Friday, December 30, 2011

RTN - Closed

The Raytheon Company (RTN) Jan12 45.00 Call was exercised early on 12/29 and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$4,500.00
Net Profit$324.10
Percent Return7.20%
Annualized Return11.95%
Days Held to Expiration220 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011RTNCSP Margin UsedCSP 100 RTN @ 45.00 ($4,500.00) 
5/23/2011RTNInitial Put OptionSTO 1 Nov11 45.00 Put @ 1.57Exercised $156.98
11/18/2011RTNCSP Margin ReturnedCSP 100 RTN @ -45.00 $4,500.00 
11/18/2011RTNStock AssignedEX 1 Nov11 45.00 Put @ -45.00 ($4,500.00)$0.00
11/30/2011RTNContinued TradeSTO 1 Jan12 45.00 Call @ 1.67Exercised$0.00$167.12
12/29/2011RTNStock CalledEX 1 Jan12 45.00 Call @ 45.00 $0.00$4,500.00
12/29/2011RTN Net Cost/Profit-Loss ($4,500.00)$324.10
DTE220 Percent Profit-Loss/Annualized 7.20%11.95%

NVS - Closed

The Novartis (NVS) Dec12 55.00 Put expired on 12/16. I was going to continue this position but decided to close it today and wait to re-establish a new position once it meets my criteria. All prices include IB commissions.

Position Summary

Cost Basis$5,500.00
Net Profit$128.98
Percent Return2.35%
Annualized Return18.61%
Days Held to Expiration46 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
10/31/2011NVSCSP Margin UsedCSP 100 NVS @ 55.00 ($5,500.00) 
10/31/2011NVSInitial Put OptionSTO 1 Dec11 55.00 Put @ 1.29Expired $128.98
12/16/2011NVSCSP Margin ReturnedCSP 100 NVS @ -55.00 $0.00$5,500.00
12/16/2011NVS Net Cost/Profit-Loss ($5,500.00)$128.98
DTE46 Percent Profit-Loss/Annualized 2.35%18.61%

Wednesday, December 21, 2011

GE - Adjustment

The following adjustment was made today on General Electric (GE). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusFallen Angel*
Previous Years of Consecutive Dividend Increases32**
Fair Value Estimate$25.00
Target Buy Price$20.00
Target Margin of Safety20.00%
Actual Buy Price$18.00
Actual Margin of Safety28.00%

*GE is what I classify as a Fallen Angel (i.e. former Dividend Champion). GE cut the dividend in 2009, but has since increased it in 2010 and 2011. **Prior to cutting the dividend GE had 32 years of consecutive dividend increases.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
12/21/2011GEContinued TradeSTO 2 Feb12 18.00 Call @ 0.50  $99.15

Current Position Summary

Cost Basis($3,600.00)
Income Generated$307.46
Percent Income Generated8.54%
Annualized Income Generated11.55%
Net Profit If Assigned$307.46
Percent Return If Assigned8.54%
Annualized Return If Assigned11.55%
Days Held to Expiration270 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011GECSP Margin UsedCSP 200 GE @ 18.00 ($3,600.00) 
5/23/2011GEInitial Put OptionSTO 2 Aug11 18.00 Put @ 0.50Exercised $99.16
8/19/2011GECSP Margin ReturnedCSP 2 @ 18.00 $3,600.00 
8/19/2011GEStock AssignedEX 2 Aug11 18.00 Put @ -18.00 ($3,600.00) 
10/25/2011GEDividend ReceivedDIV 200 Dividend @ 0.15  $30.00
10/27/2011GEContinued TradeSTO 2 Dec11 18.00 Call @ 0.40Expired $79.15
12/21/2011GEContinued TradeSTO 2 Feb12 18.00 Call @ 0.50  $99.15
2/17/2012GE Totals ($3,600.00)$307.46
DTE270 Percent Income/Annualized 8.54%11.55%

ABT - Adjustment

The following adjustment was made today on Abbott Laboratories (ABT). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases38
Years of Positive Free Cash Flow (last 10 years)10
Fair Value Estimate$68.00
Target Buy Price$54.00
Target Margin of Safety20.00%
Actual Buy Price$55.00
Actual Margin of Safety19.12%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
12/21/2011ABTContinued TradeSTO 1 Feb12 57.50 Call @ 0.29  $29.36

Current Position Summary

Cost Basis($5,500.00)
Income Generated$887.09
Percent Income Generated16.13%
Annualized Income Generated7.79%
Net Profit If Assigned$1,137.09
Percent Return If Assigned20.67%
Annualized Return If Assigned9.98%
Days Held to Expiration756 days

