Weekend Update

Weekend Update Mega MillionsI had a hard time getting myself out of a deep blue funk in order to write this week’s “Weekend Update.”

No, not because of a gut wrenching week in the market, the week treated me just fine.

For you see, it turned out, as I awoke this morning, that I had not won the $640 Million Mega-Millons Grand Prize.

Forget the fact that I won a $2 voucher at the time of my ticket purchase and chose to cash it in rather than re-invest and forget the fact that I won another $7 by virtue of having 3 of the numbers,

Believe it or not, it was the $640 million that I’d set my sights on.

Sure, the $8 net return on the $1 investment was good, but still a far cry from real triumph.

But, not to let a good thing go to waste, I may pick up a few hundred million shares of Sino-Forest.

This past week, I actually started looking for the coming week’s potential plays on Thursday and was hoping certain depressed prices would hold, because I was anxious to re-play some previous positions.

One of those was selling puts in Focus Media again, a distant relative to Sino Forest, although at some point we’re likely to find out that the distance was never really terribly great.

Unfortunately, it only offers monthly options. Too much can happen between now and the three weeks until expiration. Equally unfortunately, it’s one of those Chinese companies, so you never can really tell what’s going on. But that is what helps to explain very enticing premiums.

If you dare.

Focus Media first came to my attention months ago as yet another of the Muddy Waters companies highlighted by allegations of accounting shenanigans.

Like Harbin Energy and Spreadtrum Communications before them, their stock prices plunged on those shady accounting allegations. For each of those I waited a few days once prices seemed to stabilize and then sold puts on the shares in the hope that they wouldn’t sink any further.

Normally, you shouldn’t sell calls unless you’re both prepared and willing to own those shares..

Turned out to work quite nicely and eventually I would actually outright own those very same shares as they had recovered and stabilized in the other direction.

Focus Media reported earrnings recently, for what that’s worth, and climbed to $27.

The prior week I had my $24 puts expire and was waiting for shares to start falling again. And so when they did on Thursday, I was eager to begin the week with another bout of put selling, but then shares closed up $1 on Friday.

So we’ll just have to see how shares fare on Monday. If they go down as part of an overall market downturn, I’m a likely seller of put contracts

Otherwise, I jumped the gun a bit with a Double Dip Dividend Capture trade.

I bought shares of JP Morgan Chase, a company I’ve not owned for about 2 months, but otherwise had been a mainstay of my portfolios as shares would go in and out based on whether they would be assigned.

The more of Jamie Dimon that I see on television the less enamored I have become, but when it comes to the ability of the shares to generate steady income the subjectivity can be an impediment that I don’t need.

JP Morgan goes ex-dividend on Tuesday for $0.30/share, but I decided to buy back my Halliburton puts at $0.01, pocket those profits and then used the freed up funds to bring JP Morgan back home.

Jamie Dimon can stay in the guest house.

At this point, I’m not certain whether to use the word “fortunately” or “unfortunately” to describe my Freeport McMoRan situation.

I had sold calls on Friday for about $0.05/share, just trying to pick up a few more pennies in the hours before expiration. I needed lottery ticket money, so what else could I do? Work?

By 3:50 PM shares were hovering right at the $38 strike and I was considering buying back the position rather than losing the shares.

And then my computer froze and I couldn’t get my programs to reload after the re-boot until right after the closing bell.

So I’ll end up having more funds to re-invest than I had planned as the Freeport shares never got to spend much quality time with JP Morgan.

If Freeport McMoRan stays near or below that $38 level,  I plan to repurchase them, but will not likely immediately sell calls, because I’m giving up  a capital loss due to the wash sales rule, if I repurchase within 30 days andwant to make that loss up.

I hate losses. Especially early in the year when I have no thoughts of tax planning to clutter my mind.

On the other hand, if I were to be opening up a new position, I would sell those calls right away.

I’m also hoping to bring Morgan Stanley back home after losing shares a week ago. Those shares have proven to be another good opportunity to churn out 1% or more per week returns on investment, as long as the shares get assigned.

I won’t be doing so, but if I weren’t holding Mosaic shares, I would be very interested in picking up shares and then depending on the purchase price and market sentiment,either sell the $55 or $57.50 shares expiring this coming Friday.

For me, much of the week was shaped by my speculative holdings, the ProShares UltraSHort Silver ETF and the Barclays Volatility ETN.

The Silver ETF, although presenting me with a paper loss on the shares, has been a great income generator on both the call and put sales side. I’m still trying to scratch my way back on the VXX shares by accumulating option premiums, but there really doesn’t seem to be too much rhyme or reason, other than the fact that 3 of the previous week’s trading days saw large gains in the S&P Volatility Index that faded in the past hour.

I took advantage of that observation twice last week selling calls at what would turn out to be their daily high point, but rational thought is probably wasted on these volatility products.

In the face of further drops I may consider selling puts in the unfounded belief that the index can’t get much lower and completely ignoring Credit Suisse’s warning that theor volatilitity product is expected to have no value as a long term investment.

That can’t be good, so I’d be happy to exit my positions as quickly as possible.

Although it’s far too early, I am however already mapping outy a Mega Millions strategy regarding the use of the $7 that I still have coming to me.

Three shares of Sprint?



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Transaction Performance 


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March 31, 2012
March 31, 2012 BP Call Expired Weekly
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March 31, 2012 MOS Call Expired Weekly
March 31, 2012 GMCR Call Expired Weekly
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March 30, 2012 JPM * Call STO Weekly
March 30, 2012 JPM Stock Buy
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March 30, 2012 VXX Call STO Crumbs
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March 27, 2012 DOW Call STO * Monthly
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March 26, 2012 GMCR Call STO Weekly
March 26, 2012 ZSL Put STO Monthly
March 26, 2012 MOS Call STO Weekly
March 26, 2012 MOS Stock Buy
March 26, 2012 XLE Call STO Weekly
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March 26,2012 CHK Put STO Weekly
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