Gold Gets Hammered

Gold got smacked hard today and DGP closed well below my stop. That will happen when you're using a tight stop on a leveraged ETF. I'll close out my DGP trade in the morning. I will update this post after the trade is done.

Update:

Gold is bouncing a bit this morning which gave me a bit better of an exit point.

• Sell: 50 shares of DGP @ $56.08

I finish this trade with a gain of $5.22(10%) in about 2 months.

The Numbers

• Cash: +$2,804
• Long Stock: -$2,804

New Trades

Well I got the bounce in gold off support again so I'm still in that trade with another nice pop this morning. If I change my stop or close that trade I'll post again.

But today I put on a couple more trades, selling naked puts on a couple great stocks. The first one is Berkshire Hathaway, which I've traded before. In the Berkshire trade I wrote about how Buffett will always step up to buy at 1.1x book value. In the latest shareholder letter from Buffett, he talked again about buying at that level. Additionally, book value grew at 4.6% and is now right around $73/'B' Share(equal to 1/1500th of an 'A' Shares). Since I still feel like there's a lot of potential for short- to mid-term weakness, I'm going out a little farther.

• Sell to Open: 1 BRKB Jan 19 2013 72.5 Put @ $3.56

With about $1300 in margin requirements, this will net me 27% return in about 10.5 months.

The second trade is Annaly Capital Management(NLY). NLY is a mortgage REIT that deals only in agency-guaranteed loans. They just borrow money from the government at low(some might say artificially low) rates and use it buy mortgages that are guaranteed by Freddie Mac and Fannie Mae. Since they're a REIT, 90% of their earnings come back to the shareholders resulting in nearly a 14% dividend that's super safe. With the Fed promising to keep interest rates low until 2014, NLY will continue to bank big profits. It's a great stock that I've owned and traded in the past. I'm going to do a two-part trade on this one. The first will be a longer term out-the-money put mostly just to collect cash. The second will be a shorter term in-the-money put intended to get a stock position that I can use to collect dividends and sell covered calls against. If the stock rises above 17 and we don't get the stock, we'll just do it again and collect put premiums instead of dividends.

• Sell to Open: 1 NLY Jul 21 2012 16.0 Put @ $0.70
• Sell to Open: 1 NLY Apr 21 2012 17.0 Put @ $0.80

The Numbers

• Cash: +$506
• Short Option: -$515
• Margin: -$2000

Walmart

Walmart(WMT) is down about 4% after their earnings this morning. Still not quite a screaming value at $60/share, but I am going to take advantage to sell a put.

• Sell to Open: 1 WMT Jan 19 2013 55.0 Put @ $2.50

This will work out to 25% in just under a year. Worse case scenario, I buy WMT at $52.50 and collect dividends and sell covered calls on a rock solid company.

The Numbers

• Cash: +$250
• Short Option: -$255
• Margin: -$1000

Out of NETL

Gonna go ahead and close out the NETL arbitrage trade this morning for a nickel. This option didn't expire until April, so there was no point in tying up the margin for an extra $5.

• Buy to Close: 1 NETL Apr 21 2012 49.0 Puts @ $0.05

This trade produced nearly 15% on margin in just 4.5 months.

The Numbers

• Cash: -$5
• Short Option: +$5
• Margin: +$1000

Gold Update
My DGP gold position has been flirting with it's trailing stop the last couple days. If we don't get a bounce this afternoon or tomorrow it will likely break it's trailing stop(currently $56.53) and I will close the position.

Out of MSFT

The naked call I was holding against my Microsoft stock was exercised early(most likely someone chasing the dividend since yesterday was the ex-div date). Anyway, instead of trying to get back into this right now I'm just going to take my profits on this one and wait for a better chance. The option was exercised at $30 so that's a total capital gain of $4.59/share(18%). Additionally I received another $0.52/share in dividends and $0.42/share in option premium(that's including the $0.46 I lost when the shares were called away and I rebought) for a total gain of 21.8% in about 9 months.

• Sell 100 shares of MSFT @ $30.00

The Numbers

• Cash: +$3,000
• Long Stock: -$3,025
• Short Option: +$35

I will try and get back into MSFT if it drops back down in the next couple weeks.

Rolling, Rolling, Rolling

Haven't been very active lately, but I am going to go ahead and roll out the MSFT calls from last week another week. With so little volatility, there wasn't much premium and they barely covered commissions, but I don't want to dump the stock yet.

• Buy to Close: 1 MSFT Feb 10 2012 30.0 Call @ $0.52
• Sell to Open: 1 MSFT Feb 18 2012 30.0 Call @ $0.56

The Numbers

• Cash: +$4
• Short Option: -$4

Hahahaha...Bite me MSFT!

Isn't that awesome! Once again Microsoft is running higher and my greed yesterday is going to bite me again. This time it was the employment report this morning. Might be time to lay off the covered calls until this bullishness in the markets fades a little. If the calls I sold yesterday are still in the money towards the end of the day I'll roll them forward a week or so. I'll update this post if I do.

Update: I rolled the MSFT calls out one week on Friday afternoon.

• Buy to Close: 1 MSFT Feb 03 2012 30.0 Call @ $0.28
• Sell to Open: 1 MSFT Feb 10 2012 30.0 Call @ $0.44

The Numbers:

• Cash: +$16
• Short Option: -$16

More MSFT Calls

A couple weeks ago I got a little greedy with the Microsoft covered calls, but I'm going to try it again.

• Sell to Open: 1 MSFT Feb 03 2012 30.0 Call @ $0.11

MSFT closed the day just $0.05 away from the $30 strike, but I feel that Microsft(and the overall market in general) is a little stretched to the upside and due for at least a pause. These expire tomorrow, so even if it jumps a bit tomorrow, it shouldn't run up too much and even if the option gets exercised, it should be minor. Last week, even with earnings giving the stock a huge boost, it was still only a minor loss.

The Numbers:

• Cash: +$11
• Short Option: -$11