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Monday, September 26, 2022


The WATCH List – Spring/Summer 2010 (Members Only)


Damn, they screwed up my whole Buy List already with their silly Trillion Dollar bailout over in Europe!

We are NOT chasing!!!  We picked up plenty of bullish positions last week on the dips and, thank goodness, we held those DIA $107 calls over the weekend – those should be MONEY this morning!  What else did we buy last week?  Well these were plenty of buy/writes, both natural and artificial – as I said in Friday Morning's post:

That’s what we do at PSW and today is a good time to review my "How to Buy Stocks For a 15-20% Discount" where we reveal my secret hedge fund techniques.  Why do I do this?  Because the people who put money into a hedge fund don’t do it because they don’t know how to trade – they do it because they are busy making other money or enjoying their lives instead of putting up with this market nonsense every day.  So those people pay someone like me to manage money regardless of whether I tell them my "secrets" or not – the people who tell you their fund only works through secret techniques, to me, are suspect….

Due to ridiculous regulations, it’s not realistic to set up a hedge fund for small investors so, for what it’s worth, I do my best to teach people how to use these strategies in their own trading.  The BEST time to do this is when the VIX is high and I WILL be putting together a Buy List this weekend to select a couple of dozen sticks (we already grabbed 5 on yesterday’s dip) that are good candidates for the hedge. 

I strongly recommend that anyone who has ever considered options at least try this strategy with one stock in your virtual portfolio.  If it works out, you’ll have at least one tool that you have learned how to use that will serve you for the rest of your life!

Thursday was a great example of why you must LEARN the strategies and now just wait to be told what to trade.  I say over and over again that my philosophy for Members is "Give a Member a good trade, he makes money on that trade but TEACH a Member how to find and make good trades, and he not only makes money for life but he also contributes to the group and we all trade better as a group!"  That's why I "give away" my trading secrets – they are not based on tricks – we just find stocks with good fundamentals and then use optios for both leverage and sensible hedging.  We are more than happy to cash out our winners because we are confident that we can always find something good to trade tomorrow – in up or down markets.

There is no better time than today to reflect on this philosophy.  We were down 1,000 points for the week when I flip-flopped (yes, I'm a proud flip-flopper!) on Thursday and decided to dump the short plays and start buying.  There are two major forces at work there – the NEED to OVERCOME GREED and the TOOLS to OVERCOME FEAR.  At PSW, we have a 2-step program for overcoming greed.  Step number one is "Taking the money" and step number two is "running."  The people who master these two complex steps find they have lots of cash at the bottoms and the tops of the cycles – they find that you can buy low and sell high once you realize that you don't have to wait until the top to sell nor do you have to wait until the bottom to buy – especially when we can go from top to bottom at the lightning pace of today's crazy markets.

That's where our TOOLS come in.  Using our buy/write strategy, for example allows you to give yourself a 20% discount on the stock entry.  Our example from Friday's post was MEE, who were already down from the mine disaster and were pressed all the way to $33.50 so our play there was: 

  • Buy MEE at $33.50
  • Sell 2012 $30 calls for $11.20 (net $22.30)
  • Sell 2012 $30 puts for $8.30 (net $14)

So our entry on MEE is net $14 and we are obligated to buy another round at $30 for an average entry of $22 if MEE finishes below $30 at Jan 2012 expiration.  If MEE finishes over $30, we collect $30 from the person we sold the calls to and we have a 114% profit in 20 months.  This is what we do in hedge funds – we hedge!  We’re not buying options, we’re selling them to people who think they can beat the markets and are willing to bet that MEE still goes below $22.30 or above $38.30.  In this particular case, we also think it will go above $38.30 but, rather than pay $8.30 for the call contract, we are HEDGING our belief in a way that protects us all the way to $22 (a 33% drop from today’s price) but pays us a better percent return than if the actual stock hit $65.  Is that so complicated?

