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Tuesday, November 29, 2022


The Buy List – Update 4 (April Expirations)

Last time we did an update was Jan 30tth and the Dow was at 8,000 at the time.

That time we did an early roll to March because we had a nice, high VIX I was worried would evaporate on us (it did) so the idea was to sell while the selling was good.  Of course, since then we've had a bit of a dip and a slight recovery.  It is with some trepidation that I update this list as we're coming off a very strong day and I don't trust the gains so keep in mind this is a list of plays we are watching – NOT an immediate action list.  Always feel free to ask in chat if the exectuion is still good.  It will always depend on how we feel about the market at the time.  Keep in mind we were picking up these stocks following our strategy of "How To Buy A Stock For A 15-20% Discount" a buy/write strategy we have been pursuing since October, when many stocks got attractively low and the premiums to sell became attractively high.

I will point out to members that the chat section contains dozens of addtional plays each week so this is not a definitive list.  Last time I printed the list we were actually waiting for good enttires and we picked up a lot of them third week in February, when the Dow first dove to 7,500 as that seemed like a nice bottom.  Nonetheless, I'll be updating these as if we took the 1/30 entries that were originally posted for consistency.  This is a group of stocks that fit our criteria for solid virtual portfolio holdings that fit our core strategy, most of them are dividend payers that we don't mind owning long-term (and we NEVER write a put on a stock we don't want to own at the strike price).

I have also made some extensive comments on this strategy recently and if someone reminds me I'll append them to this post.  I always intend to come back here and make comments but I never do – sorry.  Also, I will begin including some of the very popular Long-Term Veritcals when I see them, the plays that return 500-2,000% as it's very imprortant to allocate at least some of your virtual portfolio to reasonable long-term risks.

Back on Jan 30th I said: "Now I say we have a critical day ahead of us with XOM and CVX earnings on the same day as the GDP but, if we can get through this without falling below 7,500 and retake 8,000 quickly (3 days tops) then I think we are simply reaffirming a nice bottom we can continue to trade off. "  Well that bottom was a bit lower than we thought but here we are again.  What I want you to take away from this, more than anything else is that if we had done NOTHING at all during the sell-off (we ended up doing a lot of rolling) then most of these plays would have come out fine.  Obviously, for almost all of them now, rolling back to lower puts and doubling down to lower strikes also worked out great.  The most important thing with these trades is scaling in so you are READY, WILLING and ABLE to ADD to your position when things get cheaper.  Think of it like a sale at a cool t-shirt store – you may have only wanted 1 or 2 but, if they're going to make then 5 for $25, then you'll take 5 right?

Keep in mind that our call and put writing strategy put us in these stocks 15-20% BELOW the current prices.  The cushion is fantastic in a choppy market as it lowers your need to cover with naked puts (you already have 10-15% downside protection) and it lets you ride out the dips – skipping the ulcers.  The idea is to be DIVERSIFIED, picking no more than 20% in the same sector (you can call Cramer to check your mix on Thursdays or ask me any time).   Do not just buy everything on this list, feel free to ask any time if now is a good time, these are just ideas so you can have a few post-its ready for when opportunity knocks!  Original entry prices were from 12/1 and I'm keeping the sequence (messy though it looks) as it's kind of useful to see at what price we originally liked it and also to get an idea of what kind of ride the stock gives you (bold entries are ones I really like NOW):

AAPL $89, 1/11 price: $90.58, 1/30 $93, 3/18 $101.52.  Amazing how this works!  We get called away almost every time.  Last entry was selling March $90s are $12.85 at net $80.15/85.08.  The March $90s are now $11.52 and could be rolled to the Apr $95s at $12.40 so why not?  It's $5 more if called away and .88 back in your pocket for the month with a net basis of $79.27/87.13, a pretty good margin for error even if you didn't already pocket $5-10 on the first 3 plays.  I am not so in love with AAPL as a new play at the moment, the rise is a little sharp for my taste.

