During March I made a few more trades which I haven’t reported due to lack of time. I decided to close a trade against Realty Income (O) where the option was traded at 0.05 per contract, so I bought the put option back. The return on investment for this trade was 8.58% ($316.00).
This trade happened before the market correction and Realty Income drop in price and way before expiration day. I was able to release my maintenance cash and open a new trade.
GME trade details
I opened two new trades in GameStop (GME) as these days investors are nervous about this stock due to Walmart (WMT) entering into a “used games” business. Let’s see how WMT succeeds in this endeavor. Analysts do not expect Walmart to gain much with the “buy used games” program which would be damaging GME, since GME has a stable base of clients using their PowerUp rewards program provides strong incentive of using points to buy more games. The company also benefits from expertise in dealing with local regulation and has a proprietary system for used inventory and pricing.
Morningstar analysts says to this:
we also believe GameStop’s competitive advantages in the preowned business relative to other brick-and-mortar retailers is fairly robust. Many retailers have entered the preowned market in the past, including Best Buy, Target, Amazon, and Wal-Mart itself. However, these efforts have not gained meaningful traction, and NPD data suggests that GameStop has gained share in the video game market.
GME pays dividend (3.03% yield), it however has no dividend history as it started paying dividend in 2012 and hasn’t increased it since. But we will see how this ends up.
All mess around WMT makes premiums very attractive and I believe that with a proper strategy it is possible to navigate put selling against GME successfully.
STO 1 GME Apr 18 2014 34 put @ 0.81
STO 1 GME Oct 17 2014 36 put @ 3.71
I am expecting my April contract to expire worthless and my October contract to either expire or lose value so I can buy it back. If that won’t happen, I will roll those contracts out and lower.
GLW trade details
Today I decided to close a trade against Corning Inc. (GLW). This trade wasn’t completely worthless, as it traded for 0.14 a contract, so buying it back incurred commission, but I was satisfied with the premium and decided to close the trade in order to open a new one. Instead of waiting until the end of May, I could close it today and collect $101.43 (7.53%) gain (after commissions). I released my maintenance cash and I could open a new trade, this time against Taser Int. (TASR).
BTC 1 GLW May 16 2014 17 put @ 0.14
TASR trade details
By closing GLW trade above I could open another trade against Taser Int. (TASR). Today put options are becoming more expensive as investors are getting nervous and buying more put protections. This demand pushes prices up and it becomes juicy again selling puts. Since we can see weakness in the market and who knows what happens in the next few months I decided to sell a long term contract. If markets start running up again, this contract will lose and I will buy it back. If it won’t run up and we will see a correction, I hope I am giving enough time to my trade to overcome it and gain again when investors become reasonable again.
STO 1 TASR Sep 19 2014 16 put @ 1.60
These trades are making my March 2014 quite successful. Hopefully it will stay that way.