Sunday, August 9, 2009

August trade is in - Finally

Up up and AWAY!

The market continues to climb the wall of worry. Since the July expiration date I have been trying to sell an out of the money Put on Realty Income (O) for a 2% return that has a 70% or more chance of expiring. With the near-term overbought state of the market as well as 'O' I was waiting for a pull back so I could get in on the $20 strike price Puts. But 'O' and the market just kept climbing which of course lowers the price of a Put and our premium. Possible trades with a Put premium of 2% and a 70% or more probability of expiring did not occur for the $20 and the $22.50 options. However, as O's stock price climbed past $26 the option income planets aligned and I was able to sell the $25 Puts for 55 cents for just over 2% (.55 / 25.00 = 2.2%). By the way, the option symbol for the Aug $25 Put is OTE. With only 14 days left to the August expiration O's price had reached $26.12 which gave it a 72% chance of expiring out of the money (above $25), so I executed my trade for this month.

This trade isn't as good as my previous trades, I would have liked to gotten in a week or two ago with a higher premium and at lower strike price, but it meets my criteria. Time will tell if I get my $55 per option contract without having to buy any stock or if I'm required to purchase 'O' for $25 when the market price is below $25. Note that $24.45 is my true break even cost bases due to the .55 cent option premium that I receive whether the price of 'O' is above or below $25 at the close of August 21. This may seem complicated and time consuming to the newbie but once you get some experience it is very easy. I'll soon explain how to run the free online option calculators to show you how easy it is to determine the odds of your trade succeeding.

Hope to hear from you! Drop me a comment:


  1. Whew....You just made it in time...on the last day...I think you made 2% right...

    Nice son..

    Grampa Dicky Boy

  2. You're not kidding. Very close! See my Silky Sullivan description post. (grin)

    Yep another 2% I'm up over 14% since mid-Feb 30% annual and in all cash right now. Include the monthly compounding I should come in at 36% this year. Time will tell proof is in the pudding/doing? Writing this blog has helped me stay focused on the system and fine tune it.