Stock Collars

[randallg99]

What is the dividend status on FDG? I could not find any easily retrievable data from my usual internet sites. Thanks.

divvy history:
http://finance.yahoo.com/q/hp?s=FDG&a=04&b=3&c=2002&d=05&e=4&f=2008&g=v

as you can see, the divvy recently took a hit.

however, it's only recently the met coal the FDG sells has increased from approx 95/tonnes up to above 300/tonne. Estimates are above 400 while the metrics that many of the analysts use are simply outdated.

there were a few analyst upgrades, but I don't have access to the reports.... not many big firms that I can access follow Canadian trusts

that said, here is an article:
http://biz.yahoo.com/iw/080421/0389082.html

>>>Distributions declared for the first quarter of 2008 reflect expectations for higher coal prices during the remainder of 2008.<<<


the reason for the dissapointing quarter and how the company counteracted the problem summed up in one paragraph:

>>>"The number of trains we receive directly impacts our results and year-to-date rail shipments are falling short of our requirements. Looking ahead to the 2008 coal year, the acute shortage of supply has enabled us to settle a majority of our contracts for all grades of our coal at pricing in line with our major Australian competitors."<<<

and info on the pricing (which directly affects dividend amounts) of FDG's products:

>>>
Elk Valley Coal has completed negotiations for more than two-thirds of its anticipated coal sales for the 2008 coal year commencing April 1, 2008 with its highest quality coal products being priced at or above US$300 per tonne. If the remainder of the contracts are settled on similar terms, taking into account all ranges of coal products, including thermal and PCI coals, and including the impact of carryover tonnage from the 2007 coal year, the average coal price for the 2008 calendar year is forecast to be in the range of US$195 to US$205 per tonne. Based on these prices, transportation costs for the 2008 calendar year are expected to be in the range of $42 to $44 per tonne. The substantial increase in coal prices over the 2007 coal year reflects the extreme tightness in the metallurgical coal market. Changes in economic conditions, especially in the U.S., China or India, or in the global supply of metallurgical coal could cause a decrease in prices for the 2009 coal year.<<<


I personally don't believe China or India will be slowing before 2009

 

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[randallg99]

I am surprised but pleased with the divvy announcement.... at my cost basis, this income annualizes as a 16% return and production has probably not peaked yet. Selling covered calls might not be a good strategy.

Fording announces Distribution.......... --

CALGARY, ALBERTA--(Marketwire - June 10, 2008) - Fording Canadian Coal Trust (TSX:FDG.UN.CA) (NYSE:FDG) today announced that the Trustees have declared a second quarter cash distribution of CDN$2.50 per unit to be paid on July 15, 2008 to unitholders of record on June 30, 2008. The ex-distribution date is June 26, 2008. This distribution is for the period from April 1, 2008 to June 30, 2008.

Unitholders who wish to participate in the Premium Distribution and Distribution Reinvestment Plan and have not yet provided instructions to the Plan Agent or their broker should do so prior to 5:00 p.m. EST on Thursday, June 26th. Detailed information about the Plan is provided on the Trust's website at www.fording.ca.

 

[randallg99]

just an FYI update - Cramer just pumped FDG so I will most likely sell covered calls against part of my position for the first time.


R

 

[kidgas]

While Cramer is potentially the "kiss of death", consider buying puts to lock in profits and letting FDG run. Selling covered calls only limits your upside and does nothing for you if FDG drops like a rock. You could get the Sept 85 puts for about 8.50/share and sell calls against half of your position at 90 or 95 to offset some of the cost. Not telling you what to do, just trying to point out other possibilities.

 

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[kidgas]

Just a quick update since it is the third Friday of the month:

GG-will likely have some shares called at 40. The Jun 42.5 calls will expire worthless. I did buy back some Jun 40 calls and resell at 2.05 this week picking up a little extra profit with the ups and downs of the stock. Basis is 32.96.

YHOO-Nuts! We got Yanged! What else is there to say? I sold Jul 25 calls today making my final basis 24.76. With the Jul 25 puts, I have created a conversion for July at 25. So, regardless of what happens, YHOO shares will be gone at 25 in July. Then I can move on. But considering I first bought at 30.55, I am pleased with the outcome overall.

EMC-Still working on this position. Basis is 20.65. Have Jul 13 puts and some Jul 17 calls outstanding. Not a lot of action.

