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Archive for February 14th, 2013

Posted by Martin February 14, 2013

Expiration Friday – 13.71% gain

Expiration Friday - 13.71% gain

Tomorrow will be the time to reap the profits, harvest the gains or count the loses. Since the day I decided to trade only covered calls and cash secured puts and buying dividend stocks my goal was not to lose a penny. As Warren Buffets says it.

Easy said, difficult to do. I have a couple of options trades which are not going well as far as now, but I have plenty of time to wait since the expiration day is far away and a lot of things can happen until then. So there is no need for panicking.

I hold a covered call of MBIA (MBI) stock, which is now deep in the money and that means it will get execute tomorrow. The option will be exercised and I will be required to sell my shares of MBI.

The guy on the other side will make nice profit. He will buy the stock for $9.00 a share and sell it for 10.95. Very nice gross profit of $1.95 a share. He paid 0.52 to buy my call, so his net profit (without commissions) will be 1.43 per contract.

But what about me? will I lose money?

This trade didn’t go well from the beginning and later I was even considering closing the ugly trade. But as many times in the past, the ugly ducklings turn into nice swans, this trade also turned to be a swan. If you remember, I opened this trade with a purpose of being assigned. It was my goal to get assigned because it was how I could make money on this trade.

Here are the trade details:

Bought 100 shares MBI: $8.18
Strike: $9.00
Sold 1 Covered Call: $0.52
Total Purchase: $766.00
Commissions: $8.78
Total purchase: $774.78
   
Expected Option Assignment: $900.00
Option Assignment Fee: $19.00
Expected Proceeds: $881.00
   
Expected Net Gain: $106.22
Expected ROI: 13.71%

The call option is deep in the money, and it is very unlikely that it falls below $9.00 a share tomorrow, so I can consider this trade as victory and Count the Money…

My other options have expirations in March, May, July and August 2013 and there is a plenty of time (value) in those options.

Happy Trading!

Posted by Martin February 14, 2013

New Trade – ARMOUR Residential REIT, Inc. (ARR) addition

New Trade - ARMOUR Residential REIT, Inc. (ARR) addition

This morning Armour Residential (ARR) opened 5% lower due to SPO. There may be many reasons for SPO but thoe one I have read on the internet would be financing new projects. With a book value at $6.73 this seems to be a good sign. It is also how REITs get their financing. They issue SPO, the price drops, later, usually within 30 days they get back to where they were before. It looks like a great opportunity to add shares to my portfolio.

I bought 100 shares this morning:

02/14/2013 11:31:46 Bought 100 ARR @ 6.7399

Total shares held as of today: 405
Estimated annual dividend: $388.80
Consecutive Dividend Increase: 0 years
Dividend yield today: 14.10%
Dividend 5yr Growth: N/A
Dividend paid since: 2010