AVP $19.78, 1/11 price: $24.21, 1/30 $20.83, 3/18 $18.43.  The March $20s gave us a net of $17.18/18.59 entry so we are right on track (by the way, I treat every month as a new entry or we'd all go crazy from the math!).    We did a rebuy at the bottom at $16 but entering here and selling the Apr $17.50s for $2.65 nets $15.78/16.64 so still nice.  Last month I also said: "Leaps have improved on them too and 2011 $17.50 are $6.60 (1/2 premium) and you can sell 1/2 the Feb $20s for $1.75 as a good earnings gamble but you only have to collect .30 a month to pay off the leap!"  Well that strategy sucked!  The 2011 $17.50s dropped to $4.70 and, of course, the callers were wiped out so basis is $5.73 so another 1/2 sale on Apr $17.50s there but I like the buy/write better now.

AXP for $19.64, 1/11 price: $19.95, 1/30 $16.71, 3/18 $14.09.  March $17.50s (we always are talking about selling puts and calls unless otherwise specified) at $3.85 netted$12.86/15.18 so ouch on these.  On the bright side, the Apr $15s are a whopping $3.30, on a new entry that's $10.79/12.90 so the first one I like as a new entry!

BA for $39.88, 1/11 price: $46.17, 1/30 $40.71, 3/18 $33.75.  This is the proverbial $5 T-shirt, if they keep lowering the price, I'll keep buying!  The March $40s were net $35.06/37.53 so a bit off track and there's another $3.80 to be had from the Apr $35s which nets $33.73/34.65 so knocking off 10% a month will get us to zero eventually.  As a new entry, I'd rather go for the 2011 $35s at $6.75, offering $2 per $5 to roll down.  Realize that this strategy ultimately puts you in the $10 calls for $16.75 (5 rolls down) so if you are not planning on sticking with BA at that price ($26.75) – DON'T DO IT!   As to the hedge, we're only in for $6.75 so selling 1/2 the Apr $35s at $1.30 is good to start.

BBY $19,1/11 price: $28.08, 1/30 $29.16, 3/18 $32.73.  On 1/30 I said: "I think they are consolidating for a very nice break-out but it may take a while."  Here's how that looks in pictures.  March $27.50s for $5.20, netted $23.96/25.73.  So called away if you did that.  As a new entry the 2011 $22.50s are attractive at $13.90, just $3.70 in premium and we can cover with 1/2 the Apr $32.50s at $2.60, using the 200 dma at $33 as an on off stop for the other half. 

BTU $19.55, 1/11 price: $25.48, 1/30 $26.17, 3/18 $27.03.  March $25s were sold for $6.35 and are now worth $2.25 – It's so great when you hit your targets!  They still pay a ton so I like them as a new entry with the Apr $25s at $4.85 for net $22.18/23.59.  Last time, we also went for a leap spread, selling the $5.85 for the June $25s against the 2011 $15s at $15.75.  The June $25s are $5.20 and the 2011 $15s are 15.65 so it's like watching paint dry but a nice spread still

CAT 3/18  $28.41: Last expiration we switched from DE to CAT as I liked them better but we never booked the trade here but it was called away on a 20% run.  I still like them at $28 for all the same reasons I liked them at $24 so entering here and selling the Apr $26 puts for $1.23 and the Apr $28 calls for $2.16 is net $25.02/25.51.

CBS $5.83, 1/11 price: $8.40, 1/30 $6.02, 3/18 $4.34.  As we expected last time, the dividend was cut but still 5%.  Our plan last time was: "At this point, I'd rather hope for bad earnings (2/18) and hope for a ridiculously cheap DD"  and CBS came down to $3.50 in early March.  They are still not in a good spot to sell puts and calls but we switched to the 2011 $5s at $2.15 (now $1.50), selling the June $7.50s for .57 (now .10) as a patient spread.  Of course take out the $7.50s and roll down to the 2011 $2.50s for $1.  CBS can be our first verical play!  A little low but the 2011 $5s are $1.50 and the 2011 $7.50s are $1 so .50 net entry for the $2.50 spread

CEG at $23 (Berkshire had an offer in at $26.50), 1/11 price: $25.82, 1/30 $27.01, 3/18 $18.86.  Holy cow – BUYBUYBUY!  They spent $1.4Bn to get OUT of the deal with Berkshire because they found a buyer for HALF of their nuclear business for $4.5Bn – about what Berkshire was goiing to pay for the WHOLE company.  We got bored and gave up on them last time but now they are REALLY exciting below $19.  You can go conservative and sell the Apr $17.50 puts and calls for $3.90 for a net $14.96/16.23 or you can go long with 2011 $15s at $7.80 ($1.50 premium) and sell 1/2 the Apr $20s for $1.40 as we can always sell the other half if we have to.  Oh yes, and a 5% dividend!

