Despite my success at picking stocks and selling options I do make mistakes. Those errors have become much less frequent over the years, but they still do happen and will continue as long as I trade. However I consider mistakes that cost less than about $3000 as just a cost of doing business as a trader. You take your medicine and move on, these errors are already priced into my trading model. Below are my 2011 stock buys that resulted from options trades and my plans going forward.
WIN...Windstream is a great company in my opinion. They are one of handful of legacy wire line telephone operators left in the country. The areas they serve have very little wireless penetration and that makes the stock a stable performer that will not move much in price, but pay you a handsome currently 8% dividend for years to come. However I sold a put option several months ago that did not take into account the possibility of a drop in price as traders moved from defensive stocks like Windstream to securities with more risk as market dynamics improved. Thus I currently have $14 per share in a stock selling currently at around $12.45, at 4400 shares just under $6600 in the hole on this one. Now I am getting a $1100 per quarter dividend and a monthly call option premium of around $250, so not all is lost. However I have decided with the May option expiration I will begin to be aggressive with my options and move out of this stock in attempt to cut my loss to $4400. Once I am called out of this stock I will once the wash sale rule has expired take another lower price position in this stock.
SCCO.. Southern Copper is another excellent company. It mines copper in several countries and pays a 6.5% dividend. SCCO is a volatile stock and can go up and down $3 to $5 per share in a week. Copper is absolutely necessary to the wired world and will always be needed. The emergence of China and India in the developed world and their need for copper makes this stock a roller coaster, but great for option traders. I currently am $2700 down in value at a purchase price of $40. However I am not concerned about this trade as it will be back at or above the purchase price when the sentiment about the economy improves as it always has done. I continue to make serious option money here. I bought SCCO too high, but that does not make it a bad trading vehicle.
FTR..Another legacy wire line telephone company. Similar trading mistake here as noted in Windstream above. I continue to get a nice dividend and option income from FTR. I am down about $4100 in this security and frankly do not have the available options opportunities to move out of this security. There is the chance I might clear this holding with a sizable loss too. I will sell before year end if nothing happens and take the tax loss. Trading in this stock was a mistake due to the lack of trading range so once I am out of FTR will not take a future position. If one is looking for dividend and a stable price for income this security is still a solid holding.
NYB...I am not currently carrying a loss in this stock. But their results this past week have caused me concern about their ability to hold their present over 6% dividend. I do have a put option on this stock that expires in May. At that time I will be dropping this security from my trading if I am not put on the stock. If put I will work my way out of this holding as soon as possible. It has now become clear that the recently passed Obama financial regulation bill has made investments in small banks not smart. The big banks can spread the additional costs over a larger footprint and eventually pass on those costs to customers.
No comments:
Post a Comment