Roth IRA

I have a Roth IRA that I am doing nothing with. It has only $1164 and it is difficult to get motivated to play with this account.

But this money has done nothing for a long time and it is a good place for me to try out this options strategy. My goal for this account for this year is to make $1469 ($305, 26%). I will play with 2 month out options hoping to make 6% every 2 months compounded bimonthly. I will update this particular post with my trades to show how I am doing. This account is even harder for me to make good returns as the commissions on such small trades take a large % of my profits. But I want to prove this to myself.

2008-04-30 Sold 2 AMD June Puts for $.40 – I should make $80 provided AMD does not drop below 6, and should not lose money provided AMD does not drop below $5.60
2008-05-16 Bought 2 AMD June Puts for $.07 - I was planning on waiting till these expired in June but they dropped so much so quickly that making .07 ($14, 1%) more for another month did not make sense. So I made $66 - $16(commissions) = $50,4.3% in 2 weeks
2008-05-20 Bought 100 AMD for $7.16 - I was planning on immediately selling the call, but I got greedy hoping the stock would go up, and then it dropped, so now Im stuck holding the stock
2008-06-05 Sold 1 AMD June Call for $.80 (Jul 7) - Hopefully I can make $64 here
2008-07-01 Sold 1 AMD July Put for $.55 (Jul 6) - make $110
2008-07-21 Buy 100 AMD for $6.00 - A result of an assigned Put that I did not want
2008-08-21 Sold 2 AMD Oct Call for .60 - make $120
2009-05-12 Sold 2 AMD June Call for .30 - make $60
2009-09-15 Sold 2 AMD Oct Call for .37 - make $74
2009-11-19 Sold 200 AMD for 6.79 - make $42
2010-02-10 Buy 100 ITMN for 15.60 - lose $310
2010-02-10 Sold 1 ITMN Mar Call for 5.90 - make $590 (actually $280 due to above)
2010-05-22 Exp STEC Call for .43 - make $34

2010-08-23 Exp STEC Call for 1.45 - make $137

Current Value: $2006; Current Gain: 2.2%; Goal: $1469; Needed: $26

My POT experience

So I was looking for a good options play and I discovered Potash (POT). Its a fertalizer company that has been running up like mad. I bought it at 198 and immediately sold the next out 195 calls for $15. I was hoping to be called out on these for a $12 dollar profit or 6%. But first the thing takes off to 210 and Im thinking I got the Midas touch, but then it tanks to 180 so what to do now:

If the stock closed like this on expiration day, I would lose 3 dollars (198-15-180).

The call was now trading at $5 which if I had bought back would bring my average price of the stock down to 188, and the 180 calls were selling for $8. I could do this and safely get out of the stock with nothing. Or I could sell the 185 calls for $10 and hope to make $7 or 3.5%.

So what did do... Nothing as I did not plan for this and things happened quickly. Now the stock is trading at 184 which is fine with me.

Actually I really like the premiums on this stock, and so if they do not get called that is preferred as I can sell the next month out calls and hopefully make another 7%. But this strategy relies on the fact that POT must stay at this range and not drop much further. Because if it drops, my loss will be larger then these gains and I will end up with a net loss.

But the wild swings on this stock explain the nice premiums the options are getting.

Lets see how this turns out.