April 15th, 2011
Greetings and Welcome aboard to all new subscribers.
“*IMPORTANT* Please review our definitions in order to get acquainted with language we will be using”
Feel free to look at our past issues because many trades last multiple months.
(New Picks) Sell the Puts
PAAS @ $38.00
Sell to Open PAAS May 2011 $36.00 Put @ $1.55 Limit, Good Until Canceled. (4.30% Return in 32 days) Pan American Silver Corp (PAAS)., together with its subsidiaries, engages in the exploration, development, extraction, processing, refining, reclamation, operation, and production of silver producing properties and assets. It also produces and sells gold, zinc, lead, and copper minerals. As of March 23, 2009, the company had eight mining operations in Mexico, Peru, Argentina, and Bolivia. Pan American Silver Corp. was founded in 1979 and is headquartered in Vancouver, Canada.
IDCC @ 46.20
Sell to Open IDCC May 2011 $44.00 Put @ $1.45 Limit, Good Until Canceled.(3.29% Return in 32 days) InterDigital, Inc. engages in the design and development of digital wireless technologies for use in cellular and wireless IEEE 802 related products. It also develops solutions for enhancing bandwidth availability and network capacity, wireless security and seamless connectivity, and mobility across networks and devices. In addition, the company licenses its technologies and mobile broadband modem solutions (modem IP, know-how, and reference platforms) to mobile device manufacturers, semiconductor companies, and other equipment producers that manufacture, use, and sell digital cellular products. InterDigitalsolutions are incorporated in various products, including mobile devices, such as cellular phones, wireless personal digital assistants and notebook computers, and data cards; base stations and other wireless infrastructure equipment; and components for wireless devices. The company was founded in 1972 and is headquartered in King of Prussia, Pennsylvania.
TNA @ 85.78
Sell to Open TNA May 2011 $74.00 Put @ $2.30 Limit, Good Until Canceled.
(3.1%Return in 32 days)
The fund seeks daily investment results, before fees and expenses, of 300% of the price performance of the Russell 2000Â® Index. The fund will invest at least 80% of assets in securities that comprise the index. It will also utilize financial instruments that, in combination, provide leveraged and unleveraged exposure to the index.The fund is non-diversified.
Step 2:IF it got Put to you, now we Sell the Covered Calls
MELA @ $3.66
Sell to Open MELA May 2011 $4.00 Call @ .40c Limit, Good Until Canceled.
(+10% Return in 32 days)
AGNC @ $28.53
Hold.Do not sell the Covered Call or you will lose the Dividend of $1.40 per share.
CAGC @ $6.25 (Trading Halted)
VVUS @ $6.89 Our $8.00 June 2011 Call is still cooking.
How did we do last Month?
Congratulations to those that followed the trades and made money.
IDCC and TNA Puts did not sell at our “limit” price, so those trades never happened.
These Optiions expired worthless according to plan, so we got to keep the premiums.
FCX @ $51.11 (we sold the $45.00 April 2011 Put for $1.02 per contract)
2.26% Return in 28 days
AGNC @ $28.53
(we sold the $30 April 2011 Call for .65c per contract)
+2.32% Return in 28 days
MELA @ $3.66 (we sold the $5.00 April 2011 Call for .20c per contract)
+5% Return in 28 days
CAGC @ $6.25 (Trading Halted: our April 2011 $8.00 Call did not get placed)
China Agritech (Nasdaq: CAGC) had it’s trading halted March 14th following a 20% move
higher amid news that the company formed a special committee in order to investigate
certain allegations made by third parties. Later in the day, it dismissed its auditor, Chinese affiliate of Ernst & Young.
We have a case study here:
that explains our position on this stock. We are “down” on this trade and will probably move it to the loss column whenever
it gets “unfrozen” and we can get it called away.
These Options were exercised:
GDXJ @ $40.79
Our $38 Call was exercised.
We had it Put to us @$38
We have sold 4 Calls on this stock for a total of $4.04 per contract. It was originally Put to us
@$38 for $1.40 per contract (total $5.44) making our return 14.31% in 4 months.
TNA @ $85.78
Our $80 Call was exercised.
We had it Put to us @$77
Return of 11.23% over 2 months when you add the put and call premiums plus the $3.00 per share profit.
3 rules to minimize risk with Options
Rule 1. We are never “Naked” in a position.
When you sell a call without owning the underlying stock, that is called “Naked”, when naked
your risk is unlimited. We only sell “Covered Calls”. Puts are “covered” by cash.
Rule 2. We never risk more than 5–10 % of our trading cash on any single trade, unless we have no choice (We are just starting and have very little cash to put to work.)
Rule 3.We do *not* risk Margin money. Margin is just a “Reserve”, we always want to hold around 50% of our portfolio in cash (or margin), so we can buy our way out of the position if it goes bad. If you are trading in a ROTH, you don’t have to worry, since Margin is not allowed in retirement accounts.
Bonus* Dividend Paying Stock
*This is not a monthly feature
AT @ $14.57
Dividend Yield 7.70% APR (.09c Monthly)
Dividend Growth rate: 1%
Atlantic Power Corporation (AT), an independent electric power production company, owns interests in and manages a diversified portfolio of independent non-utility power generation projects. As of December 31, 2009,
the company owned interests in 12 power generating facilities with approximately 807 MW generating capacityand one 500 kV 84 mile electric transmission line in the United States. It serves utilities and other buyers underlong-term power purchase agreements. The company was founded in 2004 and is headquartered in Boston,
This is a “Qualified Dividend”
U.S. individual or other non-corporate taxpayers should be eligible for the reduced rate of tax currently
applicable to “qualified dividends” provided that the investor meets the holding period and any other requirements.
The Company’s common share dividend is subject to a 15% withholding tax for U.S. holders. U.S. individuals
holding shares in taxable accounts may be eligible to receive a credit on their U.S. income tax return for this
withholding tax. U.S. individuals holding the Company’s common shares in Individual Retirement Accounts
(“IRAs”) may be exempt from withholding tax pursuant to the Canada–U.S. Income Tax Convention.
Taxpayers should always seek their own independent qualified professionals regarding the tax consequences of
purchasing or owning common shares of the Company. Individuals who believe the withholding tax exemption
applies to their IRA should contact their broker to determine how to claim the exemption.
“It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price.”
Any suggestions or feedback is always welcome. We want to generate the best value for you! Until next time. Brad Lee
The Options Oracle Brad Lee AKA “The Options Oracle” and “The Money Medic” is an individual investor who does not manage
money for any financial institution.You are purchasing the list of stocks that he uses to select options contracts
he feels will return him the highest, safest profits. Brad is not a broker, or financial adviser. He is a remarkable
investor who has developed a successful strategy for himself, and is willing to share some of his magic with you.
We urge you to paper trade these picks and learn how to develop a strategy that is appropriate for you.Thank
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