CI $11.16, 1/11 price: $17.09, 1/30 $17.60, 3/18 $18.50.  March $17.50s for $3.90 netted $13.7/15.6 so golden on this one.  The $17.50s are down to $1.30 and we're looking good enough to sell the $20 calls for $1.20 and the $17.50 puts for $1.35 for net $15.95/16.73 from a new entry. 

CMI $22.50, 1/11 price: $27.94, 1/30 $25.16, 3/18 $24.48.  March $25s netted $20.96/22.98 and those $25s are now $1.35 but mostly premium.  Since the end of the world seems to have been canceled, we can go for the Apr $25 calls at $1.90 and the Apr $22.50 puts at $1.30 for net $21.28/21.89, which is nice as a new entry.  This is a good place to stop and remind you that I am basing April nets off the CURRENT price, not the last successful entry.  In this particular case, if you were rolling from the last entry you would add back $1.35 (the price of the March $25s but it's too early as they still have lots of premium) to your $20.96 low basis (nothing was put to you) for $22.31 and THEN take off the $3.20 for the sale of the Apr puts and calls for a new net $19.11/20.80.  What's cool about this is we are lowering both sides of the net but kept the same call away strike ($25) for a very nice potential 30% gain if called away.

DE $30.40, 1/11 price: $42.65, 1/30, $36.00, 3/19 $31.83.  Swapped for CAT

DRYS at $4.15, 1/11 price: $13.85, 1/30 $8.50, 3/19 $5.32.  March $7.50s were last sold for a $4 for a net $4.50/6 so still a bit behind.  The April $5 puts and calls are $2.10 for a net $3.22/4.11 entry as a new play but this is one we hedged with 2011 $2.50 puts at $1.27, just in case they do go BK.  Figure if you collect $2 a month in premium on a $4 entry – the $1.27 is insurance money well spent.   

FAS 3/20 $5.  Our first official play on FAS was selling the naked Apr $5 puts at $1.20.  We also went for the stock with no covers.  It's Tuesday morning now and we had a 40% gain in FAS since Friday so it's up at $7.08.  At this point it is greedy not to cover with the $6 calls for $2.08 or at least the $7.50s for $1.38 if you are more bullish but we closed the day expecting a pullback of some sort

GCI $8.18, 1/11 price: $8.59, $6.90, 3/19 $2.25.  March $7.50s at $1.85, netted $5.05/6.28 but they killed the dividend and the stock died hard.  This is so pathetic I'm not even sure they can come back by 2011 but a fun play to just sell 2011 puts for $1.45 and see what happens.  If you have 50% margin on a naked put that's $1.25 so it's cash positive to take the risk on the $1.05 possible loss if they go BK but this is Gannett and they own USA today and a thousand local papers – you figure someone would buy them – maybe….

GE $15.50, 1/11 price: $16.11, 1/30 $12.72, 3/19 $10.13.  March $11s for $2.88 was a net $9.84/10.42 so not so bad but we originally wanted the stock for the dividend, which is gone.  The Apr $9 puts at .63 and the Apr $10 calls at $1.10 are the conservative way to go and going conservative has kept us from getting killed in this play so net $8.40/9.20 but, without the dividend, were really just looking to get called away with a 20% gain.

GLW at $8.45, 1/11 price: $11.55, 1/30 $10.48, 3/19 $12.94.  March $10s for $1.75 had a net $8.73/9.37 so called away on that one.  They make me nervous up here although they did just say demand was strong but I'd rather see them break $15 first and hold that.   We also played the Jan $7.50s at $3.55 (now $6.05), 1/2 covered with the March $10s at $1.10 (now $3) for a $3 basis on the $2.50 spread (half covered).  With a spread like that you just roll the $3 calls (assuming you waited this long and didn't stop out callers) to 2x the Apr $12.50s at $1.15, which adds .70 to your basis but keeps you well covered. 

