A New Stock. Canadian Natural Resources (CNQ) with Option trade for April.

Since my last post for Encana (ECA) that were called away, I have reviewed my current holdings in the TFSA and determined that Canadian Natural Resources (CNQ) would be the next stock to pick for the TSFA-myoneandonlystockpick to work on. Since the account has been recapitalized from the sale of ECA, I'll be adding to CNQ's current holdings of 50 shares. On Thursday March 20th, I have purchased (at market price) 150 shares of CNQ, the account now holds 200 shares or the qualitative of 2 contracts. Making my cost per share of $40.02, $8004.00. With the current closing price of $41.76 this position is already in the positive by 4.3% 

The two charts shown below highlights where I think where the fair value is for CNQ.  

5 year chart (above), on this chart we can see that CNQ has had a trading range from about $27.50 to $34.00 until it broke out (to the positive) last November. Since the beginning of the breakout CNQ ran up to top out in the $41 range and has since been bouncing between $40 and$42.50. As CNQ is in the upper trading range, it does show that some questions need to be answered. 1) what will happen in the current market place to push it higher?  2) is it more likely that it'll return back to the trading range of $27.50 - 34.00 ? or on a similar note, will the share price pull back and trade in the $34- 40 range again like it did in 2010 - 2011? For me, I'd go with the flow. CNQ is in an up trend and has begun to take a bit of a pause. I'd be looking to divest at this point and look to pick it up again under $34.

1 year chart, on this chart the longer small blue line helps narrow the price ranges to $36 and $34, with $36 being a smaller resistant range. The $34 and under is much stronger with the $32 the strongest level of resistance. Not shown on the above chart is the $30 line as its not a very strong trend line but still represents some resistance. As mentioned above I'd be looking to buy back in in the $34 or less range.

Since the TFSA accounts doesn't allow naked put writing I am required to purchase and sell forward. With my target is now where the current price is, I believe that its a good move away for this position and take it back into a cash position.

On Monday, I have wrote a call option on this position, which was filled at $0.80 for the April 18th expiry date. Collecting $160 for the 4 week position and waiting to see where the market is heading.

Current position $40.02 or $8004
April's call option at $0.80 (gross), $0.74(net)
Earning the TFSA $147.51

Returns based on the best case $2.72 or 6.8%, Return based on the April call option expiring $0.74 or 1.8% for the one month (21% annual) . I'm happy at the moment about the monthly return either way. As before, since there is cash still available in this account I'll be looking to purchase more shares of CNQ if the price declines by 10% below my average price ($36.02), but lets see what the future holds for this stock and the markets in general.

Till the next update Happy Trading.

Its about time Encana (ECA) was finally called away.

As you may recall, back in October I thought about which path to choose for my outlook for ECA. Well back then I had picked "C" as my choice. With "C"having a option premium price of $2.10 per share and a strike price of $17/ share which prepaid me $1033.76 (after commission ) with an expiry date of April 18th.

As of yesterday and 5 weeks early from expiry the buyer had in fact called away me shares. This buy back added cash back into my TFSA of $8457 after commission.

If your wondering what my total return was,
Bought (net)    ($ 9584.00)
Dividends        $   304.80
Total Options  $  1792.56
Sold (net)        $ 8457.00

Total return $970.36 (net)
or 11.47% not a bad return, could have been better thou.
 Now onto looking for the next stock to access and write covered calls on, stay posted!

Till next time, happy trading.