"An Approach to Successful Stock Trading
Combining Company Fundamentals with Chart Technicals" |
Sunday, March 23,
2015
SPECIAL REPORT
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The
Married Put Trades with TSM Stocks
Married Put Strategy (MPS): TSM
stock trades (building capital) are executed over the short term: on
average, each trade takes 6.7 days. The TSM Short Put trade (generating
income) will average less than 30 days. The third leg of the TSM system,
the Married Put trade (income and capital in an iffy market) will last 6
months or longer. In an uncertain market, you want to use strategies that
hedge risk, and that's what the Married Put Strategy does.
The MPS marries a long
TSM stock position with a long in-the-money Put. It's goal is to generate
income and capital in a risk free way. It's a simple concept, probably best
seen by an example. See the following table.
________________________________________________
1 -
MGA, an Example of the Married Put Strategy (Complete 3/31/15 for 9.76%
Annualized Yield Over 99 Days)
-
TSM stock that I'm willing to take a 400 share position (trading at
$106.67 on 12/26/14)
-
12/22/15 -
Buy 200 shares and 2 long Puts (June $110 strike) for $9.90
-
My per share cost: $106.67 + $9.90 = $116.57 plus $4 commission for the
two trades ($21,334 invested in the trade)
-
The long Put guarantees me that I can exit the trade at the June
expiration (6 months from now) for $110 so I really start the trade with
only $6.57 per share at risk, and my goal becomes to generate cash to
eliminate the entire risk
-
12/22/15 -
Immediately, I sell Calls ($1.30) and sell Puts ($0.75) {potentially
build the 2nd half of the position} to reduce my risk to $4.52; note, on
a per share basis, the commission for each of these trades costs $0.01
-
02/20/15 -
As the trade progresses, I buy those short positions back and sell more
so by February, I had reduced my risk to $1.32 as MGA's price had fallen
back to $103.97
-
02/25/15 - Five
days later, as MGA's price had climbed to $110.03, I rolled the long Put
(June $110) up to the June $115, which generated more income ($2.06)
-
03/17/15 - Rolled the $115 long
Put in to the April $115 Put, which again generated income ($1.45); at this
point, I was $2.31 beyond a risk free position, i.e., MGA could fall to
zero, and I would still earn this amount
-
03/27/15 - I received a $0.44 per
share dividend
-
03/31/15 - I closed the position:
sold the long Put and the 200 shares (note, MGA split 2 for 1 when it paid
the dividend, but I did not show that here for ease of computation
-
I ended up making $2.82 per
share, while MGA shares increased $0.57 from $106.67 to $107.24 during these
99 days
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2
- UVE,
Another Example of the Married Put Strategy (3/18/15)
Stats Of Hits
Copyright 2006
TripleScreenMethod.com
It should not be assumed that the methods, techniques, or indicators presented
in these pages will be profitable or that they will not result in losses. Past
results are not necessarily indicative of future results. Examples presented
on these pages are for educational purposes only. These setups are not
solicitations of any order to buy or sell. The author assumes no
responsibility for your trading results. There is a high degree of risk in
trading. I am not recommending that you purchase or short stocks or options
using the techniques and methods presented in this report. Trading should be
based on your personal understanding of market conditions, price patterns, and
risk. I present here information to contribute to your understanding a
technique that has worked well for me.
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