GNW $1.10, 1/11 price: $3.04, 1/30 $2.56, 3/19 $1.79.  March $2.50s for $1.05 netted $1.51/2.01 but, as I said last time – "Don't enter this position without having money on the side to DD at $1.50 and again at $1 so you need, for example (1/11 entry math) $5,170 in cash (net $2.17, +$1.50, + $1) to buy 500 shares at $3.04 and sell the puts and calls on round one.  If you are forced to buy more, you get 500 put to you at $2.17 ave and then you buy 1,000 more at $1.50 and 2,000 more at $1 and you end up with 4,000 shares at net $1.29, not including additional calls you may sell.  This is not meant to scare you off the position but we're still in an environment where you may get a crazy sell-off and it would be GREAT to be able to scale in to this one one the way down."  This strategy would have been fantastic as they bottomed out at .78 and were below $1 for 3 days before hitting just about a triple off the bottom this morning.  No reason not to go for the cycle again but I can't promise another great sell-off like that!  If they had longer contracts, these would be a great 500% play but, at this point, the wisest entry is just selling the June $2.50 puts for $1.10 with a stop at $1.30.  If they crash again, we take the .20 loss and buy them below $1, otherwise, in for net $1.40 or a free $1.10 by June.

Back on 1/11, I said (and it was in bold then too):  GOOG $265, now $315.  Wow, were we actaully offered GOOG at $265 and some of you guys thumbed your nose at it?  This is a tough play into earnings as they can go up or down $100 (more likely up) and there is no way we are being paid enough to take that risk.  Selling the Feb $310s for $46.50 pretty much assures that you will be called away off net $268.50/289.25 but it's a lot of cash to lay out and boy do you NOT want the stock if it's back at $289!  I would rather take the 2010 $220 calls for $120 and the 2010 $420 puts for $126.50 so that's in for $246.50 on the $200 spread.  From that we can sell those Feb $320 (neater there and we're a little bullish) puts and calls for $46 and that drops us down to just over net $200 on the $200 spread.  As long as GOOG stays in our range, we simply roll them to max premium every month and if we can roll them to $30 (conservatively) of premium 10 times over the course of the year – that's $300 collected plus the guaranteed $200 of our own spread = $500 less whatever we owe the caller or putter at that point but, as it's less than $300, we're ahead.

GOOG Update:  We last sold the March $340s for $43, now $10.88 so up $32.12 for this month!  As I said last time (when we had to do a roll form $40 worth of puts and calls from Feb: This is like Russian roulette where you force your putter and caller to keep pulling the trigger – they only have to finish at the strike once and you win!  Meanwhile, the Jan $220 calls are $124.55 (up $4.55) and the Jan $420 puts are $109.65 (down $16.85) so we down $12.30 on the longs (VIX crush).  Last time I suggested rolling the $420 up to the $450 puts for $21 to reduce premium and that roll would have paid +$3.  We only were looking to make $5 a month so $32 is great for March the Apr $330s offer up another $39.90 and earnings are often on expiration day for GOOG so lots of fun. 

HAR $13.25, 1/11 price: $20.51, 1/30 $17.38, 3/18 $12.13.  March $17.50s for $4.10 were a net $13.28/15.39.  These guys were a disaster but what a bargain at $9.17 a couple of weeks ago.  At this point I like the Jan $12.50s at $2.75 much better than the stock but it's a buy and hope for a recovery kind of thing so let's call them off the list as the premiums are no longer exciting enough to make it worthwhile.

HD (new on 4/16 at $25.97) pays a 3.6% dividend and is a nice recovery play and also a good play on SHW's surprising earnings as it turns out people who can't sell their homes are fixing them up!  What I really love about them right now is that earnings are on 5/19 – AFTER May expirations so we can scalp some May premium and then sell June puts and calls, which should hold a high price ahead of earnings.  Nothing fancy on this entry, May $24 puts and calls are $3, which lower the bais to $22.97/23.49, a 10% discount for this period but we can expect another $3 in June so I'm happy with that and the entry is nice and conservative but still makes 5% in a month, even if the stock jumps and we're called away.

