Investor's Opinion

Portfolio Update and Option Pick

Published: 2011-03-30 22:49:00 EDT by Unknown

Since my last post, I have STO two new positions. The first is a Call against my CPLP position. The second is a Put against cash for a stock I have been watching for a while, CIM.

When I placed the order to STO a Call option against my shares of CPLP, I was strongly influenced by the direction of the momentum indicators on a weekly interval. It was my belief that investors were taking their profits, and the stock would pull back. Unfortunately the pull-back I was expecting was short lived, and it rocketed up to my strike price and muscled through. Because all stocks go up and down, even more so for dividend stocks, I will allow the Call option to remain open against my shares and STO a put option to get back into the stock at the $10 strike price in the even that I get exercised out of my position.

I had placed the order to get into CIM weeks before last months option expiration with little expectation that it would get executed. I wanted my cash doing something other than just sitting in my trade account. So placing an order to secure an option seemed a responsible action until I found something else better. CIM has a relatively wide range that is swings in for it's cost and the dividend is a nice amount to receive if I get exercised into the stock.

I am still waiting to see what will happen with my open order to STO a Call against my DWA shares. Recently DWA has been making head-way towards the $30 strike price I got exercised into it. If things continue as they are, I should be able to get my desired premium for this option cycle.

That is my opinion, you can take it or leave it. Disclaimer: See bottom of page.

CIM - Chimera Investment Corporation
CPLP - Capital Product Partners, LP
DWA - Dreamworks Animation SKG Inc
STO - sold-to-open/sell-to-open

Labels: call options, cash-secured puts, covered calls, put options, trade terminology in use, trading strategy

Updated: 2011-03-30 22:49:53 EDT