The Spilled Milk Bounce


I grew up in a household where in my early years English was decidedly a second language.

Even as my parents quickly became fluent in speaking and reading the language of their adopted country, one thing that they didn’t adopt was the use of classically American idiomatic expressions.

Although I’m certain that most such expressions have their counterparts in other cultures, our household, at the very least was idiomatically deprived. Adages were never tossed about as part of casual conversation, nor were parables frequently used to teach life lessons.

Well, other than the obvious “Never let a Cossack into your home while your daughters are there alone.”

In fact, while I did quite well on the SAT exams, I’m certain that what kept me from having an asterisk next to my name was the fact that deciphering the meanings of such expressions as part of a multiple choice exam was somehing beyond my naturalized ability.

The exam was just culturally biased against me and probably even against those that did the actual marauding, raping and pillaging. Those poor Cossacks never stood a chance.

Over the years, though, I’ve learned some of the very basics, although I don’t seek to apply them under any circumstances, except maybe to illustrate a point, almost like what an idiom tries to do.

Silver Lining? Got it, every cloud has one.

Don’t s**t where you sleep? Got that one too. Damn good advice.

Spilled MilkBut last week I was following a path opposite that advised by another popular expression: “Don’t cry over spilled milk.”

I suppose that in the affluence of America that certainly holds true, but how could you even think to say that in parts of Bangladhesh? Or how can you even remotely suggest that to someone who’s let stock profits disappear into someone else’s pockets?

For them, it’s the end of the world as they know it.

But I get it. It’s done. It’s over. Move on. Sunk costs, etc.

But there I was last week moaning the losses of some favorite stocks as they closed above the strike prices at which I sold their call contracts.

One, which I only passingly mentioned over the past few days was Halliburton.

Halliburton, like my other favorites is such, because it predictably spins off a nice options premium. Unfortunately, it’s not one of my triple threat stocks because it has only a pathetic dividend.

It has the attractive premium because if you’re the type that worries about paper losses, you’ll need the money for antacids. It’s just a little volatile and reacts to news, rumors and politically shifting winds.

You need to have a bit of extra stomach lining when you own Halliburton. You also have to ignore its close association with lots of bad things over the years that may make you question the morality of investing in such a company.

I don’t have those kind of qualms, so Cheney, I’m talking to you. In fact, as much as I love New Orleans, making it a regular vacation spot, I applaud the Food Industry portion of Halliburton for its much maligned effort to engineer self frying fish in the Gulf of Mexico.

After all, that seemed like the natural extension and transfer of volatility from the stock to the fish.

When it comes to Halliburton, “What you don’t know won’t hurt you.”

There’s an adage for every situation.

While busy moaning, a funny thing happened. In fact, it was the sort of thing that I always count on happening and welcome with open arms.

Like now.

Jut 3 days after losing my Halliburton shares at $35 for a final options premium of only $0.28, bringing the total 3 months’ premium to $4.56 in addition to that pathetic dividend, it was time to stop moaning and do something.

That something was to snap up shares of Halliburton as it had come down to $33.50 from more than $37.

Although I did shed some metaphorical tears deep down I knew that I would never have taken profits with Halliburton at $37. I never would have sold my shares because you can’t completely escape your human nature, despite the discipline that you seek to impose.

That’s reasonably logical to assume and as we all know logic is  “the opium of the people.”

With the need to moan and feel badly about a lost opportunity that was never really lost, only repackaged, it was time to moan about another boring day in the markets.

And it really was a boring trading session for most of the day until the final 20 minutes.

That was when a rumor came out of Japan that the through the efforts of the G-20 the IMF was going to be able to float $600 Billion to the EU as part of a lending facility. Of course that would be done through the ECB.

Got it? G-20, IMF, EU and ECB. Not as catchy an idiom as the others, but still obvious in its intent.

Seeking to dispel the thought that there was even an opportunity to be “looking a gift horse in the mouth”, the IMF then denied the rumor and the market which had added 80 points in a couple of minutes then shed half of those in the final two minutes of trading.

Honestly? I don’t know what a gift horse is and none of this really effected me or my shares.

During the course of the day I did have the opportunity to make a few trades, but they seemed to follow in my recent usual pattern.

That pattern, which is one that I’m not very happy about, is to sell call options literally minutes before the underlying stock takes a sharp move upward.

Why would I do that?

Because I’m an idiot who can’t tell the future, even when its only a minute ahead.

Today, it was my turn to sell weekly calls on Goldman Sachs and the beleagured Netflix.

The same happened last week with Green Mountain, Caterpillar, JP Morgan and Halliburton.

There may have been some others, but my mind is beginning to shut down as it needs to make room for more idioms.

Over the past few years I’ve done pretty well trying to collect small option premiums, that I refer to as crumbs, just a couple of days before expiration.

Now, with the growth of weekly options, I do that sort of thing much more than ever. Although there were always instances in which I might have regretted one of those crumb picking expeditions, by and large its been a good strategy..

That is until the milk starting spilling.

All of this is pretty ironic since the primary site from which I sell the Option to Profit book is called Milking Stocks.

With all of the economic uncertainty in Europe it truly amazes me that markets would go up on Fridays and traders would stay long into the weekend.

But see, that’s where logic is misleading.

The problem is taking the contrarian approach would lead you to believe that Fridays would represent opportunities to sell off, and therefore, good opportunities to sell call contracts in anticipation.

But logic would tell you the same.

The intersection of logic and contrarianism can’t exist and they certainly can’t be the same.

Given a recent factoid that I posted last week regarding the decided overall downward bias on Mondays, over the past 6 months, traders still stay long and instead of my crumb picking sold options expiring worthless on Friday, they’re saying goodbye to my portfolio as they transition into some nameless and faceless portfolio.

But there I go. Moaning again.

You don’t have to be lactose intolerant to know that neither the spilling of the milk nor the crying over it are worthwhile endeavors.

In the meantime, every talking head is once again warning of a melt up in stock prices.

Logic or contrarian approach? Which to apply to the consensus opinion?

I’m going to stick with the contrary approach and will look to sell other holdings into any strength that may pop up on Thursday.

I may not be able to “tell a book by its cover,” but I do know that sooner or later I’m bound to guess right.and maybe start to “milk  it for all it’s worth” once again.