During Thursday's sell off, I didn't have time to write up a lot of trades, I simply said : "SPWRA and WFR are still very cheap.  MON is nice,  C is $4, CAT is cheap, GS close enough to our $140 target to take a shot…  LVS down 9% is a gift ahead of earnings.  June $19 puts can be sold for $1.47 as long as you REALLY want to own them at net $17.53."  If you have LEARNED how to trade, it was very simple to take those ideas and construct buy/write plays but I simply didn't have time at 3:40 (I trade too, you know) in the middle of a panic, to write out 6 trades in the same detail as above. 

Also notice the volume of comments was up considerably on Thursday and Friday and I do my best to get to all questions but, in a crunch, it's tough and the people who do best are going to be the ones who need help the least, the ones who can key off a quick comment like that and run with it.  How many buy/writes have we done this year?  200?   300?  You must LEARN these strategies, not just wait for the next trade to be laid out for you.  I want to take the time now to very much thank those members who have not only learned the strategy but also help to identify and bring opportunities to the group – it's a fantastic thing to do and is much appreciated. 

So I will not have time this morning to construct new plays for all of these stocks on the fly.  Below is a list of trades that were good at the levels they were at and some will be available and some will not – we won't know until the open but we DO NOT want to chase this pre-market bounce.  If we cross 1,155 on the S&P and look to be moving higher, we'll get into a strategy tonight (and I will update this list then) but for now and in the interest of giving members ideas – these are stocks and trades we've done before UNADJUSTED from where they were at the time.  The stock may now be higher but the VIX is higher and the buy/write may net the same – THAT would make it a good entry but we have no idea what the options will look like yet so this is NOT an actionable list – just stocks we need to WATCH:

From Thursday and Friday Member Chats – Great plays IF we can still get the net entries:

GOOG/Humvee – If you REALLY don’t mind owning GOOG for net $394.50, then why not sell the Jan $420 puts for $25.50?  That play has a net margin requirement of about $4K to collect $2,500 (62%) by Jan or you own GOOG at the lowest price it’s been since early 2009.   And, of course, you can always roll the putter lower – the 2012 $340 puts are $25 so you are really committing to buy GOOG at net $315

BRK/B is $75.22 and you can sell the 2012 $75 puts and calls for $26.50 for a net $48.25/61.63.  It gets you a ticket to what may be the last few Buffett conventions as well as the great story of how you got into Berkshire at less than $50! 

BAC/Bass – You own Jan $20 puts at $5 and you want to roll them to the May $17 puts, which are $1.05 and yes, you will collect $2.95 but why not just cash them in for $5?  Clearly this is a good low for BAC and you should be ahead on that leg so just cash it in and wait for the calls to come back (although I’d roll those to 2x the 2012 $10/17.50s at $4 so you are in for a $7 total upside, which you’d need BAC $23 to accomplish now and that means you can also sell 1x the June $18s for .50 and if you do that 14 time in 2 years, you’ll have a free spread!

T/Concreata – Selling 100 puts is a lot of margin!  If you sell 100 Jan $40 puts for $4.50 you collect $45K and net about $100K in margin requirement.  So $100K to make $50K.  I think I prefer the $33/41 bull call spread at $5 and you can sell the $35 puts for $2.50 for net $2.50 on the $8 spread and you can sell 50 of those for net $50K in margin (and much easier to roll) plus the $12,500K on the spread and that’s a $27,500 profit if TNA holds $41.

GOOG/Gel – Good time for it.  I’d go with the $380/450 bull call spread at $50 and sell the $420 puts for $25 for net $25 on the $75 spread, margin about $50K for 10 so 100% gain on cash and margin, 200% gain on cash and worst case is you own GOOG for net $445 but, of course, the 2012 $340 puts are $25 so more like owning GOOG at net $365, worst case..

