Seeking Alpha

John D. Thomason

View John D. Thomason's Comments BY TICKER:
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    You present some interesting ideas, but I'm afraid I would get "lost in the swamp" if I attempted anything too complicated. Regarding your opening question, I generally only find put sale opportunities that interest me when stocks have pulled back. The only situation where I might do a put sale when stocks are up, like they are now, is if a given stock has dropped, even though the over-all market is up, and it is because of a short-term condition that doesn't worry me much, I still would like to own it, and attractive puts are available. That leads me to your other (implied, at least) question, why not go for more premium in my put sales, at higher strikes. Good question. I probably have approached it a little too conservatively, but as I have said, I really look at it as a conditional buy order rather than a trade, one that won't be filled unless all heck breaks loose. Kind of like setting out low-ball buy GTC limit orders that you don't really expect to get filled, but maybe you will get lucky on one of them sometime.

    Every person has to decide how they want to approach it & how much risk vs. reward to take on. That's the beauty of options - you can really tailor the plays to fit your own risk tolerance.

    Thanks for sharing your insights.

    John D. Thomason
    Feb 23 09:40 AM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    The announcement was on July 14, 2011. at that time it said the split would occur in the first half of 2012. It also said a shareholder vote would not be required. How that could be amazes me - it just shows how little the shareholder counts these days.

    I have not seen any news with a more definite date. You might be interested in an article by SA contributor Eli Inkrot on the topic at http://seekingalpha.co....

    Investors generally have reacted favorably to the news. Barron's had an article out that was not positive.

    John D. Thomason
    Feb 23 08:17 AM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    It is treated as gain or loss. It is a short sale, in that you are selling first, at one price, and buying back later, at another price. The gain/loss is the difference, including commissions. The option seller hopes to be "buying back" the sold option for nothing, as the option expires worthless. I have mostly dealt with options in my IRAs, so I'm not completely up to speed on options and taxes - but I would be remiss if I did not alert you to the fact that there can be complications. A good book on options I can recommend is "Options Trading for the Conservative Investor", by Michael Thomsett. I also suggest you download a free booklet from CBOE on the topic, available at http://bit.ly/wDKO8w. I just retried the link, it works fine. Save the PDF file on your PC, or print it out.

    Unfortunately, options and taxes can get complicated.

    John D. Thomason
    Feb 22 02:31 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Yes, I am aware that FrontPage is a discontinued product. But, it still works well, so far. I gave up long ago on the FrontPage Extensions. My "feedback" form on my website "Connections" page does not use FrontPage extensions - just a browser script. I tested it with browsers IE8, Firefox, and Google Chrome, with my local email prgram being OutLook 2003, and it worked in all cases, to my amazement.

    John D. Thomason
    Feb 21 08:16 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    My experience has been right in line with the results you describe. I guess I'm just a little scarred by the experiences of 2008-2009, and even back to 2000-2002, such that I'm leery of committing myself too much on the world as it exists at any one point - I like the comfortable feeling of knowing I have flexibility if all hell breaks loose. I know that feeling has a cost associated with it, but since I am over-all about 70% invested in dividend stocks, and at times, another chunk of my cash is committed from having sold puts, I'm not giving up too much to sleep at night.

    John D. Thomason
    Feb 21 05:58 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    I'm using Earthlink right now. I took advantage of an introductory offer to get the domain name for free and 3 months hosting for $9.99 a month, then $19.99 a month thereafter. The cost is actually cheaper than I expected when I started out. Reliability has been pretty good. I use "FrontPage" to build & maintain the site, and I have learned a lot about HTML, RSS feeds, social network buttons, script language, and other fun stuff that only an ex-IT person could love. I generate two blog updates nearly every market day. I suspect I'm the only one looking at it most days, but it is quite therapeutic, plus it forces me to do the daily research I should be doing anyway.

    Thanks for the tip, I may make a change to reduce web hosting costs one of these days.