CY-Should have some shares called at 21 and 26. Will use the proceeds for more DRYS shares or something else. Will see what happens next week. Bought Sep 25 puts this week to cover those shares that are left. Will wait to sell more calls on strength.

DRYS-Bought Jul 80 puts at 5.7 on a good day this week and sold at 7.3 today. Basis stands at 88. Have Jul 70 puts to cover all the shares. Hope to add to shares and swing trade some more puts over the next few weeks.

 

[randallg99]

While Cramer is potentially the "kiss of death", consider buying puts to lock in profits and letting FDG run. Selling covered calls only limits your upside and does nothing for you if FDG drops like a rock. You could get the Sept 85 puts for about 8.50/share and sell calls against half of your position at 90 or 95 to offset some of the cost. Not telling you what to do, just trying to point out other possibilities.

thank you for this idea- I was watching it today trying to figure out when would be opportune to execute in the down market... and ultimately decided not to pull any triggers today and will wait for more strength before placing the call and put orders.

overall markets took it on the chin today... I suspect we may see some more downward pressure next week - if there is more selling pressure on FDG, I will consider selling naked puts.

R

 

[randallg99]

haven't touched FDG position... just letting it achieve it's real value vs its peers. (hopefully at 130) and at that point will revisit the strategies to protect the gains without selling it.

would not want to sell it due to the income it will generate...

anyway - bought another lot of DRYS the other day (will use 100 shares for example here) ... average price of 82.xx for $8200

sold covered calls Jul85 at average price of 6. Rebought all of them back today in the mid 2's... netting $350

sold covered calls -this time Jul75- against the same position shortly afterwards while price was at 77.xx and netted per 100 shares $630

in the end - if I am called out at 75/share, I will have lost $7/share ($700)

but I will have made 630+350 from the calls ($980)

after commissions, this is about a 3% return for 30 days.

let me know if there is a flaw with this strategy. (of course there is one I am not seeing...)

 

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[kidgas]

My only question is:

What if you are not called out, and DRYS drops to 50? Of course, I like the stock (and the business model) and will actually add more this week after the proceeds from CY clear.

That being said, it is possible to ride the covered calls down and not lose money which you are starting to demonstrate. You just have to hope that it doesn't gap down on you.

Let me share from personal experience: There was an internet company (I believe it was an ISP) in 1999/2000 called PSINet (symbol PSIX) and I had purchased shares on which to sell covered calls. At that time, I did not know about collars. I was just starting out. I still have lots to learn and am improving my trading all the time. Anyway, I bought PSIX at 60+ and sold some ITM calls at 60. I watched the stock drop and bought back the calls, selling the 55s, 50s, etc, rolling out a month...yada yada. End result is I bought back some calls, sold out all my stock at around 20 but didn't lose any capital. So, it can be done, but a gap down will kill your account/capital. I speak from experience on that, too.

I understand not wanting to touch the FDG position. But, watch out for FEAR and GREED. Been there, done that. Don't be afraid to take some profit or at least lock it in somehow.

Today, I ended up selling some calls on GG. Sold the Jul 40 calls on 1/3 of my position for 3.10 on a basis of 32. I plan on selling calls on the way up. Right now I have an order in to sell the Jul 42.5 at 2.55 on the next third. This gives me extra cash to replace those shares that were just called at 40 here in June. I will plan on purchasing them sometime this week hopefully right about 40 so that those calls I sold today are covered with the new purchase guaranteeing a profit of 3.10/share. If by the end of the week, I can't get them at that price, I will buy some and wait til next week. Adding on the way down and selling on the way up. Back and forth. Back and forth. All the while being protected by puts--Jul 35 and Jul 40. I will have to buy some new puts and will look out 2-3 months and sell calls monthly.

I am trying to transition to this approach with some of my other selections, namely DRYS.

Best of luck with your positions. I appreciate the dialogue and opportunity to learn from you and share.

 

[Edge]

I still think you guys should consider using 3 month put calendar spreads for downside protection. These spreads make money as the price drops and the volatility increases.

Here's an example for DRYS, I chose the 70 strike just out of the blue, but for you guys that are more familiar with the stock, might choose another. The July 70 put gets 2.70 credit, the Sept 70 put cost 7.5, so you've paid 4.80 for the spread. The idea is to lower that 4.80 by rolling the July 70 put to the Aug 70 put when the premium is dried up out of the July 70.