The idea of laying out these disaster hedges was orignially to protect long-term positions.  As we pretty much cashed out everything, not their use is to establish long-term positions.  Since you have $3.11 coming to you if large cap bears stay low, it makes sense to take something like CAT at $63.50 (one of the buys I mentioned this afternoon, when we were lower) and sell the Jan $65 puts and calls for $18.50.  That drops your net on CAT to $45 and you make $20, or 44% if CAT simply makes it back to $65 and your worst case is cat is put to you at a $55 average.  Since CAT is a major large-cap and we don’t see a reason it will ignore the group or the group will ignore it, we have a resonable expectaion that any fall in CAT will coincide with a rise in BGZ and that will lock in your 1,400% gain or maybe even improve it

RIG Jan $60/75 bull call spread at $7.20, selling $50 puts for $3.30 is net $3.90 on $15 spread and worst case is you own RIG at net $53.30.  I think their liablility is not that great on spill and much work is ahead for them.

TBT/BDC – Good day as any to sell puts but not buy calls, they are a rip-off at the moment.  I like Selling June $41 puts for $1.25 and I like selling Jan $38 puts for $2.50 and you can pair either with the Jan $38/42 spread for $2 and you have some serious upside if rates tick up.

So, the best move is to be patient and see if 1,152 holds up and we will take a bullish play IF we cross back over 1,155 as long as at least the Russell is back over 690 with us.  That being the case, the best upside play to look at is the crazy-assed Russell so either selling TZA $6 calls at .80, which were .50 yesterday or buying the $8 puts for $1.55 (.15 premium) are the VERY SPECULATIVE bullish plays of the moment and out if we fail to hold 1,152 on S&P.

So we weren't lacking for bullish trade ideas on Thursday or Friday were we?  Of course the smartest thing I said on Thursday was my bit of non-greedy advice to the bears: "YES TO ALL BEARS, TAKE PROFITS ON A 5% ONE DAY MOVE!!!!"  I don't make a lot of all-caps comments, do I? 

Anyway, moving on – The following group is snippets from old lists of stocks I still LIKED and wanted to update last night but then I realized it was going to be pointless as the EU hit us with a Trillion dollar package so we'll just have to wait and see who's still cheap at the end of the day.  Keep in mind the trades listed here are from the old post, NOTHING below is a current trade set-up but we'll be looking for ones that are better than the old ones:

AET (12/21 – $34.04, 1/9 – $32.70, 1/31 -$29.97) Health Care is up in the air but this is a nice opportunity on this stock.  AET is cheap with a good cash postion and a p/e around 11.  Last time out we went with the 2011 $25s at $9.65 (now $7.30), selling the Apr $33s for $2.50 (now .45) and the Apr $30 puts for $1.50 (now $2.05) so that was BRILLIANT!  I also liked the 2012 $25/35 bull call spread for $5, selling the Feb $35 calls for .90, saying: "If you get away with 5 of those sales in 2 years, it’s a free $10 spread!"  That spread is now $4.50 and the calls are .10 – see how these things work!  You can replicate the last trade with the 2011 $22.50s at $9.10, selling the Apr $30s for $2.10 but this time I’d hold off and sell (not buy) the Apr $27 puts at $1.75 if AET continues down to the 200 dma at $27.50.  Don’t forget, you have to REALLY want AET long term! 

AGNC (11/24 – $26.20, 12/21 – $27.91, 1/9 – $26.50, 1/31 – $26.69) is (gasp!) a REIT.  But it’s a strange one that (according to them) "Invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government sponsored entity.  The company funds its investments primarily through short-term borrowings structured as repurchase agreements."  This $26.50 just paid a QUARTERLY $1.40 DIVIDEND (21%) on Jan 29th!  Best to see if they pull back a little now but totally great if you are in them from last time. 

ATVI (11/24 – $11.40, 12/21 – $10.91, 1/9 – $10.90, 1/31 – $10.16) Owns WarCraft, which is the 2nd biggest monthly on-line game revenue producer behind SNE’s Everquest.  Having a monthly subscription base sees them through rough times and they have had their growth halted in China as they switch distributors, which should be finished by the fall.  Now that we are at $10, I still like selling the 2011 $10 puts and calls for $2.70 for a $7.46/8.73, a nice, mellow 34% gain if called away (see Jan 9 list for riskier 257% play).

