May 14th, 2013 at 9:45 am
Today, 5/14/13, I BTC 3 NVDA May13 $14.00 Covered Calls and STO 3 NVDA Dec13 $16.00 Covered Calls for a net deposit of $35.43 in an IRA account. My basis for these NVDA shares is now $19.44. This transaction represents a simple return of about .60% and an annualized return of about 1.00% on my prior basis. There are 221 days to expiration.
NVDA has been moving nicely lately. So nice, in fact, that it has overrun my prior strike price for May. I am still underwater on NVDA and prefer it not be called away at this time. On top of that, it goes ex-dividend next week on 5/21/13. I would prefer to continue to collect the dividend.
So, what is driving the price up? There is some expectation that NVDA growth will accelerate in the second half of this year. Earlier this month NVDA reported its fiscal first quarter earning rose 29% on stronger revenue and margins. Today the company reported an accelerated deal to repurchase $750 million of its stock from Goldman Sachs. Apparently, this is part of the NVDA plan to return $1 billion to shareholders in the current fiscal year.
At one time, I thought I would eventually let NVDA be called away. I even began to think of it as dead money. Then they started to pay a dividend. I am still underwater on the shares that I own but am more optimistic than I once was. I even considered buying additional shares a couple of months ago to average down my holdings. In the end, I sold Puts that expired worthless in April. I sold Puts again for May and expect them to expire worthless this Friday.
NVDA now pays a .075 quarterly dividend for a yield of about 2.07% at the current price. Okay dividends but add in the option premium and NVDA becomes more attractive.
S&P currently has a 12-month target of $14 for NVDA with a hold recommendation. MarketEdge has a price opinion of $13.00 a Long recommendation. The 23 Yahoo! Finance analysts have a mean 12-month price target of $14.27 and a recommendation of 2.6 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.
May 13th, 2013 at 9:37 am
Today, 5/14/13, I sold 2 BP May 31, 2013 $44 Calls for a net deposit of $26.46 in an IRA Account. My basis for these BP shares is now $43.46. This transaction represents a simple return of about .33% and an annualized return of about 6.26% on my prior basis. There are 19 days to option expiration.
My $44 weekly Puts were assigned to me last Friday. Now I start to sell Covered Calls on my new shares.
I wrote last week that I might have been a little aggressive selling the $44 Puts. BP went ex-dividend last Wednesday so I am not too surprised that it would take a small hit, at least as much as the .54 dividend. BP is trading at $42.97 as I write this. I suspect that part of the decline has to do with the general unease in the market place, but maybe not. I see that other integrated oil and gas companies are up while others are down.
I originally thought to sell Covered Calls on these shares above my assigned price. However, I would have had to gone out to at least June 7 to even get a $44.40 strike with any premium at all. I decided to go ahead and sell the $44 strike a week earlier. I will only net about $108 if called away but a profit is a profit. I will watch BP and probably roll the Calls out and maybe up if the $44 strike appears in jeopardy as expiration approaches.
I already own 500 BP shares in this IRA account and would like to own more. I also like that weekly options are available. I think that BP is finally getting out from under theGulf of Mexicodisaster. Apparently they are doing more drilling in the Gulf than before.
BP pays a good dividend, currently .54, which is about a 4.88% yield on its current price. BP paid a dividend of .84 prior to the oil spill. The dividend was cut in half to .42 after the spill and has been increased twice since then to .48 and the current .54.
S&P continues a 12-month price target of $56 with a Hold recommendation. MarketEdge has a price opinion of $43.96 and a Long recommendation. The 10 Yahoo! Analysts continue a 12-month price target of $51.42 and a recommendation of 2.3 where 1.0 is a Strong Buy and 5.0 is a Strong Sell.
May 9th, 2013 at 1:02 pm
Today, 5/9/13, I sold 2 NLY Oct13 $14.00 Puts for a net deposit of $84.47 in my Taxable Account. My basis for these NLY shares, if Put to me, would be about $10.82. This transaction represents a simple return of about 3.90% and an annualized return of about 8.74% on my potential basis with 163 days to expiration.
This is the latest in a series of selling Puts on NLY going back to early 2011 in this account. I have yet to be assigned NLY shares in this account but did roll the Puts out twice in the series. I continue to reduce my potential basis as long as the series lasts through assignment of the shares and their eventual assignment away from me. I could treat each Put sale as a separate event and not accumulate the option premium against the strike price but I think this method helps me understand the cumulative return and cash flow on the capital employed.
The 52-week low for NLY is $13.72 on 11/15/12 with a high of $17.75 on 9/12/12. I expect my current Puts will expire worthless in October. If not, I will probably take the assignment rather than attempt to roll the Puts out even though I will probably be buying the shares on margin. I will then begin to sell Covered Calls and collect the dividends.
I like NLY and its nice dividend. NLY currently pays out .45 per quarter in dividends for a yield of about 11.87%. The dividend is down from a previous .50 last October.
S&P has a 12-month price target of $15 with a Hold recommendation. MarketEdge Second Opinion has a price opinion of $15.12 with an Avoid recommendation. The 17 Yahoo! Analysts have a 12-month price target of $15.38 and a 2.7 recommendation where 1.0 is a Strong Buy and 5.0 is a Strong Sell.