I guess it’s at least a little exciting.
That is, making the first official trade on LEAPtoProfit
The only problem is that it’s more of an “OTP Legacy” kind of trade.
That is, it was a trade, in this case the sale of calls on a position that was opened during the days of “Option to Profit.”
Still, let’s dissect out what the thought process was behind this trade.
If you go to “How Does it All Work,” you will see the basic thought processes that are involved in making a LEAP trade.
In this case, Newmont Mining (NEM) was trading at about $38.45.
I looked at the January 2020 options, which expire in about 18 months.
That’s longer than I would generally look, but Newmont Mining is already an old position, going back about 5 years, so what’s another 18 months?
For me, i has clearly been a “Buy and Hold” position that has, to this date, exceeded the S&P performance by about 20% (about 10% when considering dividends).
I looked for a strike price about 10% higher than the current price.
What I received was a premium of $3.85/share, or approximately 10% of the current share price.
To that, I add the imputed dividends of $0.84 over the next 6 quarters, or about another 2%
That means, if the shares are assigned, the return for this trade would be approximately 22% or about 14% annualized.
Maybe that’s not much for some people, but it lets me sleep.
And it just gave me a fair amount of cash.
I can use that cash as cash or I can use it as part of PRIP Strategy if I was still in that asset accumulation phase of life.
The trade looked like this:
To Trade Alert Subscribers it came through as:
OTP LEGACY – STO Newmont Mining (NEM) 1/17/20 $42 calls $3.85 bid
Hopefully, there will be some more trades coming, particularly some new positions either going directly into LEAPS or working our way there through Leapfrogging.