HOG $14.71, 1/11 price: $16, 1/30 $12.87, 3/18 $13.32.  As I said last time: "It's Harley Freakin' Davidson – do you really think they will no longer exist?  Just part sales alone could keep them in buisness, not to mention merchandising.."  No change in feelings here and the March $12.50s at $3.55 netted $9.32/10.91.  They did cut their dividend and plunged to an amazing buy/DD at $7.99 and I would continue a conservative path here selling the Apr $12.50 puts and calls for $3.10 for net $10.22/11.36.

INTC for $12.50, 1/11 price: $14.91, 1/30 $13.37, 3/19 $15.15.    March $13s are $1.92 netted $11.45/12.23 so called away there.  They are a tough call way up at $15 and, at this point, I'd rather just put the Jan $17.50s under my pillow at $1.38 and I would sell Apr $19s if they hit .20 or better.

IR at $14.50, 1/11 price: $19.41. 1/30 $16.73, 3/19 $14.78.  Right back where we started from!  I didn't like the strike last time and there was no play but I think, given what we've survived, that selling the Apr $15s for $2.10 is not a bad entry at net $12.68/13.84.  

ISRG 3/23 $97.92.  I love this company as a buy and hold.  Not many I can say that about.  Apr $95 calls for $9.20 and Apr $90 puts for $5 make a great starter entry at net $83.72/86.86.  You can also spend 1/2 and buy the Jan $70s for $36.25 and you can sell 1/2 the $95s for $9.20 and selling the other half $90s if we break below $95 and taking advantage of the roll to the Jan $55s for $9 or less (now $46.85).

KO $44.33, 1/11 price: $44.93, 1/30 $43.55, 3/18 $42.18.  March $42.50s were $4.25, now .60 so good on those as the net entry was$39.30/40.90.  Apr $42.50s are just $3.20 so I'm not thrilled with the returns.  You can go with the 2011 $35s at $9.90 and sell 1/2 Apr $42.50s for $1.45, which is a very good return tying up 75% less cash

M at $6.41, 1/11 price: $11.69, 1/30 $9.41, 3/19 $8.76.  Last time I said: "This one is good as a scale-in, planning to DD lower if retail tanks again as it's a nice long-term hold on a 100 year-old brand name with nice volatility to sell into but certainly riskier than some of our other blue-chip plays (but they do pay a nice 5.5% dividend if they can keep it up)." The dividend dropped to 2.4% and the stock gave us a great DD at $6.50 so great deal here.  March $10s were $2.65 (now $1.30) for net $6.76/8.38 and the Apr $10s are $2.02 so we can keep doing this forever if we're going to make $1 per month on a $9 stock!

Keep in mind that the dividend we cite, like 5.5% on M above, is based on the current price.  If you drop you entry price by 10%, you effectively raise that dividend to 6%.  I've been investigating a premise that it may be a GOOD idea to jump on stocks that cancel or suspend their dividend and sell off significantly as they have a better than average chance of resuming a dividend long-term and you may get some crazy discounts but it's going to take a long time to prove out this theory and it's hard to back-test since this economic disaster is unprecedented!

MSFT for $18.65, 1/11 price: $20.52, 1/30 $17.59, 3/19 $17.14. This company is a disaster.  I hate the company, I detest the management and their products are aging and falling apart and competition is nipping at their heels.  So why are they on the list?  Well they are a money printing machine that will keep making money through sheer inertia even with a chimpanzee at the helm (and Steve Ballmer has proven that). At this price, they are accidental good dividend payers (3.1%) so my plan here is to always hedge them low and be happy to get cashed out if they run up.  Our last sale was March $18s $2.29 (now $.90) and the Apr $17.50s are $1.77 so I no longer like the returns.  I would go to cash on this one this month and see how they handle the 50 dma at $17.50 and maybe get in on momentum.    If you do want to establish a position in MSFT, selling the July $15 puts for $1 is not a bad entry point

NKE $48, 1/11 price: $50.46, 1/30 $45.99, 3/18 $46.50.  March $45s were $7 – now $1.69!  Last time I said: "Unfortunately, the dividend on NKE is not that exciting but they are getting interesting as a leap if they come back below $45 so stay tuned.  Still patiently waiting on ANF – the only other clothing play I like.."  We got a dip all the way to $38.24, which was a great entry point.  Back up here, the premiums are way down but I still like them, selling the $45s for $5.10 for net $41.40/43.20.

