| NEW POSITIONS/STO | NEW STO | ROLLOVERS | CALLS ASSIGNED/PUTS EXPIRED | CALLS EXPIRED/PUTS ASSIGNED | CLOSED |
| 5 / 5 | 1 | 3 | 4 / 0 | 4 / 0 | 0 |
Weekly Up to Date Performance
January 27 – 31, 2014
New purchases beat the time adjusted S&P 500 this week by 1.6% and also surpassed the unadjusted index by 1.8% during a week that saw the end to the worst performing month since 2010.
The market showed a small adjusted loss for the week of 0.2% and unadjusted loss of 0.4% for the week, while new positions gained 1.3%.
For the 25 positions positions closed in 2014, performance exceeded that of the S&P 500 by an unexpectedly large 1.5%. They were up 3.5% out-performing the market by 81%. While my expectation is for the difference to be greater than 1% in a flat or down market, I don’t expect it to continue at that great of a difference as the year continues.
If you’re looking for a positive spin it’s hard to find one as the market ended a bleak January 2014.
Okay, but there were a few positives despite the lack of a January Rally.
On a positive note, despite a third successive down Friday the market made a great recovery, as it was looking as if it would be another 200 point range loss. Unfortunately, that recovery gave way in the final 30 minutes, but I wouldn’t get overly concerned about that, as there’s little value for big players to stay long over the weekend when there is international risk.
On another positive note some may have noticed that of the three rollovers this week two actually rolled up to higher strikes as suddenly the premiums are beginning to show some life as volatility perked up.
But that’s enough spinning.
This was another of those weeks that creates nervousness. You can’t rely on good earnings from Netflix and Facebook to carry an industrial economy forward.
Next week’s Employment Situation Report will be more important than usual, coming off of last month’s abysmal report.
As earnings season starts to wind down, with most of the important barometers now having reported, we may simply fall prey more to economic reports and the developing issues in the rest of the world.
While it remains counter-intuitive more of this churning back and forth, especially as it develops nervousness, is really a good thing for those selling options. The most humane way to arrive at a good place as far as getting those fatter premiums would be a slow and methodical decline. That would make it much easier to rollover positions and would likely require fewer new purchases, as assignments would be less frequent.
Having been in bear markets and corrections before, that’s really a good place to be.
The problem though, is that declines are rarely methodical. They tend to be swift and they tend to have given plenty of clues, yet everyone acts surprised when it does finally occur.
Human nature makes it difficult to learn, because, at heart, we’re all optimists.
What’s nice about a market decline if you have some degree of hedging going on is that you can still be an optimist or at least not feel the pressure as much as the next guy.
I don’t think that next week will necessarily be a continuation of the past week or January, for that matter.
While I really dislike adding to the list of uncovered positions I think that a number are well positioned to gain back some ground in order to restore their cover. That may also be made a little easier if volatility continues to increase, as the premiums will improve and make it more likely to be worthwhile to make some of the hedging trades.
While I would have liked even more assignments this week, it was an improvement over the situation the previous two weeks and opens up the possibility of staying in the game.
Next week is another earnings busy week and I’ll have another separate article focused on some of the potential earnings plays.
I’ve been somewhat reluctant to recommend some of those earnings related trades, as they usually are done through the sale of puts. The concept of puts isn’t always intuitively grasped by all and sometimes requires greater oversight. However, I’ve been making those trades for my own account and have been, for the most part, pleased.
Sometimes frustrated, but overall, pleased.
For those that haven’t considered those trades as part of their arsenal, consider reading this article on the role of puts in a conservative investing strategy I’ve evloved quite a bit over the years regarding the role of puts and am glad that has been the case.
For those that communicate with me you know that I always welcome the communication. For those that don’t if you have any questions or want some clarification, fire away. Some of the best opportunities may come with otherwise risky trades that have their risk understood and attenuated.
Understanding the various tools, as well as considering a different mindset as spelled out in the “D’oh Strategy” are especially useful at a time when the market may finally be ready for a little bit of a break.
This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: BMY, CHK, FAST, IP, TXN
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: ANF, TXN
Calls Rolled over, taking profits, into extended weekly cycle: none
CallsRolled over, taking profits, into the monthly cycle: MSFT
Calls Rolled Over, taking profits, into a future monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
New STO: HFC
Put contracts sold and still open: none
Put contracts expired: none
Put contract rolled over: none
Long term call contracts sold: none
Calls Assigned: BMY, EBAY, IP, VZ
Calls Expired: C, HAL, INTC, LOW
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: FAST (1/29 $0.25), TXN* (1/29 $0.30), C (1/30 $0.01)
* some reported early assignment of TXN shares
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For the coming week the existing positions have lots that still require the sale of contracts: AGQ, APC, C, CLF, DRI, FCX, GPS, HAL, INTC, LB, JCP, LOW, LULU, MCP, MOS, MRO, NEM, PBR, PM, RIG, TGT, WAG, WFM, WLT (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.