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Weekly Up to Date Performance
July 28 – August 1, 2014
New purchases for the week beat the unadjusted S&P 500 by 1.4% and surpassed the adjusted index by 0.9% during the worst week in about two years.
While performing better than the market those new positions still lost ground for the week.
With lots of companies reporting earnings this week it was all overshadowed by other events that converged to do their damage.
New positions opened this week went 1.3% lower while the overall market was 2.7% lower on an unadjusted basis and 2.2% lower on an adjusted basis.
Existing positions again significantly out-performed the market for the week by a really unusually large 2.8%. If the week’s big gainer, First Family Stores 2 lots which were closed early in the week are removed from consideration, the out-performance was still a very high 1.3%.
Existing positions actually showed an overall gain of 0.2% for the week if Family Dollar Stores is included, as compared to the market loss of 2.7%. If Family Dollar Stores is removed then the existing positions fell 1.3% as compared to the market’s fall which was twice as large.
Performance of closed positions out-perform the S&P 500 performance by 1.7%. They were up 3.7% out-performing the market by 83.9%.
This was not a very good week for the markets, with it all turning fairly suddenly on Thursday, most likely due to Argentine default news and word of increasing sanctions against Russia.
Add to that continuing turmoil in the Middle East, Ebola scares, worries of increasing interest rates and the fear of heights, you really had the makings for profit taking.
For those holding shares of either or both lots of Family Dollar Stores, the week started off nicely, as did new purchases.
But that changed pretty quickly.
Following an almost 400 point decline in the DJIA over the final two trading days I feel fortunate to have had any assignments, at all. Even the early assignment of Texas Instruments to grab its dividend turned out to be a good thing.
Somehow, there was also the opportunity to pull off a few rollovers and even some new covered positions on existing uncovered shares.
After the dust cleared the entire portfolio was lower, but owing to the good fortune of being able to make some of those additional trades, no where close to the decline that the market suffered.
While I was happy to have seen some assignments, rollovers and the new call sales, I would have liked to have rolled over even more and was disappointed by the number of positions that fell victim to the two day slide. However, it just didn’t seem very practical or rewarding to roll some of those positions over to the next or even following week, as the costs to have done so made me rather take my chances with some recovery early in the week and hopefully the ability to simply sell new calls.
While I hate to take losses in any given week, one of the early lessons I learned from reading Money Magazine about 30 years ago is that when they rated mutual funds one of the really key ratings, but which they said was under-estimated by most others, was how a fund performed in a down market. That’s the principal reason I look so closely at comparative performance for each position and cumulatively.
Money Magazine used their mathematical models to show that it was far easier for a portfolio, or a fund, to catch up if it trailed in an advancing market, but far more difficult if it trailed in a declining market.
Conceptually, that makes sense, particularly if you think in terms of what needs to be done in the event of a loss.
Imagine a loss of 20% versus one of 25%.
The 20% loss requires a gain of 25% to reach back to your starting point. However, that 25% loss needs a 33% gain to recover. Decreasing your loss makes it much easier to outperform.
Among the reasons I like volatility, which is now suddenly in everyone’s vocabulary, is that it tends to be associated with a down market. That actually becomes the most opportune time to pull away from the crowd and to position yourself for the next stage higher. That tends to be easier to do than you might think because the volatility, while depressing stock prices, happens to drive premiums higher and also makes it more lucrative to even rollover in the money positions.
Next week it’s anyone’s guess as to whether the market follows through with the weakness of the past few days.
But with some cash in reserve and the good luck of having had at least a couple of assignments to offset some of the new purchases this week, there may be some bargains to be had as trading begins.
If volatility shows itself in the premiums, there may be good reason to bypass the weekly expiration and go straight to the monthly contract, which is just 2 weeks away and also buy a little time for the market to perhaps repair itself, while we sit and get paid to wait.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: BX, DOW, EBAY, IP, PFE, TXN
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: C, EBAY, GPS
Calls Rolled over, taking profits, into extended weekly cycle: none
Calls Rolled over, taking profits, into the monthly cycle: CHK
Calls Rolled Over, taking profits, into a future monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
New STO: BMY, GPS, HFC
Put contracts expired: none
Put contract rolled over: none
Long term call contracts sold: none
Calls Assigned: BMY, KSS, TXN
Calls Expired: BX, DOW, EBAY ($54.50), GM, IP, RIG ($43), RIG ($44)
Puts Assigned: none
Stock positions Closed to take profits: FDO, FDO
Stock positions Closed to take losses: none
Calls Closed to Take Profits: none
Ex-dividend Positions: C (7/31 $0.01), PFE (7/29) $0.26
Ex-dividend Positions Next Week: WLT (8/6 $0.01)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, BX, C, CLF, COH, DOW, EBAY, FCX, GM, IP, JCP, LULU, MCP, MOS, NEM, PBR , RIG, TGT, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)
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