Trade History

1/22/2010ABTCSP Margin UsedCSP 100 ABT @ 55.00 ($5,500.00) 
1/22/2010ABTInitial Put OptionSTO 1 Feb10 55.00 Put @ 1.00Exercised $100.00
2/19/2010ABTCSP Margin ReturnedCSP 100 ABT @ -55.00 $5,500.00 
2/19/2010ABTStock AssignedEX 1 Feb10 55.00 Put @ -55.00 ($5,500.00) 
2/22/2010ABTContinued TradeSTO 1 Mar10 55.00 Call @ 0.60Expired $60.14
4/30/2010ABTContinued TradeSTO 1 May10 52.50 Call @ 0.31Closed $31.14
5/15/2010ABTDividend ReceivedDIV 100 Dividend @ 0.44  $44.00
5/21/2010ABTBuy Back and Roll Out/DownBTC 1 May10 52.50 Call @ -0.03  ($3.01)
5/21/2010ABTInterim TradeSTO 1 Aug10 50.00 Call @ 1.05Expired $104.99
8/15/2010ABTDividend ReceivedDIV 100 Dividend @ 0.44  $44.00
9/1/2010ABTContinued TradeSTO 1 Jan11 55.00 Call @ 0.76Closed $76.24
11/15/2010ABTDividend ReceivedDIV 100 Dividend @ 0.44  $44.00
12/21/2010ABTBuy BackBTC 1 Jan11 55.00 Call @ -0.03Expired ($2.96)
2/15/2011ABTDividend ReceivedDIV 100 Dividend @ 0.44  $44.00
4/6/2011ABTContinued TradeSTO 1 May11 52.50 Call @ 0.25Closed $24.99
5/16/2011ABTDividend ReceivedDIV 100 Dividend @ 0.48  $48.00
5/19/2011ABTBuy Back and Roll OutBTC 1 May11 52.50 Call @ -0.90  ($89.72)
5/19/2011ABTContinued TradeSTO 1 Jun11 52.50 Call @ 1.39Closed $138.98
6/17/2011ABTBuy Back and Roll Out/UpBTC 1 Jun11 52.50 Call @ -0.03  ($3.02)
8/15/2011ABTDividend ReceivedDIV 100 Dividend @ 0.48  $48.00
6/17/2011ABTContinued TradeSTO 1 Aug11 55.00 Call @ 0.30Expired $29.98
9/20/2011ABTContinued TradeSTO 1 Nov11 55.00 Call @ 0.70  $69.98
11/15/2011ABTDividend ReceivedDIV 100 Dividend @ 0.48  $48.00
12/21/2011ABTContinued TradeSTO 1 Feb12 57.50 Call @ 0.29  $29.36
2/17/2012ABT Totals ($5,500.00)$887.09
DTE756 Percent Income/Annualized 16.13%7.79%

PH - Closed

The Parker Hannifin Corp (PH) Dec11 70.00 Put expired on 12/16. I decided to close the position today, since PH is scheduled to announce earnings on 1/19/12. I may re-establish an new position after earnings are announced. All prices include IB commissions.

Position Summary

Cost Basis$7,000.00
Net Profit$134.55
Percent Return1.92%
Annualized Return30.50%
Days Held to Expiration23 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PHCSP Margin UsedCSP 100 PH @ 70.00 ($7,000.00) 
11/23/2011PHInitial Put OptionSTO 1 Dec11 70.00 Put @ 1.35Expired $134.55
12/16/2011PHCSP Margin ReturnedCSP 100 PH @ -70.00 $0.00$7,000.00
12/16/2011PH Net Cost/Profit-Loss ($7,000.00)$134.55
DTE23 Percent Profit-Loss/Annualized 1.92%30.50%

Sunday, December 18, 2011

PG - Closed

The Procter and Gamble (PG) Dec11 60.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$6,000.00
Net Profit$83.98
Percent Return1.40%
Annualized Return22.21%
Days Held to Expiration23 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PGCSP Margin UsedCSP 100 PG @ 60.00 ($6,000.00) 
11/23/2011PGInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.84Expired $83.98
12/16/2011PGCSP Margin ReturnedCSP 100 PG @ -60.00 $0.00$6,000.00
12/16/2011PG Net Cost/Profit-Loss ($6,000.00)$83.98
DTE23 Percent Profit-Loss/Annualized 1.40%22.21%

PEP - Closed

The PepsiCo Inc (PEP) Dec11 60.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$6,000.00
Net Profit$64.98
Percent Return1.08%
Annualized Return17.19%
Days Held to Expiration23 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PEPCSP Margin UsedCSP 100 PEP @ 60.00 ($6,000.00) 
11/23/2011PEPInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.65Expired $64.98
12/16/2011PEPCSP Margin ReturnedCSP 100 PEP @ -60.00 $0.00$6,000.00
12/16/2011PEP Net Cost/Profit-Loss ($6,000.00)$64.98
DTE23 Percent Profit-Loss/Annualized 1.08%17.19%