Lots of ways to get creative and adjust this position. Through credits from rolling the puts and credits from the calls you are selling, you could get cheaper downside protection (keep more premium) than just buying the near month put.

Maybe DRYS is too volatile to do this and sleep at night, but this is how I play the indexes.

 

[kidgas]

So, if DRYS gapped down to 50 tomorrow, what would be the result?:

I would own the Sept 70 puts which might be worth 25/share, but I would have sold the July 70 puts and to avoid being put the stock at 70, I would have to buy back the position at about 21 or 22. I could then sell the Sept 70 puts and net 3 or 4/share against the 4.80 cost and only lose a small amount. But, how do I protect my long shares? I lose 26/share in equity on my long share position.

I assume you are just talking about using spreads by themselves in which case your scenario would be very reasonable. But, how would you adjust it to cover long shares while decreasing the cost of protection? Maybe I am missing something in your message. Please clarify for me. Thanks.

 

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[Edge]

So, if DRYS gapped down to 50 tomorrow, what would be the result?:

I would own the Sept 70 puts which might be worth 25/share, but I would have sold the July 70 puts and to avoid being put the stock at 70, I would have to buy back the position at about 21 or 22. I could then sell the Sept 70 puts and net 3 or 4/share against the 4.80 cost and only lose a small amount. But, how do I protect my long shares? I lose 26/share in equity on my long share position.

I assume you are just talking about using spreads by themselves in which case your scenario would be very reasonable. But, how would you adjust it to cover long shares while decreasing the cost of protection? Maybe I am missing something in your message. Please clarify for me. Thanks.

No you aren't missing anything, this position would be a disasterous loser if DRYS gapped down to 50 tomorrow.

I put my calendars at the low end of the range that I would expect the underlying to go to, and I either take my profits when it gets there, or I roll. If you think that gapping to 50 is a possibility then this wouldn't work.

On a slow descent to 50 over the next 12 months, this would be a great positon to roll down each month (that's why I thought it would be a good position to compliment to long stock) but I definitely agree that if gapping 30% overnight is a concern, you need a long put in the near month.

I should've kept in ming that you and Randallg choose your long holdings for different reasons. You are looking for the relative strength with enough volatility to sell calls, and Randallg is looking for long term core holdings that he can spice up.

 

[kidgas]

Edge,
Thanks for your reply. You are correct in that I am looking at a little higher volatility stock as well as the potential for some momentum within the framework of macroeconomic trends. My current positions are all within retirement accounts so short term gains and the immediate tax consequences are immaterial. My main concern is protection of capital while trying to generate a respectable return while maintaining the ability to sleep at night. Also, I cannot always be available for short term changes in market conditions as I might not have access to my accounts during market hours at various times.

I am getting out of YHOO in July and will be looking for a replacement stock. So I will likely be looking for those with momentum but will want to protect myself from major losses of capital. My thinking is that avoiding the big losses is more important in the long run than hitting the occasional home run. I am going for on-base-percentage.

 

[kidgas]

Quick update on GG after an interesting week:

Since I believe in the current macroeconomic environment, gold will continue to do well relative to other assets, I have elected to maintain some exposure to this asset through gold mining shares, specifically GG.

As GG rose, I ended up selling some July 40 and 42.5 calls. As it continued to rise, I wanted to look to the next several months and picked up some Oct 42.5 and 45 puts. Right now the plan is to watch next week. If the opportunity presents itself, I would like to pick up some shares below 45 meaning they would have guaranteed profit in October at 45. I am trying to sell calls and buy puts on the way up and buy shares when the stock drops. I have done this and still have some uncommitted shares to benefit from further increases in the stock price.

 

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[randallg99]

kidgas, if it's any consulation, I really like gold now.... especially with the rising developments of more uncertainty in the mid east now

R

 

[kidgas]

I like it, too. Right now GG is carrying the majority of my retirement portfolio. In fact, it represents over 25% of my retirement stock assets. I am seriously thinking about replacing YHOO with another precious metal miner when it sells in July.

