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Weekly Up to Date Performance
December 29 – January 2, 2015
This was a week with no real news to account for any kind of movement, yet the market was decidedly weaker as most were expecting a more traditional end to the year.
The 3 new positions added this week ended the week just 0.1% higher, but handily beat the unadjusted S&P 500 by 1.6% and the adjusted index by 1.5%, as the broad market was much weaker than it may have appeared given the low key trading for the week and the absence of any real news to drive markets.
The market itself lost 1.4% on an unadjusted basis and was also 1.4% lower on an unadjusted basis to end 2014.
That relative performance advantage was also seen in the existing positions, as they finished the week 0.2% lower, but still surpassed the S&P 500 for the week by 1.2%, although there were no real stand-outs among the positions. Instead, it was more a situation where they simply traded were frozen in place for the week as the market lost ground.
For the very briefest of whiles, it looked as if maybe the week would end with just a little flavor of the Santa Claus Rally that most everyone was expecting. That glimmer of hope lasted only about 30 minutes, but even as the market reversed about 200 points there wasn’t too much of a sense of pessimism, maybe because the trading floor was still fairly empty as anyone with the ability to do so would have been wise to extend the New Year’s break by taking Friday off.
Instead, while those with the ability to make things happen stayed at home or at their Hamptons winter wonderlands, the market gave up that triple digit gain, almost had a tripe digit loss and finally finished the day unchanged.
That pretty much summed up much of the year. Not in terms of volatility, but in terms of being very difficult to characterize.
In fact, even the volatility today was hard to characterize as it should have been much higher given the roller coaster ride today. Instead, it was much lower, although those aberrations have a way of evening out.
Still, it was an odd kind of week.
There weren’t many positions set to expire this week so there wasn’t too much activity necessary to maintain positions as is usually the case. With an already shortened trading week and with only a brief period of an upward trend, which came this morning, it felt like a gift to get some limited opportunity to make some sales of new calls and even get one of the two positions set to expire this week, rolled over.
With no assignments this week and with two key economic events scheduled for next week, I don’t think that I’ll be too active in adding new positions.
With an FOMC Statement and the Employment Situation Report it will be busy, as both can easily move markets.
With last month’s change in FOMC wording it will be interesting to see how the FOMC may respond to the strong movement in the GDP ever since oil prices started their steep decline. That reaction, if any, would have to be in the direction of increased interest rates, which even though expected by everyone, would still come as a near term shock to the system and would likely send markets tumbling for a short period.
January, though, will be a month with two FOMC meetings, so there may be some time for the committee to keep collecting data before making a substantial policy change so quickly after they seemed to indicate that rates may not be raised for quite a while.
As has been the case for a while, next week, then, I would much rather be able to sell more calls on existing positions and would be very happy to see some assignments. At the same time I’m not as excited about replacing those positions, as I’d like to cut down on the total number of positions in play.
There are 4 positions set to expire next week and if adding new positions and likely to add to that list, rather than to the following week, which is the end to the monthly cycle. That week already has 9 positions set to expire. However, if volatility does move higher again, back above 20, there may be reason to start looking at that date and even weeks beyond.
That may be especially true as earnings season starts all over again the week after next. That’s always a reason to alter the equation and to look at expanded weekly options in order to get some premium protection for existing positions that may be in harm’s way as earnings are announced.
The real question, when Monday arrives and most everyone is back is just how different 2015 will be from 2014, as that arbitrary divide of January 1st usually seems to bring about a different character in the upcoming year.
Hopefully that coming year will finally see some recovery in commodities as we’re due for some inflation, anyway, so why not have it happen in a way that might be good for some stocks at the same time? That kind of an environment is generally not terribly good for the broader market, but it also tends to increase market volatility, which when sustained, does tend to be a really great environment in which to trade stocks, especially large caps and blue chips.
That would be nice for a change.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: BNO, EMC, HAL
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: HAL
Calls Rolled over, taking profits, into extended weekly cycle: none
Calls Rolled over, taking profits, into the monthly cycle: none
Calls Rolled Over, taking profits, into a future monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
New STO: GDX (1/9), AZN (1/17)
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: none
Calls Expired: DOW
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: DOW (12/29 $0.42)
Ex-dividend Positions Next Week: GPS (1/5 $0.22)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, BP, CHK, CLF, COH, DOW, FCX, GDX, HAL, HFC, .JCP, JOY, LVS, MCP, MOS, NEM, RIG, SBGI, TMUS, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)
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