MDT - Closed

The Medtronic Inc (MDT) Dec11 30.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$3,000.00
Net Profit$59.98
Percent Return2.00%
Annualized Return16.22%
Days Held to Expiration45 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/1/2011MDTCSP Margin UsedCSP 100 MDT @ 30.00 ($3,000.00) 
11/1/2011MDTInitial Put OptionSTO 1 Dec11 30.00 Put @ 0.60Expired $59.98
12/16/2011MDTCSP Margin ReturnedCSP 100 MDT @ -30.00 $0.00$3,000.00
12/16/2011MDT Net Cost/Profit-Loss ($3,000.00)$59.98
DTE45 Percent Profit-Loss/Annualized 2.00%16.22%

JNJ - Closed

The Johnson and Johnson (JNJ) Dec11 60.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$6,000.00
Net Profit$75.98
Percent Return1.27%
Annualized Return20.10%
Days Held to Expiration23 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011JNJCSP Margin UsedCSP 100 JNJ @ 60.00 ($6,000.00) 
11/23/2011JNJInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.76Expired $75.98
12/16/2011JNJCSP Margin ReturnedCSP 100 JNJ @ -60.00 $0.00$6,000.00
12/16/2011JNJ Net Cost/Profit-Loss ($6,000.00)$75.98
DTE23 Percent Profit-Loss/Annualized 1.27%20.10%

DOV - Closed

The Dover Corp (DOV) Dec11 45.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$4,500.00
Net Profit$90.98
Percent Return2.02%
Annualized Return16.40%
Days Held to Expiration45 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/1/2011DOVCSP Margin UsedCSP 100 DOV @ 45.00 ($4,500.00) 
11/1/2011DOVInitial Put OptionSTO 1 Dec11 45.00 Put @ 0.91Expired $90.98
12/16/2011DOVCSP Margin ReturnedCSP 100 DOV @ -45.00 $0.00$4,500.00
12/16/2011DOV Net Cost/Profit-Loss ($4,500.00)$90.98
DTE45 Percent Profit-Loss/Annualized 2.02%16.40%

AVP - Closed

The Avon Products Inc (AVP) Dec11 16.00 Put expired and the position was closed. All prices include IB commissions.

Closed Position Summary

Cost Basis$3,200.00
Net Profit$113.15
Percent Return3.54%
Annualized Return28.68%
Days Held to Expiration45 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/1/2011AVPCSP Margin UsedCSP 200 AVP @ 16.00 ($3,200.00) 
11/1/2011AVPInitial Put OptionSTO 2 Dec11 16.00 Put @ 0.57Expired $113.15
12/16/2011AVPCSP Margin ReturnedCSP 200 AVP @ -16.00 $0.00$3,200.00
12/16/2011AVP Net Cost/Profit-Loss ($3,200.00)$113.15
DTE45 Percent Profit-Loss/Annualized 3.54%28.68%

Wednesday, November 30, 2011

RTN - Adjustment

The following adjustment was made today on Raytheon Company (RTN). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChallenger
Years of Consecutive Dividend Increases7
Fair Value Estimate$49.00*
Target Buy Price$34.30
Target Margin of Safety30.00%
Actual Buy Price$45.00
Actual Margin of Safety8.16%

*The Fair Value was lowered from $61.00 to $49.00 during the holding period, which lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/30/2011RTNContinued TradeSTO 1 Jan12 45.00 Call @ 1.67  $167.12

Current Position Summary

Cost Basis($4,500.00)
Income Generated$324.10
Percent Income Generated7.20%
Annualized Income Generated10.86%
Net Profit If Assigned$324.10
Percent Return If Assigned7.20%
Annualized Return If Assigned10.86%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011RTNCSP Margin UsedCSP 100 RTN @ 45.00 ($4,500.00) 
5/23/2011RTNInitial Put OptionSTO 1 Nov11 45.00 Put @ 1.57Exercised $156.98
11/18/2011RTNCSP Margin ReturnedCSP 100 RTN @ -45.00 $4,500.00 
11/18/2011RTNStock AssignedEX 1 Nov11 45.00 Put @ -45.00 ($4,500.00) 
11/30/2011RTNContinued TradeSTO 1 Jan12 45.00 Call @ 1.67  $167.12
1/20/2012RTN Totals ($4,500.00)$324.10
DTE242 Percent Income/Annualized 7.20%10.86%

MDT - Adjustment

The following adjustment was made today on Medtronic Inc (MDT). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases33
Fair Value Estimate$46.00*
Target Buy Price$32.30
Target Margin of Safety30.00%
Actual Buy Price$38.00
Actual Margin of Safety17.39%

*The Fair Value was lowered from $48.00 to $46.00 during the holding period, which lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/30/2011MDTContinued TradeSTO 1 Jan12 38.00 Call @ 0.78  $77.98

