|Option to Profit Week in ReviewAugust 5 – 9, 2013
|CALLS ASSIGNED/PUTS EXPIRED
|CALLS EXPIRED/PUTS ASSIGNED
|7 / 8
|4 / 1
|0 / 0
Weekly Up to Date Performance
August 5 – 9, 2013
For the week, new purchases returned to its usual ways and well exceeded the time adjusted S&P 500 in a week that the market had a negative tone, but still showed great resilience.
New positions beat the adjusted index by 2.7%, and also bested the unadjusted index by an even larger 3.1%. But just as I used JC Penney as an excuse last week for trailing the overall market, this week’s results are skewed by having used a number of September 17, 2013 option contracts. That actually added almost 1% to the results.
Adjusting for time, to a standard weekly observation period the week’s new positions beat the adjusted S&P 500 by 1.7% and the unadjusted index by 2.1%.
The market showed an adjusted loss of 0.6% for the week, while the unadjusted S&P 500 lost 1.1%. New purchases gained 2.1% for the week, well above the threshold, even when adjusting for extended options.
For positions opened in 2013 and subsequently closed, performance exceeded that of the S&P 500 by 0.5%. They are up 2.7% out-performing the market by 20.6%.
Well, this week was more like it, although I’m still upset about JC Penney, particularly the silence this past week regarding its vendor’s lending facility remains unanswered. Besides that, the soap opera was amusing and at least offered a brief window to sell some call options as Bill Ackman helped to temporarily raise share price by being Bill Ackman. Of course that only lasted about a day as shares went down because Bill Ackman acted like Bill Ackman.
Additionally, it was a week where we may have gotten a message that things aren’t as dour in China as we have believed. For me, that would be wonderful, because much of my 2013 thesis was based on better than expected outcomes from China. So far, that hasn’t been a good call, but I remain patient (and stubborn).
But otherwise, this was a week that demonstrates why a weak or declining market may have value and benefit that if alternating with an advancing market can create returns well in excess of the apparent net.
For much of 2013 that hasn’t been the case as alternating markets just haven’t been the norm as they usually are.
Every now and then when I need confirmation that sometimes the sum of the parts is far greater than the whole I look at historical returns and remind myself that a stock doesn’t have to move anywhere in order to be a profit generating machine.
Lately I’ve been looking for confirmation with great regularity.
As much as it’s convenient to try and read into this week’s weak performance, it’s probably not a good idea to do so.
With the August 2013 option cycle expiring next Friday, I’m simply hopeful that the market will maintain enough integrity to see many positions assigned.
That was also my hope at the end of June, but the Federal Reserve got in the way and prices dropped just in time to help reduce the number of assignments, so I’m not counting on anything.
Since I’m not reading much into the lack of strength this week, I still plan to follow the same pattern as with the past two months, looking to reduce cash from about 40% to 25% over the course of the week.
The question and where I’ve been varying the approach recently is deciding between weekly or monthly contracts when both are available.
I do want to have weekly contracts in the mix because they form the basis for cash flow necessary to both replenish cash reserves and fund new investments, if they’re assigned.
Now, the really big news is that next week’s first new position will be the 500th since expanding the service from being shared among only a small group of insiders to opening it up to outside subscribers 15 months ago.
Thank you for making it possible and providing reason to continue an implausible venture
Initially intended to provide a basis for subscribers to “graduate” after a few months, and the Informational web site continues to list that as the objective, a large core of subscribers have been here for all 499 trades.
That level of trust and confidence, together with the comments I receive are incredibly gratifying (as are the subscription fees).
Thank you. Looking forward to the next 500.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: ANF, GMCR (puts), FL, LO, MOS, MRO, PSX, WNR
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: CAT
Calls Rolled over, taking profits, into extended weekly cycle: none
Calls Rolled over, taking profits, into the monthly cycle: WNR, X
Calls Rolled Over, taking profits, into a future monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
Put contracts sold and still open: none
Put contracts expired: GMCR
Long term call contracts sold: none
Calls Assigned: ANF, EBAY, MOS, STX
Calls Expired: none
Puts Assigned: none
Stock positions Closed to take profits: none
Stock positions Closed to take losses: none
Calls Closed to Take Profits: none
Ex-dividend Positions: AAPL (ex-div 8/8 $3.05), BP (ex-div 8/7 $0.54), INTC (ex-div 8/5 $0.22), STX (ex-div 8/25 $0.38)
Some did report early assignment of AAPL (which was expected), in addition to early assignment of INTC (which was not expected). The early assignment of INTC was a small minority, while the number reporting early assignment of AAPL was more sizable, but less than a majority of respondents.
For the coming week the existing positions have lots that still require the sale of contracts: CLF, DE, FCX, INTC, JCP, MCP, MOS, PBR, SHLD, WLT, WY, X (See “Weekly Performance” spreadsheet or PDF file)
* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.