 

[kidgas]

Yesterday picked up some shares of GG at 47 and some more at 44.75. Owning Oct 45 puts means that second group of shares are not at risk at all. The next thing I need to do is try to pick up some more October puts (likely 47.5) so that I can set myself up for after the third Friday of July. I will likely have some shares called at 40 and 42.5 and use the cash to replace the majority of those shares.

 

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[randallg99]

I have no idea why the disconnect between gold stocks and the price of gold... I am shaking my head and getting borderline annoyed...

also - a stink bid for long FDG leaps went off this morning - already up 15% on this position - but kept the entire underlying FDG position

been selling covered calls on the DRYS position and rebuying them. Have done this 4 times and this has offset about 75% of the total loss on the DRYS position when I bought it around 81-82

the current volatility in the markets is making options trading that much more lucrative ... not to mention giving me a headache it's spinning up and down so much...

hope all have a great 4th weekend

R

 

[kidgas]

randall,
Gold stocks and gold do disconnect from time to time. Use the times when stocks are down to pick up additional shares. There are risks with the stocks themselves. Miners face increasing capital costs in terms of labor, energy, equipment. You still have to look at low cost producers of gold. When the price of gold goes up, supply can actually go down. Miners will take ore that costs more to produce (ie lower quality reserves) and place them into production saving the easy stuff for when price goes down (ie cheaper to produce higher quality ore). Since the processing of ore is limited by throughput, you get less gold out of the lower quality ore and supply decreases. On the world market, you may not notice much since people will trade in their gold jewelry etc for recycling.

Have you been using any puts? That would be especially helpful in your DRYS position and will enhance returns when combined with the covered call work you are doing. I am trying to get to the point where I buy some puts on a move up and wait for the shares to decline to pick up the shares. Then I wait for the shares to increase and sell calls. It takes some patience but I am getting better at it. I have had decent success with GG. Now I am working on DRYS to get it to that point. DRYS tends to follow the Baltic Dry Index fairly closely which has been falling recently. It is down about 40% from its recent high. I suspect it (and thus DRYS) is nearing a bottom and will begin to level out if not rise. Most of the shipping for the Christmas holiday needs to get started about August. So, I am planning on stabilization of shipping rates in the next several weeks with a likely increase.

 

[randallg99]

kidgas,
your good insight into the miners piqued my interest - this week I am investigating their expenses and costs... and interesting how jr. precious metal miners are subject to all of the increased costs that exponentially kill their potential earnings....

this is why I am very firm believer in peak oil and that the drilling infrastructure is a very viable investment going forward. big oil companies are subject to too much govt intervention/taxes but smaller companies with specific niches are poised to make solid money.

speaking of puts - I contemplated last week to buy them on FDG to protect my gains. Oh well.... I think this recent pullback is an extreme aberration and was thinking about buying more when some low ball stink bids for calls went off that are already up 15%... to reduce the exposure, I will be buying out of the money puts on signs of strength. Can't be too confident in this market.

regarding drys = what do you think of selling in the money puts and using the proceeds to buy out of the money puts?

 

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[kidgas]

randall,
You have described a bull put spread and, in general, I think it is a good idea. I did one using GG awhile back. For those who might be reading and learning:

Let's break down the parts of the trade for understanding.

The "bull" refers to the fact that the trade requires a bullish result in the stock for the trade to be profitable. That is, the stock has to close above a certain level to maximize profit.

The "put" refers to the fact that puts are used as the vehicle for the trade, and the "spread" refers to the fact that the option strike prices have a difference between them or a spread.

Using DRYS as an example, the July 75 put could be sold for 6.90 per share and the July 65 put could be purchased for about 2.00/share. This is a credit spread meaning that you would get cash in your account while waiting for the third Friday of July. The risk here is that the stock would drop significantly, and you would be forced to buy DRYS at 75/share. However, you own the 65 puts and could exercise those in a worst case scenario. So, you would get 4.90/share credit and have $10/share at risk resulting in a worst case 5.10/share risk. The maximum reward would occur if DRYS closed above 75, and you would keep all 4.90/share when the 65 and 75 puts expired worthless.

One of the thoughts when using bull put spreads is that you can buy back losing positions and roll them out and down so that you never actually lose money unless the company goes bankrupt or drops straight down. (sort of like buying back covered calls and reselling).

I certainly think this is a viable option with DRYS. Personally, I would consider using a smaller spread with DRYS (5/share) and going with the July 70/65 since I feel a floor of 70 is fairly likely with DRYS.