NYX $19.79, 1/11 price: $27.93, 1/30 $21.76, 3/18 $18.55.  Dividend is now 6.5% so I still like the stock.  Our last play was March $20s for net $16.39/18.20 so right on target there and the Apr $17.50s bring in $3.37 more for a net (off a new entry) of $15.18/16.34.  We also did the 2011 $15s at $9.88 (now $6.92) and sold March $22.50s for $2.20 so down .76 so far and that can be made back by selling the current $20s for .99 but I'd actually pay $1.20 to roll down to the 2011 $12.50s at $8.12 and wait to see if they can break $20, otherwise we can then sell the Apr $17.50s (now $2.20).

PEP $53.65, 1/11 price: $53.89, 1/30 $51.68, 3/18 $48.99.  March $50s were $5.25 netting $46.43/48.22 so right on the money there and the Aprils don't pay enough premium anymore so I'd rather wait and see if they can break $50 – hopefuly they are held down for expirations.   Last time I set up a spread of the 2011 $40 calls for $14.60 and the 2011 $70 puts for $22, which was $36.60 on a $30 spread so risking $6.60.  Selling March $50 puts and calls for $5.25, ended up at $1.65 so we've already collected $4.95 of the $6.60 risk on this trade!  If you JUST capture $1 per month in profit (and the profit on the Feb $50s we last was already $2.60) your ROI is $24 and it is NOT POSSIBLE for your put and call spread to be worth less than $30 in 2011.  Not bad for a net $31.35 investment!  If PEP goes instantly to zero, you owe your putter $50 and your long put is $70 so loss of $11.35.  If PEP goes instantly to $100, you owe the caller $50 and your leap is $60 (assuming no premium on a buyout) and you lose $21.35 – that is the real risk of these trades until you pay off that gap so keep that in mind and stay away from companies that may do something crazy with this strategy.  This would have happened if you had this spread with WYE!

PFE $15.28, 1/11 price: $17.49, 1/30 $15.12, 3/18 $13.70.  Now with an 9% dividend!  March $15s for $1.60 netted $13.52/14.26 so we're a little behind and I keep looking for a safer drug co but I don't see it.  The Apr $14s pay just $1.38 but hopefully PFE is done surprising us and we can live with net $12.32/13.16 (plus the $1.28 dividend!).

TEX $11.71, 1/11 price: $18.51, 1/30 $12.57, 3/23 $10.40.  Last time I said "What makes them attracive is the $3.45 you get for selling the March $12.50s which nets $9.12/10.81 but I'd sell the calls naked for $1.75 and buy the stock and sell the puts if it breaks $13 but more likely we'll see $1 less than here before they head up."  What a great plan that was as we got $1.75 for nothing but, now we need to decide if it's worth an entry here.  Still a very nice premium and a stock we like long-term but we don't want to get caught in a dip so selling the $10 calls for $1.25 only (we'll sell puts if there's a dip) net's an entry of $9.15, a small profit if called away.

TIE at $7.28, 1/11 price: $9.39, 1/30 $7.39, 3/23 $5.91.  Selling March $7.50s for $1.78 netted $5.61/6.56 so a little off but no biggie.  No point in selling more puts for .17 and calls are too cheap so this is a wait and see at the moment.

That's another point about the buy/write plays – when you are between two strikes, you often don't get the best premium so it's better to wait.  Even if it gets higher, that only serves to add premium to the putter and caller at the higher strike so with TIE above, our logic on 1/11 was to wait to be sure they broke $10 and THEN sell the $10 puts and calls than risk it right then, since I felt short-term worried about them.  The premium paid for the $7.50 puts and calls was just .75, nowhere near enough discount for me to get excited about.  So if some plays are offering you 15-20% discounts, even if put to you – there's no reason to go with ones that offer 10%.  Having that 5% discipline every month is a free way to do 60% better over the year.