AYE (12/22 – $24.04, 1/9 $22.99, 1/31 – 20.95) Pays a 2.6% divdend and are trading back at their lows.  Our last entry was the July $22.50 puts and calls at $3.50 nets $19.49/21 so more like a wait and see here but July $22.50 calls are .80 and should be stopped at $1 (.25 trailing).

A nice way to play a long game selling options is an exttended butterfly/double diagonal.  I prefer to set up a play with a guaranteed return so we can concentrate on the premium selling game.  BAC is nicely volatile but generally positive and we can take the 2011 $10 calls for $8.60 and also the 2011 $20 puts for $5.90, which is net $14.50 on the $10 spread.  That means we are paying $4.50 in premium over 15 months (.30 per month) for the privilege of selling the Sept $17 puts and calls for $1.88.  There is no margin needed as both our puts and calls have superior positions and the return on $7,250 committed (5 contracts in the spread) is $940 the first month or 12.9%. 

C can give us a quick $14 per 100 shares we’re willing to buy by selling the Sept $4 puts.  We’re willing to buy 500 shares of course but really, at $4, we’d take 1,000.  If we sell 10 Sept $4 puts naked then, we’ll get net $140 credit and have a margin requirement (at 50%) of $2,000.  That’s a 7.5% return on net $1,860 committed for the month (margin less the cash collected) so let’s call that our first trade, looking to sell the puts for .15 or better if possible. The alternative to selling the puts is buying C for $4.70 and selling the Sept $5 puts and calls for .88, which is a net $3.82/4.41.  In order to make the same $140, C would have to finish with 500 shares (the most we would want to commit to this early)at $4.69, that’s 17.25% higher than it has to finish to pay us $140 by just selling the puts.

CEPH (12/21 – $59.75, 1/9 – $63.01, 1/31-63.84)  We’re on track with our 2012 $50/70 bull call spread that was $9.50 and is now $11.50 but still worth offering $11 for.  We paired that with the sale of the 2012 $50 puts at $6, now $4.40 so the new combo would net $6.60, almost a double from the $3.50 of our original spread but still with plenty of upside and, of course, more in the money now.

CPLP (11/24 – $7.54, 12/21 – $8.80, 1/9 – $9.82, 1/31 – $8.93) is an all double-hull tanker company that pays a nice dividend (21%).  They are up 18% from our November entry and last time I said we’ll have to hope for a pulback from $10 and we got it but if you didn’t get in on the dip down to $8.18 last week, they are less sexy here.  Selling naked June $10 puts naked for $2.60+ ($3 would be great) is not a bad long-term entry.

CUZ (11/24 – 7.06, 12/21 – $7.77, 1/9 – $8.15, 1/31 – $7.66) is another one that shot up on us and now pulled back.  They are a REIT that took some write downs and is raising capital and that took them from $10.95 in Aug down to $7.50 later in Aug, now back to $7.66.  They are not in a bad spot for a conservative play, selling the July $7.50 puts and calls for $1.90 for net $5.76/6.63.  They cut their dividend to .36 for the year but that’s over 5% of $6.63 if it holds but consider this one a gamble for sure.

DF (12/21 – $17.68, 1/9 – $18.23, 1/31 – $17.63)  Whatever the economy, people tend to eat and DF supplies the basics.  They haven’t been lower than $11, even in the Nov crash and by March they held steady at $18 so a nice, mellow buy/write, selling the 2011 $17.50 puts and calls for $4.20 nets $13.43/15.42, which is a happy 30% if called away.  You can also get more aggressive and do it arificially with the 2011 $12.50s at $5.50, with the same sale, which is net $1.20 on the $5 spread for a 216% upside if called away.