Current Position Summary

Cost Basis($3,800.00)
Income Generated$244.24
Percent Income Generated6.43%
Annualized Income Generated9.73%
Net Profit If Assigned$244.24
Percent Return If Assigned6.43%
Annualized Return If Assigned9.73%
Days Held to Expiration241 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/24/2011MDTCSP Margin UsedCSP 100 MDT @ 38.00 ($3,800.00) 
5/24/2011MDTInitial Put OptionSTO 1 Aug11 38.00 Put @ 1.01  $101.03
8/19/2011MDTCSP Margin ReturnedCSP 100 MDT @ -38.00 $3,800.00 
8/19/2011MDTStock AssignedEX 1 Aug11 38.00 Put @ -38.00 ($3,800.00) 
9/20/2011MDTContinued TradeSTO 1 Nov11 38.00 Call @ 0.41Expired $40.98
10/28/2011MDTDividend ReceivedDIV 100 Dividend @ 0.24  $24.25
11/30/2011MDTContinued TradeSTO 1 Jan12 38.00 Call @ 0.78  $77.98
1/20/2012MDT Totals ($3,800.00)$244.24
DTE241 Percent Income/Annualized 6.43%9.73%

FDX - Adjustment

The following adjustment was made today on FedEx Corporation (FDX). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChallenger
Years of Consecutive Dividend Increases9
Fair Value Estimate$112.00
Target Buy Price$78.40
Target Margin of Safety30.00%
Actual Buy Price$80.00
Actual Margin of Safety28.57%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/30/2011FDXContinued TradeSTO 1 Jan12 85.00 Call @ 2.57  $257.12

Current Position Summary

Cost Basis($8,000.00)
Income Generated$768.43
Percent Income Generated9.61%
Annualized Income Generated14.49%
Net Profit If Assigned$1,268.43
Percent Return If Assigned15.86%
Annualized Return If Assigned23.91%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011FDXCSP Margin UsedCSP 100 FDX @ 80.00 ($8,000.00) 
5/23/2011FDXInitial Put OptionSTO 1 Oct11 80.00 Put @ 2.55Exercised $255.34
10/21/2011FDXCSP Margin ReturnedCSP 100 FDX @ -80.00 $8,000.00 
10/21/2011FDXStock AssignedEX 1 Oct11 80.00 Put @ -80.00 ($8,000.00) 
10/27/2011FDXContinued TradeSTO 1 Nov11 85.00 Call @ 2.56Expired $255.97
11/30/2011FDXContinued TradeSTO 1 Jan12 85.00 Call @ 2.57  $257.12
1/20/2012FDX Totals ($8,000.00)$768.43
DTE242 Percent Income/Annualized 9.61%14.49%

Tuesday, November 29, 2011

LOW - Adjustment

The following adjustment was made today on Lowes Companies Inc (LOW). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases48
Years of Positive Free Cash Flow (last 10 years)10
Fair Value Estimate$30.00*
Target Buy Price$21.00
Target Margin of Safety30.00%
Actual Buy Price$25.00
Actual Margin of Safety16.67%

*The Fair value was lowered from $36.00 to $30.00 during the holding period, which lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/29/2011LOWContinued TradeSTO 2 Jan12 25.00 Call @ 0.87  $174.55

Current Position Summary

Cost Basis($5,000.00)
Income Generated$505.36
Percent Income Generated10.11%
Annualized Income Generated12.51%
Net Profit If Assigned$505.36
Percent Return If Assigned10.11%
Annualized Return If Assigned12.51%
Days Held to Expiration295 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
3/31/2011LOWCSP Margin UsedCSP 200 LOW @ 25.00 ($5,000.00) 
3/31/2011LOWInitial Put OptionSTO 2 May11 25.00 Put @ 0.50Closed $100.57
5/19/2011LOWBuy Back and Roll OutBTC 2 May11 25.00 Put @ -0.28  ($55.44)
5/19/2011LOWContinued TradeSTO 2 Jun11 25.00 Put @ 0.69Closed $138.56
6/17/2011LOWBuy Back and Roll OutBTC 2 Jun11 25.00 Put @ -2.20  ($439.44)
6/17/2011LOWContinued TradeSTO 2 Oct11 25.00 Put @ 2.93Exercised $586.56
10/21/2011LOWCSP Margin ReturnedCSP 200 LOW @ -25.00 $5,000.00 
10/21/2011LOWStock AssignedEX 2 Oct11 25.00 Put @ -25.00 ($5,000.00) 
11/29/2011LOWContinued TradeSTO 2 Jan12 25.00 Call @ 0.87  $174.55
1/20/2012LOW Totals ($5,000.00)$505.36
DTE295 Percent Income/Annualized 10.11%12.51%

DOV - Adjustment

The following adjustment was made today on Dover Corp (DOV). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases55
Fair Value Estimate$73.00*
Target Buy Price$51.10
Target Margin of Safety30.00%
Actual Buy Price$55.00
Actual Margin of Safety24.66%

*The Fair value was lowered from $77.00 to $73.00 during the holding period, which lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/29/2011DOVContinued TradeSTO 1 Jan12 55.00 Call @ 2.23  $222.97

