sell calls or puts to receive a premium. The only option that I can sell to receive a premium seems to be a covered call(if I already own the shares). I can buy a call to open a position and sell a call to close the same position. I can also purchase a put to open a position and sell it to close a position.

 

Thats one of the first things that came to mind. So it would be way better to merely find a stock that I want and is within a reasonable price range to perform this strategy, thanks. You make $2-$3k on just receiving premiums each month? Your options never get assigned?(especially the ones that have strike prices lower than the stocks price)

 

  mslk said:

hi - you are allowed to sell calls\puts with level 2 on sharebuilder. link here

 

 

 

and yes you could sell the Dec $55 put for $1.5 ... but only do this on stocks you *want* to keep and are not too volatile. also, because you are dealing with 100 shares per option, the price of the stock matters as 1 contract for QCOM means a potential outlay of $5500 where i can sell 2 contracts on INTC (~$23) with the same potential outlay. just something to think about. i've been able to make ~$2-3k a month using this strategy.

 

i'll post another update this friday after expiration. good luck.

 

-mslk

[mslk 10]

  Josh7 said:

:missy: It must be the lack of sleep but I went to the same location on Sharebuilder.What I meant was that I can not sell calls or puts to receive a premium. The only option that I can sell to receive a premium seems to be a covered call(if I already own the shares). I can buy a call to open a position and sell a call to close the same position. I can also purchase a put to open a position and sell it to close a position.

 

sorry yes you are right ... i reread the link and it looks like you can't sell 'naked puts'. too bad you should look into another broker if possible

 

  Josh7 said:

Thats one of the first things that came to mind. So it would be way better to merely find a stock that I want and is within a reasonable price range to perform this strategy, thanks. You make $2-$3k on just receiving premiums each month? Your options never get assigned?(especially the ones that have strike prices lower than the stocks price)

 

yes i do make about $2-3k but each trade is only about $200-$400 in premiums - i just have 10 trades going at one time that's all.

 

e.g right now you can sell a Jan $24 put on INTC for $0.75. So I would sell 4 contracts and receive about $296 (400x.74). but this is 'committing' me to purchase $9600 in INTC IF i get assigned.

 

you just have to make sure you are ok with buying 400 shares of INTC if it gets assigned. if it does get assigned, then i just collect dividends and also write covered calls on the shares until they get called away. the key is to do this with companies that have low beta, a decent dividend, and little risk of a major stock price drop.

 

the big risk is if there is a big overall market drop and you get assigned all your puts ... you just have to make sure you are not committing to buy too much. slow and steady - don't try to risk too much each month. take a couple hundred bucks every month and before you know it you'll be taking a couple thousand each month.

 

-mslk

[Josh7 10]

That sounds like a good strategy. I will keep that in mind if I am confident in any company. Or even get approved to sell options. Do you know what the requirements would be in order to be approved for margin trading and selling puts and calls(or performing spreads) on TD Ameritrade? I am assuming theres a specific number for yearly income, net assets and liquid assets.

 

 

 

Also, is this the only strategy that you has worked for you? Have you ever had much trouble with other strategies like a call backspread or protective put(hedging)?

 

 

  mslk said:

sorry yes you are right ... i reread the link and it looks like you can't sell 'naked puts'. too bad you should look into another broker if possible

 

 

 

yes i do make about $2-3k but each trade is only about $200-$400 in premiums - i just have 10 trades going at one time that's all.

 

e.g right now you can sell a Jan $24 put on INTC for $0.75. So I would sell 4 contracts and receive about $296 (400x.74). but this is 'committing' me to purchase $9600 in INTC IF i get assigned.

 

you just have to make sure you are ok with buying 400 shares of INTC if it gets assigned. if it does get assigned, then i just collect dividends and also write covered calls on the shares until they get called away. the key is to do this with companies that have low beta, a decent dividend, and little risk of a major stock price drop.

 

the big risk is if there is a big overall market drop and you get assigned all your puts ... you just have to make sure you are not committing to buy too much. slow and steady - don't try to risk too much each month. take a couple hundred bucks every month and before you know it you'll be taking a couple thousand each month.

 

-mslk