ENP (11/24 – $18.02, 12/21 – $19.70, 1/9 – $20.76, 1/31- $20.22) is a nice little E&P operation that we first entered at $16.50 and they went ex-dividend on 11/5 at $19 and were back to $17.50.  They were a tough buy at $19.70 but selling the naked Feb $20 puts for $1.35 was a nice then and those puts are down to .70 already.  Here’s my thought on this one as it’s gone up so much – Rather than commit $2,026 for the stock to get a $100 dividend between now and June, how about buy the Sept $17.50/20 bull call spread for $1.40 and sell the $17.50 puts for $1.30 and that’s net $10 with a $250 payoff at $20 or THEN you end up owning the nice, dividend-paying stock for net $17.60 so we either get our $240 profit by Sept or we get a 13% discount on the entry.  According to TOS, they only want $200 in net margin for the naked put sale so that’s nice

FLY (11/24 – $9.10, 12/21 – $9.17, 1/9 – $10.58, 1/31 – $9.61)  They’re back!  I was upset last time that they got away so quickly as they have a great business leasing aircraft and their competitors have a lot of troubles, which should help them long-term.  No options on these guys and we’d like to get them for $8.50 but I doubt it so entries (20% scales) of 1x at $9.50, 1x at $9 and 2x at $9.50 averages $8.87, which is close enough for a long-term play and, of course, $10.50 is around where we look for the exits again.

FTR (11/24 – $7.83, 12/21 $7.56, 1/9 – $7.68, 1/31 – $7.61) is a CT-based phone carrier that pays a REALLY nice 13.4% dividend.  The stock is $7.61 but the contract prices are very lame, with the Aug $7.50 puts and calls just $1.25 but we don’t mind owning them long term at net $6.36/6.93 as long as they are paying that $1 annual dividend (14% on that basis!).

GE $15.50, 1/11 price: $16.11, 1/30 $12.72.  After two flat months we got tagged.  Dividend is still there so I am too and we lst sold $16s for $2.75, now $3.60 and no big deal if you started from month one but from $16.11 the net is $13.36/14.68 and the roll to the March $14s or $15s is better than even so it depends how bad you feel about them now.  Since your call away price remains $13.36 less whatever add you get on the roll, I like the $15s better for $3.19 as it drops your basis to $12.92/13.98.  As a new entry, I can’t think of any good reason not to sell the $11s for $2.88 for net $9.84/10.42 – an 18% discount from here and you still get the $1.28 dividend if you stick it out. 

GENZ (12/21 – $47.95, 1/9 – $53.81, 1/31 – $54.26)  Oops!  That one really got away this month.  I think with these guys we can now just hope they get rejected off the 200 dma at $54 to set up a new entry.  If they refuse to lose and establish a new floor, we can deal with that later (if someone reminds me in chat).  $55 has been giving them trouble so far.

GLW (11/24 – $16.53, 12/21 – $18.98, 1/9 – $19.89, 1/31 $18.08)  I said in November: "All the things that are selling:  Laptops, phones and TVs have one thing in common – glass!  That’s half their business and the reason they were a favorite of ours last fall.  Now they have more than doubled but the other half of their business is fiber so I think they have room to double again. " 2011 $17.50 calls are now $2.75 and you can sell March $18 puts for $1 for net $1.65 and we’ll hope to sell March $20s, now .30, for $1 on a move back up.  I’m thinking the recent sell-off was a gift entry on these guys but some is legitimate disappointment that they didn’t supply IPad glass.

GOOG (11/24 – $583, 12/21 – $598, 1/9 – $602, 1/31 – $529) Last time, I liked buying 4 June $570 calls for $63.50 ($25,400) and selling 5 June $600 calls for $46.70 ($23,350) – net $2,050, which was meant to be profitable from about $575 to $700.  The June $570s are now $20.10 ($8,040) and the June $600s are $11.90 ($5,950) for net $2,090 -pretty amazing considering it fell $100 rather than went up like we expected.  That’s the power of doing these conservative ratio spreads – they are very tricky to figure out the best math but, as you can see, they give you TONS of room for error! 