Current Position Summary

Cost Basis($5,500.00)
Income Generated$488.93
Percent Income Generated8.89%
Annualized Income Generated13.41%
Net Profit If Assigned$488.93
Percent Return If Assigned8.89%
Annualized Return If Assigned13.41%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011DOVCSP Margin UsedCSP 100 DOV @ 55.00 ($5,500.00) 
5/23/2011DOVInitial Put OptionSTO 1 Sep11 55.00 Put @ 1.39Exercised $138.98
9/16/2011DOVCSP Margin ReturnedCSP 100 DOV @ -55.00 $5,500.00 
9/16/2011DOVStock AssignedEX 1 Sep11 55.00 Put @ -55.00 ($5,500.00) 
9/27/2011DOVContinued TradeSTO 1 Nov11 55.00 Call @ 1.27Expired $126.98
11/29/2011DOVContinued TradeSTO 1 Jan12 55.00 Call @ 2.23  $222.97
1/20/2012DOV Totals ($5,500.00)$488.93
DTE242 Percent Income/Annualized 8.89%13.41%

CSX - Adjustment

The following adjustment was made today on CSX Corporation (CSX) due to a 3:1 stock split. All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChallenger
Years of Consecutive Dividend Increases6
Fair Value Estimate$31.00
Target Buy Price$21.70
Target Margin of Safety30.00%
Actual Buy Price$21.67
Actual Margin of Safety30.10%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/29/2011CSXContinued TradeSTO 1 Jan12 21.67 Call @ 0.67  $66.98

Current Position Summary

Cost Basis($2,167.00)
Income Generated$140.96
Percent Income Generated6.50%
Annualized Income Generated10.89%
Net Profit If Assigned$140.96
Percent Return If Assigned6.50%
Annualized Return If Assigned10.89%
Days Held to Expiration218 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
6/16/2011CSXCSP Margin UsedCSP 100 CSX @ 21.67 ($2,167.00) 
6/16/2011CSXInitial Put OptionSTO 1 Nov11 21.67 Put @ 0.74Exercised $73.98
11/18/2011CSXCSP Margin ReturnedCSP 100 CSX @ -21.67 $2,167.00 
11/18/2011CSXStock AssignedEX 1 Nov11 21.67 Put @ -21.67 ($2,167.00) 
11/29/2011CSXContinued TradeSTO 1 Jan12 21.67 Call @ 0.67  $66.98
1/20/2012CSX Totals ($2,167.00)$140.96
DTE218 Percent Income/Annualized 6.50%10.89%

Wednesday, November 23, 2011

TEVA - New Position

A new CSP position was established today on Teva Pharmaceutical Industries Ltd (TEVA). All prices include IB commissions.

Note: This is the second position on TEVA.

CriteriaValue
Dividend Champions StatusContender
Years of Consecutive Dividend Increases12
Fair Value Estimate$58.00
Target Buy Price$40.60
Target Margin of Safety30.00%
Actual Buy Price$35.00
Actual Margin of Safety39.66%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011TEVACSP Margin UsedCSP 100 TEVA @ 35.00 ($3,500.00) 
11/23/2011TEVAInitial Put OptionSTO 1 Jan12 35.00 Put @ 1.01  $100.98

Position Summary

Cost Basis($3,500.00)
Income Generated$100.98
Percent Income Generated2.89%
Annualized Income Generated18.16%
Net Profit If Assigned$100.98
Percent Return If Assigned2.89%
Annualized Return If Assigned18.16%
Days Held to Expiration58 days

SPY - New Position

A new CSP position was established today on SPDR S&P 500 ETF (SPY). All prices include IB commissions.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011SPYCSP Margin UsedCSP 100 SPY @ 96.00 ($9,600.00) 
11/23/2011SPYInitial Put OptionSTO 1 Jan12 70.00 Put @ 1.09  $109.28

Position Summary

Cost Basis($9,600.00)
Income Generated$109.28
Percent Income Generated1.14%
Annualized Income Generated7.16%
Net Profit If Assigned$109.28
Percent Return If Assigned1.14%
Annualized Return If Assigned7.16%
Days Held to Expiration58 days

PH - New Position

A new CSP position was established today on Parker Hannifin Corp (PH). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases54
Fair Value Estimate$97.00
Target Buy Price$67.90
Target Margin of Safety30.00%
Actual Buy Price$70.00
Actual Margin of Safety27.84%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PHCSP Margin UsedCSP 100 PH @ 70.00 ($7,000.00) 
11/23/2011PHInitial Put OptionSTO 1 Dec11 70.00 Put @ 1.35  $134.55

Position Summary

Cost Basis($7,000.00)
Income Generated$134.55
Percent Income Generated1.92%
Annualized Income Generated30.50%
Net Profit If Assigned$134.55
Percent Return If Assigned1.92%
Annualized Return If Assigned30.50%
Days Held to Expiration23 days

PG - New Position

A new CSP position was established today on Procter and Gamble (PG). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampiom
Years of Consecutive Dividend Increases55
Fair Value Estimate$72.00
Target Buy Price$57.60
Target Margin of Safety20.00%
Actual Buy Price$60.00
Actual Margin of Safety16.67%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PGCSP Margin UsedCSP 100 PG @ 60.00 ($6,000.00) 
11/23/2011PGInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.84  $83.98