    John D. Thomason
    Feb 21 04:41 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Agreed. I did follow that strategy on a very-near-the-money put sale on First Energy (FE), as I indicated in my response comment to Larry Melman, above. In the case of COP, I would have been happy to buy at the put strikes on the options I sold, but not at the prices available, which never got close to my desired entry price(s). All I can say is that the options market makers had a less favorable view of COP's prospects than I did, to have allowed puts so far below the current market to be sold for what I was able to sell them for. Usually, when I look at options quotes available, both calls and puts, I am disappointed, and I skip that trade. But occasionally, I am surprised, favorably, and that is when I enter a sell order.

    John D. Thomason
    Feb 21 03:29 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Hi, MakotoUeno,

    You have grasped the essence of my strategy, which is pretty much the same as your strategy. The 1st condition I consider is that the put must be on a stock I want to own. Also, I only sell options, so Theta (time) is always on my side. I tend to ignore the other "greeks" - I look at it from the standpoint of how I would feel if I were assigned, which is largely based on the strike price, and how much I can sell the option for, with a minimum for calls of $1.00, and puts of $1.50.

    Option selling is not central to my investing approach, but more of a peripheral strategy, to generate some $ when there isn't much else to do, as far as opportunities are concerned.

    John D. Thomason
    Feb 21 03:20 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Hi, Larry,

    Generally, if I can buy back a sold option, whether it is a call or a put, and make $100 after commissions, I will take it & be done. An exception to this is if the option only has 2 or 3 weeks to go, I will usually wait for it to expire. I have sold 12 to 15 puts since 1/1/2010, and have never been assigned on a trade that I entered with the expectation that I would probably not be assigned. I entered one put trade very close to the money, on First Energy (FE), expecting the put to get me back into the stock before the next ex-dividend date. It worked, and I got the dividend, and then after FE went up a little, I sold a call against the shares. I believe options strategies can enhance returns, as long as the risks are recognized.

    Although it hasn't occurred on a put, I have sold calls where the stock went up beyond the call strike by several dollars, I was not assigned, and the call dropped back below the strike before expiration. On both calls and puts, I enter with the expectation that I will exit early only if I can make a quick $100, or hold until the end and accept whatever happens. So I'm not planning on a short-term trade at the outset, but as I have said, when the market gives you a gift, you need to take it, it doesn't happen often.

    John D. Thomason
    Feb 21 01:47 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Thanks. It's pretty academic these days, but in more normal times, the put selling strategy is further augmented by the fact that the cash reserved to cover potential purchases via put assignments also generates interest income. Today, if it generates anything at all, it isn't enough to be worth counting.

    John D. Thomason

    Feb 21 01:15 PM | Likes Like |Link to Comment
  • Cash-Covered Put Selling: 1 Response To Zero Returns On Cash [View article]
    Hi!

    My approach is not very sophisticated. As detailed on my website, I keep up with around 100 to 150 dividend stocks, on three watch lists, dubbed Tier1 (top quality), Tier2 (good quality), and Tier3 (ultra-high yield, but risky). I try to keep up with ex-dividend dates & yields, earnings reporting, upgrades/downgrades, and other news, reporting daily on changes via my website's daily blog. If one of the stocks that I would like to own, but don't currently, seems down a bit for no good reason, I check the options quotes for expirations 4 to 8 months out, and if I can sell a put for $1.50 to $3.00 or even more, with a strike that I wouldn't mind paying, I submit a bid. I usually only carry 2 to 3 open put trades at a time. More than that is beyond my risk tolerance, as explained in the article. I also do covered calls on stocks I own. I have tried spreads, and other options strategies, but at this point I'm only doing straight-forward sells of puts and calls.

    My approach to investing and options is detailed on my website. Click on "visit Optimum Stock Investing" just below my photo to the left of the article.

    Hope that brief synopsis helps.

    John D. Thomason
    Feb 21 01:09 PM | Likes Like |Link to Comment
More on COP by John D. Thomason
COMMENTS STATS
301 Comments
181 Likes