Other comments: I like the companies that supply the oil infrastructure (like Levi's and the 49ers). I just haven't invested in those yet (too many ideas and not enough capital). I did own HAL awhile ago. Also, I agree that picking up a few puts on strength is a good idea. Consider covering about half your position so that if FDG keeps going up, you don't feel like you lost money, but if it goes down you protect at least some. Also, you could consider swing trading the puts to get a little extra capital and gain on the ups and downs within the overall upward trend.

 

[randallg99]

the volatility creates amazing premiums in the options that rebuying the covered calls has become habitually profitable. (and probably too greedy) At this juncture, I have recouped my losses in the underlying stock by rebuying the calls and then reselling.

I am going to go with the bull put spreads in the day tomorrow barring any meltdown disaster- and I really appreciate this dialogue... and it helps with specific examples that you've provided.

Thanks, kidgas.

 

[kidgas]

There is definitely some volatility in the market as evidenced by the last 2 days. Unfortunately, I have not had access to the market during the day and so could not take advantage of the movement.

Glad to hear that you have been able to trade the calls to your advantage. Today would have been a good one for DRYS.

 

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[kidgas]

Picked up some Oct 47.5 puts on GG. Waiting for a pullback and can then add some shares at price less than that. Looks like I will have half of my position called this next Friday at 40 and 42.5. Then I will be looking to add shares at less than 47.5. I have Oct puts at 42.5, 45, and 47.5. Looking to buy lower than 47.5 and sell some 47.5 or 50 Aug calls, then do the same for Sept and Oct. The plan is to essentially swing trade on a monthly basis while purchasing puts at 3 month intervals for capital security. I will always keep some shares unobligated in case there is a huge run-up. Right now I have half of my shares unobligated, so I have benefitted from this run in the gold price.

 

[kidgas]

Kidgas - did you leave that GG unhedged?

It sure has been an interesting week, and it is only TUESDAY!!! Let me provide a brief summary of what has transpired with GG and what I plan. Yesterday, I picked up some Oct 50 puts. Now I have Oct 50, 47.5, 45, and 42.5 puts. I also sold some Aug 55 calls leaving only 25% of my position open. So, today I decided to buy back the July 40 calls (GG was about 52 at time) and ended up buying back the July 42.5 calls later in the day (GG about 49 at time) after the tide turned and GG started to decline. So, now I have 75% free and clear, but that only does me some good provided GG doesn't collapse.

However, it is not as bad as it sounds since the worst case scenario is that I exercise puts in October giving me a combined sale price of 47.5 on a stock that has a combined overall basis of 42.4. That is a 12% return since October 2007 through October 2008 and assumes that I do absolutely nothing to decrease the basis between now and October when the puts expire. I certainly plan on selling calls when the stock rebounds, and if not, will sell calls at 45, 47.5 and 50 creating conversions which would lower basis into the high 30's and guarantee a close of my position at an aggregate 47.5 price regardless of the stock price in October.

I believe that gold and thus GG will continue to increase over the next few weeks and that $1000 is likely. But if I am wrong, I am still just playing with "house money" since my profit is locked in even if GG goes to $2/share. Certainly, I missed out on some upside profit. But, the key for me, like the YHOO story, is that I don't get hit with a large loss that I need to come back from. I feel the key to making money is avoiding the big loss. I prefer to use collars as opposed to stops is all.

You could just use protective puts and increase the put strike price as the stock increases. I have tried that some with some of my other stocks. The problem comes in that you are waiting for the stock to increase without the call premium offsetting the cost of the puts. If that happens for too many months, your basis goes up without the stock increasing, and it becomes more difficult to resuscitate the stock. I am seeing that primarily with EMC right now. I did not sell any calls initially and the stock declined. The puts helped, but had I sold calls, I could have bought back and sold on the way down. Now I am adding to my position and trying to get enough shares under 13 so that I can offset some of the basis by selling a call with a strike of 13.

Still learning and enjoying the process.

 

[kidgas]

Well, it has been awhile since I have posted. Went on a cruise for a week and am busy working on getting some of my SFH's re-rented. Anyway, time for a brief update:

GG- Boy I messed up by rolling up on those calls. That being said, I have the Aug 40 puts and will let those get exercised allowing me to start over with the stock. I did buy some more shares yesterday for a different account. Bottom line will be basis of 35 with sell price of 40, or 14% profit since last October. Met my goal on this for now.

