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August 13th, 2017 at 1:03 pm
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qcm,
Armchair trades.
Only during the last 14 days I have mention quite a few of these trades. In my portfolios I do have at least 125 of these trades. I have published a write up on armchair trades in Members corner.
However regret to say, I find it difficult to find the article myself. Possible Irene, the gate keeper of Members corner, could assist in making it more possible to find articles.
I have grumbled various times, that some of my trades I mentioned, are not even looked at. Only Phil, I must say reads everything!
I am not a wisest like Phil as well not a genius as some members on this board, so you must understand I am very happy to answer and help any member asking questions, but repeat and repeat the same, because people do not read the things when published, can get a bit heavy. I do keep myself busy with my 3 portfolios, which possible hold sometimes up to 1000 option plays.
I regret to say I am not such a patient teacher as Phil, even my wife grumbles about this.
But here again the basic thoughts on armchair trades.
To show you some of my trades, which are already 3 and four month old, does not help you. A trade must be done when it is hot, not when the horses are already out of the stable.
So let’s pick on GE. Possible many others could do, but you look for a stock which is good but undervalued. GE was mostly in the 30 range but now it is trading at 25 with a div. of 3.81% per year and having a quarter payout at present of .24 cents.
I could as well pick PM, but I hold this stock at 87$ and 93$ so it would not be good at present market conditions, to buy the stock at 114$. At this point I could give you a bunch of good looking stocks but they are no good at the present price, however I can continue to play these, as I bought them at a much lower price. With other words, if you wish to become an armchair trader you need to build up an arsenal of good stocks. Only last week various stock were mentioned. CHL , CIM etc. CHL already from 52 to 56.!
Before we carry on with GE here the basic thought of armchair trading Buy the stock and sell a further out say now Jan18, Mar 18 or even as far as Jan 19 close at the money a strangle or even a straddle. In case of the strangle, the put just slightly under the stock price and the Call at or just above the stock price.
The stock you will be looking at should pay a minimum div. of over 3% plus. Buy receiving a fat premium you should be able, when and if assigned you get the stock for an at least 20% discount. This is not too bad as you now already buying the stock for the present price, so you need to feel comfortable with the stock when you at a dip, receive the stock 20% lower.
I mentioned PM above, which if my option play expires shortly, I possible would only sell a caller but not a put, as on a put sale I might get burned under present “TRUMP market” conditions with many and this type of stock. But I do not mind if the caller gets called at this high price as I bought it for 87.5$!
Back to GE
Buy the stock @ 25.20 and sell the Jan18 26/25 call/put strangle for 2.02. Calculating the combined monthly return from div. and option sale, you receive .46 per month over the next 5.3 month. Giving you a monthly return of 1.82%. Obviously the 2.02 you already do have in your pocket, which is part of the .46 cents per month. During the time you just have to watch that you do not get an early assignment, at which time you will have to get out of your armchair and reload.
Please copy and paste this in your note book as I do not will rewrite this again.