Trade Alert: Potash Corp. of Saskatchewan (POT)

On November 26th I sold to open the December 55 put @3.50 thereby collecting $350 per contract sold (less commissions). If the stock is put to me my cost basis will be 51.50 per share (55 minus 3.50 in premium received). That is less than the 52 week low for this stock. Option premiums for this issue are very high so if I decided to accept having the stock put to me I could turn around and write a pretty high dollar covered call position. Of course, before purchasing the stock I would weigh the alternatives of buying to close or rolling the position.

I like this stock as potash, which is used in fertilizer, is in a bull market. It has gone up in price while most other agricultural commodities have gone down significantly. A nicely written article on potash can be found at http://tinyurl.com/5mp9td. I also like that it is a Canadian company as Canada was smart enough not to get themselves in the credit default swap mess that the United States is in.

General Electric; A Bellwether in Distress?

When GE hit a low of $12.84 on November 20th I debated on whether to write $12.50 December puts. It now looks like they would have been successful trades as GE is over $17 at the time of this writing. James Quinn wrote a great article on GE for Seeking Alpha http://tinyurl.com/6h3bnb. Reggie Middleton has written another one that I recommend reading http://tinyurl.com/6cnqy3. Their findings are very disturbing and suggestive of a company in big trouble. I struggle with whether these issues are already cooked into the stock price.

I own a bunch of GE in my accounts and accounts that I manage. I have been writing at the money or just out of the money covered calls on them which has consistently lowered the cost basis albeit not enough to make up for the nosedive in stock price. I am still having an internal debate whether to write out of the money near term puts but needless to say I will be monitoring the situation closely and welcome any and all thoughts on the subject.

Top Sectors

I am currently interested in trading options on stocks or ETF's in the following sectors: energy, metals especially precious metals, agriculture, international ETF's, blue chips, railroads and utilities. Since the strategy of selling options is a bullish one, these are the sectors I am most bullish on at this time.

Welcome

Welcome to my blog. The purpose of this blog is to share my investment philosophies as well as my trades and put them up for discussion. As the name of the blog indicates I primarily sell put and call options and collect the premiums.