Position Summary

Cost Basis($6,000.00)
Income Generated$83.98
Percent Income Generated1.40%
Annualized Income Generated22.21%
Net Profit If Assigned$83.98
Percent Return If Assigned1.40%
Annualized Return If Assigned22.21%
Days Held to Expiration23 days

PEP - New Position

A new CSP position was established today on PepsiCo Inc (PEP). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases39
Fair Value Estimate$76.00
Target Buy Price$60.80
Target Margin of Safety20.00%
Actual Buy Price$60.00
Actual Margin of Safety21.05%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011PEPCSP Margin UsedCSP 100 PEP @ 60.00 ($6,000.00) 
11/23/2011PEPInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.65  $64.98

Position Summary

Cost Basis($6,000.00)
Income Generated$64.98
Percent Income Generated1.08%
Annualized Income Generated17.19%
Net Profit If Assigned$64.98
Percent Return If Assigned1.08%
Annualized Return If Assigned17.19%
Days Held to Expiration23 days

JNJ - New Position

A new CSP position was established today on Johnson and Johnson (JNJ). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases49
Fair Value Estimate$77.00
Target Buy Price$61.60
Target Margin of Safety20.00%
Actual Buy Price$60.00
Actual Margin of Safety22.08%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011JNJCSP Margin UsedCSP 100 JNJ @ 60.00 ($6,000.00) 
11/23/2011JNJInitial Put OptionSTO 1 Dec11 60.00 Put @ 0.76  $75.98

Position Summary

Cost Basis($6,000.00)
Income Generated$75.98
Percent Income Generated1.27%
Annualized Income Generated20.10%
Net Profit If Assigned$75.98
Percent Return If Assigned1.27%
Annualized Return If Assigned20.10%
Days Held to Expiration23 days

BDX - New Position

A new CSP position was established today on Becton Dickinson and Company (BDX). All prices include IB commissions.

Note: This is the second position on BDX.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases38
Fair Value Estimate$89.00
Target Buy Price$71.20
Target Margin of Safety20.00%
Actual Buy Price$65.00
Actual Margin of Safety26.97%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011BDXCSP Margin UsedCSP 100 BDX @ 65.00 ($6,500.00) 
11/23/2011BDXInitial Put OptionSTO 1 Jan12 65.00 Put @ 1.09  $108.98

Position Summary

Cost Basis($6,500.00)
Income Generated$108.98
Percent Income Generated1.68%
Annualized Income Generated10.55%
Net Profit If Assigned$108.98
Percent Return If Assigned1.68%
Annualized Return If Assigned10.55%
Days Held to Expiration58 days

LOW - Adjustment

The following adjustment was made today on Lowes Companies Inc (LOW). All prices include IB commissions.

Note: This is the second position on LOW.

CriteriaValue
Dividend Champions StatusChampion
Years of Consecutive Dividend Increases48
Fair Value Estimate$30.00
Target Buy Price$21.00
Target Margin of Safety30.00%
Actual Buy Price$21.00
Actual Margin of Safety30.00%

*The Fair value was lowered from $36.00 to $30.00 during the holding period, which slightly lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/23/2011LOWContinued TradeSTO 2 Jan12 21.00 Put @ 0.65  $130.55

Current Position Summary

Cost Basis($4,200.00)
Income Generated$361.66
Percent Income Generated8.61%
Annualized Income Generated12.99%
Net Profit If Assigned$361.66
Percent Return If Assigned8.61%
Annualized Return If Assigned12.99%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011LOWCSP Margin UsedCSP 200 LOW @ 21.00 ($4,200.00) 
5/23/2011LOWInitial Put OptionSTO 2 Oct11 21.00 Put @ 0.56Expired $112.56
10/31/2011LOWContinued TradeSTO 2 Nov11 21.00 Put @ 0.59Expired $118.55
11/23/2011LOWContinued TradeSTO 2 Jan12 21.00 Put @ 0.65  $130.55
1/20/2012LOW Totals ($4,200.00)$361.66
DTE242 Percent Income/Annualized 8.61%12.99%

Tuesday, November 22, 2011

The Definition of Risk

Many people define risk in terms of price volatility and/or price movement. They believe a stock is risky if its price swings are wide or declining, and believe a stock is less risky if its price swings are narrow or rising.

My opinion differs greatly from the above. From my perspective, risk doesn't equate to volatility or price movement, it equates to what Ben Graham called a "permanent loss of capital". And by "permanent", I don't mean the day-to-day fluctuations in the mark-to-market value, I mean "permanent", as in "realized loss".

