In my last post, I updated many of the changes that had occurred in my positions due to options expiration last Friday. Well because of those changes, it has been a busy week and I have had a lot of additional adjustments happening so I thought I would make a few comments.
As you know, my position in Silver Wheaton (SLW) was sold due to the exercise of the April $30 put options. I bought back one-third of that position at $28.50 plus a few more shares at $28 snagging a significant discount. Now I went ahead and sold some May $29 calls for $1.25 per share meaning that I will have made the $1.50 discount on the repurchase, $1.25 on the premium, but lost $1 for selling at a lower strike. However, the net will be $1.75 per share profit provided that the stock gets called away.
Yesterday, I was able to buy back the next third for $29.90. I still have the stock uncommitted so I could sell some additional calls. Gold and silver are up a little this morning. I suspect the weak GDP number means that traders are thinking the Fed might have to get more active in trying to stimulate the economy and inflation expectations down the road have been heightened. Who really knows? I will keep trading my system month to month. Right now, I am working on decreasing the basis in SLW so any shares that I add will do just that.
Do to the discount that I got in the repurchase and cash from selling calls, I think I might be able to add some shares to be ready for the next upswing. As I work out my position in AKS over the next few months, I want to use those funds as well to add additional shares of SDRL and SLW.
This has been a big week in Onyx Pharmaceuticals (ONXX). Buyout rumors caused the stock to pop over 8% on Wednesday. I ended up buying back some May $40 calls that I had sold as well as some May $42 calls. I then sold some May $45 calls and plan on selling some $47 calls when I can. Unfortunately, yesterday was sideways and today is looking somewhat weak to start out. I may just buy some put options to protect some of the gains and see what happens. I would hate to not be able to take advantage of a nice little spike, but if the rumors dissipate then the stock will languish for sure.
Other Calls That Were Sold on Strength
I also managed to sell some SDRL May $38 calls, STX May $30 calls, and INTC May $28 calls on strength yesterday. I had simply placed some good-til-cancelled (GTC) limit orders earlier in the week and they happened to all hit yesterday. It was definitely a good thing with STX since it looks to drop about 8% today. Let me tell you, volatility can be crazy sometimes which is why I have many protective puts since it is impossible to know how the market will react.
This past Friday, there were several happenings with my retirement portfolio as options expiration happened. I had several calls expire, a few that were exercised and some puts that were exercised as well. So let’s quickly run through the activity and explain what I plan to do for each of the positions in the portfolio. I will start with the simple and work toward the more complex.
Expiring Call Options
I had several call options expire. Some of the outstanding calls for Seadrill (SDRL), AK Steel (AKS), Seagate Technology (STX), DryShips (DRYS), and Intel (INTC) expired. The plan will be to sell some more on a day when the market is showing a little bit of strength. I already have some outstanding in-the-money calls on SDRL, AKS, and STX from when I felt that I should be a little defensive and raise some cash. So I will likely sell some out-of-the-money calls in case the market is able to hang on into May. Right now it is a little difficult to tell which way it will go, but I have a few weeks to see what happens.
I will also need to sell some calls on INTC when I get a chance. I am using the stock as part of my dividend plan for 2012, but want to enhance the return by getting a little extra cash. I am thinking that the stock has made a great run since August when I first purchased it and may be in for some sideways action. Again, it is just one of those things that it may be worth sitting back for a week or so to see what happens. If the stock drops some more, I could add to my position and pick up more dividends in the process.
Exercised Call Options
I did have some call options that were exercised on Friday. Some of my stock in DRYS was sold at $3 and in STX at $28. I was already able to buy some of the DRYS stock back yesterday at $3 so I managed to keep all the premium and not change my position on those shares. I still have to buy some more back, but will be seeing what happens this week. If it shows some strength, I might be able to sell some $3.50 calls. If not, then I will sell some May $3 calls and try to pick up more shares at $3.
With STX, I still have quite a few shares and am counting on the dividends so I will be wanting to re-purchase those shares in the next few days. I will probably sell some calls right away when I do since I will want to lower my basis. This is a volatile stock in which I have already locked in a profit by purchasing May $25 put options. So I can feel confident that whatever decision I make will only help and not hurt me.
Exercised Put Options
This is one of the more interesting trades to discuss, and I suppose the most complicated although it really isn’t that difficult. I own shares of Silver Wheaton and have been trading it up and down over the past 14 months. I am currently negative in the position due to a few rolls that I made so I am working to decrease the basis. I had some April $36 and $35 calls expire meaning I kept some decent premium.
However, the stock has performed poorly enough as of late that my April $30 puts ended up being exercised. Yesterday, I bought some May $25 puts and began getting back into my previous position. I purchase some shares at $28.50 and a few more at $28. That means those shares were sold at $30, and I was able to buy back at a discount. As long as I am getting shares below $30, I am making a profit on that portion of the transaction.
The plan is to purchase a few shares here and there while seeing what the stock will do. When I have a decent sense of what is happening, I will sell some covered calls to profit on that portion of the transaction and buy some more shares. Ultimately, I will likely end up with more shares than I had started with for the same amount of cash expense. Plus I will still have protection below $25 in case the bottom drops out.
If I can sell some May $29 or $30 calls and fill out the remainder of my position under $30 per share, I should end up ahead of where I otherwise would have been. I will retain some shares against which I haven’t sold calls just in case there is a big run up in the stock as well. Ultimately, I am needing to trim about $6 per share from the basis to get back into the black. It will simply require a little bit of patience. In the meantime, I can collect a few dividends on the stock.
So, do you have any investing plans heading into the summer? Feel free to share or comment.
Sorry about not posting yesterday, but I had worked 50 hours during the week even with taking a half vacation day yesterday to pack and otherwise prepare for a soccer tournament in Kentucky today and tomorrow. Between the work and everything else that I have going on, I was quite tired and didn’t have the energy to do much else. But I did get almost 8 hours of sleep last night so I am feeling quite well. I will also likely get some extra rest tonight as well since I have no major obligations.
Unfortunately, it is misting and about 46 degrees outside. I was quite chilled this morning after the game so it is nice to have a few hours to warm up in the hotel. I don’t think the weather will be getting any warmer today. Maybe we can get lucky tomorrow and see a bit of sunshine like last weekend when it rained on Saturday but was sunny on Sunday.
The New Blog
I launched the new blog, Penny Thots, on April 1st. So far, things seem to be going reasonably well. I am a little disappointed in the level of traffic. I was hoping that it might be better, but I really can’t complain that much. It is starting to pick up and should only get better as time goes on. If you haven’t had a chance to check it out, feel free to do so at PennyThots.com. Every day, new content is added so you may want to subscribe as well.
Here are the Carnivals that have featured my blogs the past few weeks (CFM = Cash Flow Mantra, GPM = Grand Per Month, PT = Penny Thots):