GOOG (11/24 – $583. 1/9 – $602, 1/31 – $529 ) my play for those of you not inclined to watch so closely was the 2012 $700s are $62.50, selling 2011 $660s for $44.50, which was net $18.  The $700s are now $30 and the $660s are now $16.50 so net $13.50 but we have a year so I like this spread as a new entry or you can be more aggressive and sell the $630s for $22.  Certainly a $3.50 trailing stop (20% of the gains) should be set on the callers and $7 rolls you down to the 2012 $670s, another fine adjustment ($30 for $7).

GPW (11/24 – $25, 12/21 – $25.16. 1/9 – 25.03, 1/31 – $25.02) is a nice little (and I emphasize little) power company that pays a 5.75% dividend on $25 shares (no options).  The kicker for them is they MAY qualify for state aid in building their new plants as they continue to expand and that could give them a boost as would an acquirer paying just a fraction over the $250M market cap.

KO $44.33, 1/11 price: $44.93, 1/30 $43.55.  The Feb $42.50s at $4.90 netted $40.03/41.27 and my comment last time was: "selling the $45s just doesn’t give you any real protection."  They are struggling below the 50 dma at $44.50 so maybe we’ll stay conservative on the roll.  This one is a good example of how fast volatility has come down as the March $42.50s net $4.25 now but, due to the lower price of the stock, the net of a new entry is $39.30/40.90 so still nice!

MHP held $28.50 on a big volume drop.  If we can sell 5 Oct $25 puts for .70 (Thursday’s high) that’s a nice entry ($24.30 net).

MON (12/21 – $80.97, 1/9 – $86.65, 2/2 – $77.31)  I’m close to dropping them but I would buy them back in the mid $60s so they’ll stay on here.  Very wise last time to say out of them but, long-term, this is a nice company to own.

NDAQ (12/21 – $20.03, 1/9 – $20.23, 2/2 – $18.42) Low volumes make the exchanges less sexy but NDAQ has good growth and will do better if people come back into the markets over the next few years.  Last time I predicted: "I’m confident enough they’ll hold $18 that the 2011 $15s for $6.20 are attractive, selling the March $20 puts and calls for $1.10 for a net $5.10 entry on the $5 spread, which is a nice way to start."  The 2011 $15s are now $4.60, which makes them a great deal and I like selling the June $18 puts for $1.35 and waiting on the sale of the June $20s for at least $1.25 (now .85)

NLY (1/9 – $17.53, 2/2 – $17.45)  As you’ll see in the comments on the last update, AJbcfa likes them better than AGNC for very good reasons.  NYL is another REIT that pays a lovely 17% dividend and they just firmly tested their 50 dma at $17.35 so we like the entry here at $17.  I like the buy/write with the 2011 $17.50 puts and calls at $4 for net $13.45/15.48 but keep in mind the danger is – if they cut the dividend, the stock drops like a rock and you are doubly screwed.  Last month we deconstructed this play and found a better way to make $3 than holding the stock for dividends but the sellers have wised up and jacked up the vertical prices (making our old play a winner already) so it’s no longer valid as a new entry. 

NRF (11/24 – $3.42, 12/21 – $3.27, 1/9 – $4.19, 2/2 – $4.55) is a small REIT but a lender, not an operator and they are based in NY dealing with mainly corporate clients so, hopefully, based a little steadier than most.  In December I said: "They are at a bad spot for options right now at $3.27 as they only have $2.50 and $5 strikes but even the 65% reduced dividend of .10 is 11.4%.  The company has $260M in cash and $3.3Bn in properties (never trust those values) with just $1.9Bn in debt.  They do keep selling stock to raise cash and A/P has run up and bears watching so this is a scale-in but they could easily double up if CRE really does recover."  On Jan 9th I said: "An aggressive way to play is buying the June $2.50 calls for $1.70 and selling the June $5 puts for $1.25, which REALLY screws you to the downside but I’m sticking with my $5 target and then we can sell the $5 calls for about .75 to drop our net to a $1.15 credit, which has a b/e down at $3.18."  Check out this chart – sometimes I amaze myself.  😎 

NSM (12/21 – $15.26, 1/9 – $15.26, 2/2 – $13.68)  At $13.68 they remind me of that song "I Love You More Today Than Yesterday."  Our last entry was the 2011 $12.50 calls at $3.70 (now $2.50), selling the Feb $15 calls for .85 (now .10) and the May $14 puts for .75 (now $1.30) so a big fat loser so far and I like the Leap and the put leg still, waiting for a bounce to collect at least $1 for the May $15 calls (now .55), which makes the leap just net .20 and your worst-case put-to price net $15.20. 