I use three categories of risk when analyzing a company for potential investment:

  • Fundamental Risk
  • Valuation Risk
  • Cash Flow Risk

Fundamental Risk is the risk associated with the company financials, such as revenues, expenses, debt, cash flow, etc. and requires thorough analysis of the financial statements. You wouldn't buy a used car these days without checking the CarFax, and neither should you buy a stock without checking the financial statements. To minimize fundamental risk, I look for wide or narrow moat companies that are financially stable, have sustainable revenues and a history of generating positive free cash flow.

Valuation Risk is the risk associated with the fair value of the company vs its current market price. If a stock is overpriced in relation to its fair value, there's a greater risk of loss. On the other hand, if a stock is undervalued in relation to its fair value, there's a greater potential for gain, and the more undervalued the better. As Buffett said "If you buy a dollar for 60 cents, it's riskier than if you buy a dollar for 40 cents, but the expectation for reward is higher in the later case". In other words, risk/reward are not always correlated. Sometimes, less risk means greater reward. To minimize valuation risk, I look for companies that are trading at a discount to fair value, and always with a Margin of Safety between 20-40% lower than fair value, just in case the fair value estimate is wrong or changes due to fundamentals.

Cash Flow Risk is the risk associated with investor cash flow, meaning cash flow generated as a result of an investment in a given company. This usually means dividends received, but for a CC/CSP portfolio, it also means premiums from the sale of call and put options. To minimize cash flow risk, I look for companies with a history of consecutive dividend increases. For a CC/CSP portfolio, I look for stocks with good option liquidity and premiums that meet my cash flow requirements.

If a company passes all three risk assessments, then I consider it low risk. I'll allocate up to a maximum 10% of working capital per company, but will leg in with smaller positions of at least 1%. I normally establish an initial position by selling a CSP 20-40% below fair value. In order to get assigned, the stock has to decline in price. So, where those who define risk as volatility or declining price will avoid this stock, I'm happy to take assignment and then sell a call at or above the purchase price. If the company still passes all three risk assessments, I'll even sell another CSP at a lower strike and greater discount to fair value. This second CSP is even less risky than the first (i.e. a dollar for 40 cents vs 60 cents). I'll repeat this up to 10% of working capital per company. Currently, my average position size is around 3%, with the max between 5-6%.

So, that's my definition of risk. What's yours?

Sunday, November 20, 2011

SPY - Closed

The SPDR S&P 500 ETF (SPY) Nov11 88.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$8,800.00
Net Profit$113.28
Percent Return1.29%
Annualized Return8.24%
Days Held to Expiration57 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
9/22/2011SPYCSP Margin UsedCSP 100 SPY @ 88.00 ($8,800.00) 
9/22/2011SPYInitial Put OptionSTO 1 Nov11 88.00 Put @ 1.13Expired $113.28
11/18/2011SPYCSP Margin ReturnedCSP 100 SPY @ -88.00 $0.00$8,800.00
11/18/2011SPY Net Cost/Profit-Loss ($8,800.00)$113.28
DTE57 Percent Profit-Loss/Annualized 1.29%8.24%

PH - Closed

The Parker Hannifin Corp (PH) Nov11 55.00 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$5,500.00
Net Profit$141.97
Percent Return2.58%
Annualized Return16.24%
Days Held to Expiration58 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
9/21/2011PHCSP Margin UsedCSP 100 PH @ 55.00 ($5,500.00) 
9/21/2011PHInitial Put OptionSTO 1 Nov11 55.00 Put @ 1.42Expired $141.97
11/18/2011PHCSP Margin ReturnedCSP 100 PH @ -55.00 $0.00$5,500.00
11/18/2011PH Net Cost/Profit-Loss ($5,500.00)$141.97
DTE58 Percent Profit-Loss/Annualized 2.58%16.24%

CSX - Closed

The CSX Corporation (CSX) Nov11 21.67 Put expired and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$4,334.00
Net Profit$148.98
Percent Return3.44%
Annualized Return8.09%
Days Held to Expiration155 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
6/16/2011CSXCSP Margin UsedCSP 200 CSX @ 21.67 ($4,334.00) 
6/16/2011CSXInitial Put OptionSTO 2 Nov11 21.67 Put @ 0.74Expired $148.98
11/18/2011CSXCSP Margin ReturnedCSP 200 CSX @ -21.67 $0.00$4,334.00
11/18/2011CSX Net Cost/Profit-Loss ($4,334.00)$148.98
DTE155 Percent Profit-Loss/Annualized 3.44%8.09%

Tuesday, November 8, 2011

PFE - Closed

The Pfizer Inc (PFE) Nov11 19.00 Call was exercised yesterday (the day before Ex-dividend date) to capture the dividend and the position was closed. All prices include IB commissions.