TXN at $14.15, 1/11 price: $15.86, 1/30 $14.95, 3/23 $17.01.  Remember when these guys used to be important?  No one talks about TXN anymore but they have been nice, quiet winners for us every month.  March $15s at $2 for a $12.95/13.98 entry was our last play – too conservative it turns out but we don't complain about a $2 gain.  I liked them more Friday at $15.80 than I do up here so I'd rather wait for a pullback or a breakout over $17.50. 

TXT $13.90, 1/11 price: $15.87, 1/30 $9.09, 3/23 $6.89.  Still our worst performer now and I still like them long term but our last play left us with Jan $10 puts and calls at $6, now $6.57 with our net at $11.18.  I said at the time it was really not worth it unless you absolutely don't want to risk owning more and you just want to buy some time and you can see how it does just that.  As a new play, I love them because you can sell the May $5 puts and calls for $2.95 for a net entry of $3.94/4.47 and that's a 35% discount if put to you and 25% profit if called away – not a bad way to initiate a position.

XLF at $10.55, 1/11 price: $12.45, 1/30 $9.92, 3/23 $9.47.  People forget that XLF pays a 6.6% dividend too, which is nice.  March $9s were $2.32 for net $7.60/8.30 so those are effectively gone.  We don't get paid as well for the Apr $9s but it's still a nice play, selling them for $1.83 for net $7.64/8.32.

UNH $20.12, 1/11 price: $26.30, 1/30 $28.69, 3/23 $22.05.  HOLY COW, A STOCK THAT WENT UP EACH TIME!   This was a no-trade last time as I didn't trust $27 to hold  and it really didn't.  We had the 2010 $20s at net $7.45 (now $5.85) and shame on you if you didn't roll down and re-cover at some point.  Now the 2011 $15s are just $10.35 and you can sell May $22s for $2.30 with a stop on 1/4 at $2.75 and 1/4 at $3.25, which would raise your net entry to $10.70 if you buy them both back with the stock $1 higher so a good trade there.  As a new play, the premiums are pretty good and $17 held the bottom well so selling the $21 calls for $2.17 and the $20 puts for .82 nets $19.06/19.53, a good place to start scaling in.

UYG at $4.34, 1/11 price: $5.86, 1/30 $3.40, 3/23 $2.94.  March $3s for $1.35 netted us $2.05/2.53.  We gave up on these last month though and switched to FAS (see above) as they had better premiums.

VLO $16.23, 1/11 price: $23.68, 1/30 $24.69, 3/23 $18.55.  2011 $15s were net $9.31 and now $6.92 if you didn't roll or sell more calls since $25.  I love those calls as a new play, for $6.92 you have 2 years to sell calls like 1/2 the $18s for $1.56.  Our net writing the March $25s last time for $4.55 was $20.08/22.54 and if you still have those and did nothing, the move would be to sell the May $18s for $3.85 to drop the net to $18.69/18.35 – not a bad landing after a 25% sell-off!  As a new entry, they are really attractive, selling the May $17s for $4.02 nets $14.53/15.77.

WMT $53, 1/11 price: $51.58, 1/30 $47.86, 3/23 $51.48.  We got called away on Feb $50s at earnings and the 2011 $30s at $20 were a "buy and forget" until they hit $55 again, then we can sell something, now $22.90 and right on track.

X at $25.40, 1/11 price: $40.14, 1/30 $32.89, 3/23 $22.08.  March $30s for $8 netted $24.89/$27.45 – not terrible.  The premiums on X are fantastic but they are so loco that I feel safer selling the May $20 calls for $4.50 and the May $17.50 puts for $1.65 for a net (off new) entry of $15.93/16.72.  

Think about what we are buying here, Boeing, American Express, Intel, Microsoft, Texas Instruments, Macys, US Steel, Corning, Johen Deere, Pfizer, GE, Coke, Pepsi, Nike, Avon, CBS, Gannett, Harley Davidson, Apple, Best Buy, Wal-Mart…  Even in a depression, can you imagine life without those things?  That's the idea of bottom fishing in a tragic market – take advantage of the opportunity to buy the top brands at bottom prices.  You can always gamble on the up and comers but this is a very rare opportunity to get the best companies on sale.

Happy hunting!

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