ORCL (11/24 – $22.14, 12/21 – $24.43, 1/9 – $24.68, 2/5 – $23.11) is up "just" 50% off the bottom but MSFT is up 100%.  ORCL has a slightly lower p/e than MSFT and they have yet to realize gains from their buys of PeopleSoft, Siebel and BEAS (who we had played as a bargain before they got snapped up).  They are also buying JAVA which will turn them into a total solution provider so I like them long-term.  The 2011 $20s are $4.40 ($1.30 premium) and you can sell March $23 calls for $1.05 and March $22 puts for .55 for net $2.80 on the $3 spread with 9 months to roll.

PFE $15.28, 1/11 price: $17.49, 1/30 $15.12.  Now with an 8% dividend!  We last sold the $17s for $1.95, now $2.24 so not much going on here but I think $15 is the new $17.50 for these guys after that overpayment for WYE.  The 8% dividend keeps me interested so rolling down to the March $16s at $1.85 is the way to go.  As a new entry, I’m good with selling the March $15s for $1.60 for a net $13.52/14.26 which is not a great discount but a $1.28 dividend (and they’d better not be cutting it after a 10% beat!) gives us nice additional cushion on this new Super Mega Corp. 

PGH (11/24 – $9.70, 12/21 – $9.64, 1/9 – $10.38, 2/5 – $10.42) is almost always our value lists.  They are a Canadian trust that pays a MONTHLY .07 dividend.  You’ve gotta love the lack of movement here in a downturn too!  At $10.42, the VIX has finally improved and we can sell the July $10 puts and calls for $1.65 for net $8.77/9.39.  From ‘04-’08 dividends were around .20 per month so a nice set and forget in the long-term virtual portfolio once you establish a good position.

PRM (11/24 – $3.20, 12/21 – $3.93, 1/9 – $3.60, 2/5 – $3.15) hit our offer last time at $3.40 (see last update) and have spiked very close to our DD target at $2.40 (there are no options).  They make those little free apartment and home for rent/sale guides that you get for free in diners.  Like every publisher in America, were getting killed and they were all the way down under $1 last time we picked them.  This is generally a stock to stick under your pillow and forget about for a couple of years (but another DD or TD (triple down) at $1 of course).

SB (11/24 – $8.93, 12/21 – $8.27, 1/9 – $8.86, 2/5 – $7.90) is a very boring shipper that pays a very boring 7% dividend and has no options.  They were as low as $6.75  at $8.86.  This is back around our original 10/13 pick and they fell all the way to $6.45 in Nov and may hit it again so more of a wait and see at the moment but fine to scale in as a LONG-term holder.  They have made .58 to .76 a share in Q3 ‘08 through Q2 ‘09 and little is expected of them but there is a serious glut of cargo capacity that will hurt everyone if we keep going down.

TASR got the sell-off we were hoping for and we can pick up 500 shares for $4.50 (now $4.60) but we have to go on faith and just sell 5 Oct $5 puts for .60 so net $3.90 on that spread is our goal.  When they get back to $5, we’ll look at selling the calls.

UNG has gotten so freakishly low it’s now worth a risk.  Keeping in mind that UNG can go back over $15 quickly if we have a hurricane but could also be wiped out if the ETF unwinds badly (doubtful) The 2011 $6 calls, now $4.20 can be paired with the 2011 $12 puts, now $4.60.  That’s spending $8.80 for a $6 spread so the risk is $2.80.  My plan is to offer $8.30 for the spread and then, if we get it, sell some puts and calls against it whenever UYG makes a big run one way or the other.  We only need to sell .30 per month to eliminate our premium.  2 contracts to start this play.