Position Summary

Cost Basis$3,800.00
Net Profit$411.11
Percent Return10.82%
Annualized Return23.50%
Days Held to Expiration168 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011PFECSP Margin UsedCSP 200 PFE @ 19.00 ($3,800.00) 
5/23/2011PFEInitial Put OptionSTO 2 Aug11 19.00 Put @ 0.44Exercised $88.32
8/19/2011PFECSP Margin ReturnedCSP 200 PFE @ -19.00 $3,800.00 
8/19/2011PFEStock AssignedEX 2 Aug11 19.00 Put @ -19.00 ($3,800.00)$0.00
8/29/2011PFEContinued TradeSTO 2 Sep11 19.00 Call @ 0.39Expired$0.00$78.31
9/20/2011PFEContinued TradeSTO 2 Oct11 19.00 Call @ 0.21Expired$0.00$42.31
10/27/2011PFEContinued TradeSTO 2 Nov11 19.00 Call @ 1.01Exercised$0.00$202.31
11/7/2011PFEStock CalledEX 2 Nov11 19.00 Call @ 19.00 $0.00$3,799.86
11/7/2011PFE Net Cost/Profit-Loss ($3,800.00)$411.11
DTE168 Percent Profit-Loss/Annualized 10.82%23.50%

Thursday, November 3, 2011

TEVA - Closed

The Teva Pharmaceutical Industries Ltd (TEVA) Oct11 35.00 Put expired on 10/21. I was going to continue the position but decided to close it today. All prices include IB commissions.

Position Summary

Cost Basis$3,500.00
Net Profit$86.36
Percent Return2.47%
Annualized Return29.05%
Days Held to Expiration31 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
9/20/2011TEVACSP Margin UsedCSP 100 TEVA @ 35.00 ($3,500.00) 
9/20/2011TEVAInitial Put OptionSTO 1 Oct11 35.00 Put @ 0.86Expired $86.36
10/21/2011TEVACSP Margin ReturnedCSP 100 TEVA @ -35.00 $0.00$3,500.00
10/21/2011TEVA Net Cost/Profit-Loss ($3,500.00)$86.36
DTE31 Percent Profit-Loss/Annualized 2.47%29.05%

TEVA - Adjustment

The following adjustment was made today on Teva Pharmaceutical Industries Ltd (TEVA). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusContender
Years of Consecutive Dividend Increases12
Fair Value Estimate$63.00
Target Buy Price$45.00
Target Margin of Safety28.57%
Actual Buy Price$45.00
Actual Margin of Safety28.57%

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/3/2011TEVAContinued TradeSTO 1 Jan12 45.00 Call @ 0.91  $91.13

Current Position Summary

Cost Basis($4,500.00)
Income Generated$214.11
Percent Income Generated4.76%
Annualized Income Generated7.18%
Net Profit If Assigned$214.11
Percent Return If Assigned4.76%
Annualized Return If Assigned7.18%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011TEVACSP Margin UsedCSP 100 TEVA @ 45.00 ($4,500.00) 
5/23/2011TEVAInitial Put OptionSTO 1 Sep11 45.00 Put @ 1.23Exercised $122.98
9/16/2011TEVACSP Margin ReturnedCSP 100 TEVA @ -45.00 $4,500.00 
9/16/2011TEVAStock AssignedEX 1 Sep11 45.00 Put @ -45.00 ($4,500.00) 
11/3/2011TEVAContinued TradeSTO 1 Jan12 45.00 Call @ 0.91  $91.13
1/20/2012TEVA Totals ($4,500.00)$214.11
DTE242 Percent Income/Annualized 4.76%7.18%

STRA - Adjustment

The following adjustment was made today on Strayer Education Inc (STRA). All prices include IB commissions.

CriteriaValue
Dividend Champions StatusChallenger
Years of Consecutive Dividend Increases7
Fair Value Estimate$130.00*
Target Buy Price$78.00
Target Margin of Safety40.00%%
Actual Buy Price$95.00
Actual Margin of Safety26.92%

*The Fair value was lowered from $172.00 to $130.00 during the holding period, which lowered my Margin of Safety.

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
11/3/2011STRAContinued TradeSTO 1 Jan12 95.00 Call @ 4.63  $462.97

Current Position Summary

Cost Basis($9,500.00)
Income Generated$781.95
Percent Income Generated8.23%
Annualized Income Generated12.41%
Net Profit If Assigned$781.95
Percent Return If Assigned8.23%
Annualized Return If Assigned12.41%
Days Held to Expiration242 days

Trade History

DateStockDescriptionTransactionStatusStock InvestmentIncome Generated
5/23/2011STRACSP Margin UsedCSP 100 STRA @ 95.00 ($9,500.00) 
5/23/2011STRAInitial Put OptionSTO 1 Oct11 95.00 Put @ 3.19Exercised $318.98
10/21/2011STRACSP Margin ReturnedCSP 100 STRA @ -95.00 $9,500.00 
10/21/2011STRAStock AssignedEX 1 Oct11 95.00 Put @ -95.00 ($9,500.00) 
11/3/2011STRAContinued TradeSTO 1 Jan12 95.00 Call @ 4.63  $462.97
1/20/2012STRA Totals ($9,500.00)$781.95
DTE242 Percent Income/Annualized 8.23%12.41%