Option Investor

Option Writer - April Portfolio

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As I mentioned in the last post, I lost the original and am putting the portfolio one position at a time. I am still allocating according to the assumed worst case scenario of being assigned on all options. That is the worst for us since it requires us options sellers to own stock. Yuck!

BHP - BHP Billiton Limited, together with its subsidiaries, operates as a diversified natural resources company. The company operates 10 customer sector groups (CSGs), aligned with the commodities that the company extracts and markets, which includes Aluminium, Base Metals, Uranium, Diamonds and Specialty Products, Energy Coal, Iron Ore, Manganese, Metallurgical Coal, Petroleum, and Stainless Steel Materials.

Sector: Basic Materials
Industry: Industrial Metals & Minerals

EPS Date:

The suggested trade is a little larger than our average. However, the initial return of 20% along with the nearly 8 points out of the money helps. Aggressive traders could sell up to 6 positions before breaking the $5,000 initial margin requirement limit.

I like the idea of selling one contract here and then waiting for the price to retest the 50 and 200 DMA near 69. Price support is strong at the 66 level with a little help at 64 and then a little more at 62.30. But after 62, the bottom falls out until 54.

Strike Stop = $62.50

Cost Basis Stop = $61.20

Technical Stop = $64.00

P/L Stop = $65.98

You may notice a lot of commodity related sectors in the portfolio this month. We hope to get better exposure to commodities, such as base and precious metals, oil and gas, and agricultural. We will make an effort to find a financial company that isn't exposed to the sub-prime mess as well as finding a couple of technology names. Look at the watchlist below to see what I am concidering.

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