UYG seems safe enough down here at $5.63 and I love ETFs with $1 strikes to roll to.  The ETF paid a penny dividend on June 24th, no big deal.  I made a mistake in my initial calculation so this is a rewrite from earlier as I now like owning the 2011 $4 puts and calls for $3.05, selling the Sept $6 calls for .25 and Sept $5 puts for .20.  As long as the net spread is $2.60, the amounts don’t matter but the key is this is a very rollable 17% return for the month and the margin requirement is just $1 on the put side so 10 contracts takes just $3,600 in net cash plus margin and $450 on our first sale is 12.5%, very nice!

VLO $16.23, 1/11 price: $23.68, 1/30 $24.69.  We went with the 2011 $15s at $11.60 ($3 premium) and sold the Feb $25s at $2.29.  They were much better behaved than I expected and now we have a rising 50 dma to protect us so we can do a buy/write here, selling the March $25s for $4.55 for a net $20.08/22.54, which is pretty much down to the 50 dma.

WMT $53, 1/11 price: $51.58, 1/30 $47.86.  We went with the Feb $50 puts and calls at $5.40, net $46.18/48.09.  Any sell-off in WMT is silly so I’m loving the new entry, selling the FEB $47.50s for $3.40, which nets $44.46/45.98.  If you sold the Feb $50s, earnings are the 17th so we’ll have to keep an eye on them but I expect that’s the right price.  The leaps got cheap and I love the 2011 $30s at $20 as a buy and forget until they hit $55 again, then we can sell something

WFR (12/21 – $13.05, 1/9 – $15.02, 2/5 – $11.60)  Outlook is 10% lower than last Q, stock is 40% lower.  Seems like a buy to me.  The company is projecting to earn .70 per $11.60 share (p/e of 16) and a conservative entry here, selling the July $12 calls for $1.42 and the July $11 puts for $1.28 is net $8.90/9.45 so another 18.5% discount if put to you and  a nice 35% if called away at $12.  TOS says they only want net $1 per contract to sell the 2012 $10 puts naked for $2.15 and if you pair that with the purchase of the 2012 $10/17.50 bull call spread at $2.60, that’s $7.05 of upside on net .45 cash out of pocket ($3.60 margin) with a break-even at $10.45 (10%).  It’s aggressive but you have a bit upside and you can sell March $14s for .20 and you have over 20 sales ahead of you. 

WHX (11/24 – $16.25, 12/21 – $16.26, 1/9 – $16.93, 2/5 – $16.89) is an interesting little REIT.  They are a subsidiary of WLL that seems to be nothing more than a vehicle to funnel profits off land leases out of the parent company to be distributed out as dividends through WHX.  That makes the income fairly uncertain as it seems tied to oil revenues but they have no debt at all and the dividends work out to over 15% so worth a small position at $16.89.  Sadly – no options… 

XLF at $10.55, 1/11 price: $12.45, 1/30 $9.92.  People forget that XLF pays a 6.6% dividend too, which is nice,  Our last sale was the $12.50s, now $3.10.  The March $10s are $2.30 and if you were in from the beginning it’s still best to roll down.  As a new play I’d sell the $9s for $2.32 so that’s net $7.60/8.30.

OLD NOTE: We’ll be keeping an eye on opportunities to get back into mainstays from our original virtual portfolios:  GE, CAT, PGF, UNG, UYG, KEY, C, LYG, TNK, PGH abd TASR and I also have my eye on new dividend paying plays like MHP, ANF, PG, PBI, CEG, JNJ, PFE, MRK as well as stocks I still consider cheap like TIE, WFR, AA, ERTS, GENZ, SPWRA, ACAS, AET, VRSN, CELG, HIG and CVH.  Every week the question is going to be, who has the best chance of giving us a clearn return that gets us to our goal.


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