YHOO- was sold at small profit (nice considering I bought shares at 30+ and sold for 25). Replaced with IMCL. Bought some 45 puts, and held shares with an order to sell the Aug 50 calls. Well, an offer to buy out IMCL was made and it shot up (gapped up) and my order was filled for 14 (essentially selling at 64). Nice profit in two weeks. Even nicer learning that the transaction occurred while on the beach. I bought the calls back and sold the stock. Replaced with ONXX.

EMC, CY, DRYS- little action. DRYS taking it on chin. I picked up a few more shares around 70 for a short term trade. Hoping to sell some 70 calls when it moves back up. I suspect it should base soon with a PE just over 4. Also bought some yesterday for another account.

 

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[kidgas]

The third Friday of the month has past so it is time for an update.

GG--Obviously, this stock has been down the past few weeks following the price of gold. I held Aug 40 puts and so I allowed those to be exercised. I no longer hold any shares in this account. The end result is a net profit of 4.90 on a basis of 35.10 since October of 2007. The annualized return works out to 17.1%. I plan on buying back about half of my shares on Monday with new puts and selling calls. Then I will wait to see which direction the stock will be heading.

ONXX--I did something a little different with this stock. I will explain my rationale. After selling out IMCL, I decided that I wanted to pick up ONXX. Well, earnings were coming up. I decided to buy "x" number of shares protected them with enough August put contracts for "2x" shares. I did not sell any calls. If ONXX shot up after earnings, I would be profitable with the shares and could sell a call to cover the cost of the puts and walk away with some profit. However, my main concern was that ONXX would decline. If it declined enough, I could purchase additional "x" number of shares and still get a profit. This was because I bought the Aug 40 puts for 2.10 and the shares for 39.85. So, my basis became 39.85 + 4.20. I could pick up additional shares at 35 and still make money. It didn't turn out that way, but I did pick up some shares at 37.45 a few days after earnings. I ended up selling "x" Aug 40 calls to offset some of the cost a few days after that. The net result is that I currently hold "x" number of shares at a basis of 41.06. I plan on buying some Sept 35 and Sept 40 puts, selling some Sept 40 calls to lock in some profit and buying additional shares which I will leave uncommitted since ONXX may end up being a buyout candidate.

CY--I ended up selling some Aug 30 calls on Friday since CY gapped up. Sold them at 1.15. My patience has paid off since now the remaining shares that I hold have a basis of 27.95. I had purchased some of these shares near 36.40 but used the profit from the puts to lower the basis along the way. I am not sure if I will use the cash from the sale of shares to repurchase of more CY or DRYS since they are in the same account.

DRYS--Still working on this one. I had picked up a few extra shares between 68 and 71 while purchasing the 65 August puts for protection. Sold the Aug 70 calls for 4 and they were exercised. With earnings coming up this week, I need to devise a plan of attack. I will see what happens with the stock on Monday and Tuesday. Right now I have a basis of 92.77 with Sept 70 puts. None of my shares are committed so I gap up after earnings would be huge. I may buy some extra puts on any strength going into earnings figuring a gap up would cover the expense and a major gap down would be pure profit on those puts.

EMC--Not much action. Have Oct 11 puts and waiting to sell some calls. Just watching the stock slowly grind. Maybe it will continue to increase. Basis is 20.42. Along with DRYS, represents my other unrealized losing stock.

 

[kidgas]

Brief update post Labor Day. Markets seem to be taking it on the chin yesterday and today.

GG- Back into the shares for the retirement account. Have puts at 27.5 and 25 going into September plus some at 32.5 that I picked up on the recent rebound. I am trying to work a month at a time and generate some cash flow with selling calls. I have outstanding calls at 32.5 and 30 essentially establishing 30/25 and 32.5/27.5 collars. Then I bought a few more shares which are uncommitted. Overall basis is 30.85 with a few shares guaranteed to sell at 32.5 in a few weeks if no rebound.

ONXX- Sold some 45 calls and hold Sept 35 and 40 puts. Half shares are uncommitted. Waiting and watching on this one. If the 40 puts get exercised, so be it. I will buy back at cheaper price on Monday. Basis is currently 42.65.

EMC- Holding Oct 11 puts and sold some Sept 15 calls on shares that I got for less than that price. If called will repurchase and sell Oct calls. If not, will try to sell Oct 15 calls on those shares. Basis down slightly to 19.84. I am working on trimming the basis working with this stock as an experiment in patience.

DRYS- Picked up more shares today. Hold Sept 75 and 70 puts. If exercised will buy back at lower price to decrease basis some more. Bought Oct 60 puts for the shares today. Am in the process of probing for a bottom. It worked with CY. I plan on it working here and with EMC ultimately. Basis is 84. Clearly some work left.

CY--Sold all shares today. Net result is 2.20 profit on 27.95 basis since Christmas Eve 2007. Annualized is 11.3%. Used proceeds to add to DRYS.

 

[kidgas]

Time for the monthly post-expiration update:

GG--Calls at 30 were exercised as were the puts at 32.5. There were more calls at 30 than puts so the net result was that my basis increased. However, I plan on purchasing more GG today and selling the 32.5 calls for October. This will lower the basis such that 32.5 will be profitable should I be called out. Of course, I will have some uncommitted shares plus a little cash to buy more positions in a few weeks as dictated by the market. I already have plenty of October 25 puts. Basis is 33.57. That sounds worse than it is considering my purchase prices before the big decline and rebound were 31, 33.30, and 34.91. To think that my basis for those shares ended at 30.85 heading into expiration is OK with me.

ONXX--Well puts expired so I still hold all my shares. I had sold the Oct 40 calls on half my shares last week and purchased Oct 35 puts. I will sell Oct 40 or Oct 45 calls in the next week or two depending on the action of the stock. Basis is 42.46.

EMC--Trying something interesting with this one. I have a block of shares that have an overall basis of 14. So, I plan on selling some October 14 calls since Sept 15 calls expired worthless. I also took some of my Oct 11 puts and spent 1.63 net to upgrade to Oct 14 puts. In otherwords, I sold the Oct 11 puts for 0.75 and bought the Oct 14 puts for 2.38. In essence I traded 1.63 cash for 3 in equity protection. Once I sell the Oct 14 calls, this assures me that some shares will sell at 14 regardless. If the stock is over 14, that is good since my losses are declining on those shares I still hold. If the stock is under 14, I can re-purchase at a cheaper price and lower my overall basis. Current basis is 19.96.

DRYS--Remains volatile. I purchased some additional shares along the way down as well as turned my puts into cash. Right now, I hold Oct 45 puts, Oct 55 puts, and Oct 60 puts. All shares are uncommitted so I can sell calls to start generating additional cash. I have enough cash to increase my current holding by 15%. I had recently purchased some shares at 47.5 and sold them at 55. If the stock is down, I will add to my holdings, if up will sell some calls. Basis is 67.67, a marked improvement from 84.

 

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[kidgas]

Been an interesting 2 weeks. Have 2 more til expiration. Quick update--

GG--Been nibling on the way down. Picked up some more shares at 27.5 and immediately sold the 27.5 calls for 2.55. Have some 35 puts and lots of 25 puts. Sold some 35 calls earlier which look likely to expire worthless. Overall basis is currently 31.62.

ONXX--No change over past 2 weeks. Basis still 42.45. The 35 puts are ITM. Will look to decreasing the basis if the puts get exercised.

EMC--Basis is 19.96. Still trying to be patient with this one to see how I can repair it over the next several months.

DRYS--Big decline over past 2 weeks. The Oct 60, 55, and 45 puts are all ITM. I will allow these to be exercised in 2 weeks. Then I will buy back into the stock on the following Monday, buying puts and selling calls while retaining a fair amount of cash. This will lower the basis from the current 64.12. I will not increase the number of shares I hold until I see the stock start to turn upward.

On a side note: In another account, I started purchasing DRYS at 55 and have been swing trading some puts. I hold Oct 55 and Oct 30 puts yielding an average potential sell price of 42.5/share. Current basis is 45.78. I also hold a few extra Oct 35 puts purchased on Friday which will be sold at a profit should the stock be down tomorrow. I have been trying to purchase puts when the stock is up and sell them the next day when profitable to avoid the daytrade designation.

 

[MJ DeMarco]

The premiums on GG gotta be insane due to volatility ... you concur?