Option to Profit
Week in Review
August 17 – 21, 2015
|CALLS ASSIGNED/PUTS EXPIRED
|CALLS EXPIRED/PUTS ASSIGNED
|2 / 2
|0 / 0
|4 / 0
Weekly Up to Date Performance
We’ve recently had a series of weeks that have been really hard to classify.
That’s not the case with this week as there aren’t too many ways to sugarcoat the events for the week.
It was still a week, though, that we could point our fingers toward China, but we also did nothing to help ourselves as earnings couldn’t offset the plunges on the other side of the world, especially when the earnings weren’t very good.
As opposed to last week in which there was a relative oddity of not ending the week on a sour note, today’s close more than made up for the lack of a bad f
inish to last week as this was the single worst performing week in 4 years.
There were 2 new positions opened this week. They out-performed the unadjusted S&P 500 by 4.0% and the unadjusted S&P 500 by 4.0%. However, those new positions still lost 1.8% for the week.
In comparison, both the adjusted and unadjusted S&P 500 measures were 5.8% lower for the week, marking the worst week in 4 years.
Despite a very poor weak for the energy sector and materials, existng positions out-performed the broad market by 3.0%, but they were 2.8% lower on the week.
With no assignments once again, the 46 closed lots in 2015 continue to outperform the market. They are an average of 5.0% higher, while the comparable time adjusted S&P 500 average performance has been 1.3% higher. That difference represents a 283.3% performance differential.
This week was an easy one to describe.
It was terrible.
It started as a week of reversals. Some of those early reversals in the week could have given some reason to be optimistic until along came an intraday reversal to a reversal.
The rest of the week really fell apart once the market’s valiant attempt to climb back from a 200 point loss was rebuffed and sent us right back toward the lows of the day.
The cumulative loss on the DJIA the following 2 days was about 900 points. That’s more reminiscent of 2008 and 2009 than anything in recent memory.
It’s weeks like this though that you depend on your hedges to limit those losses and somehow there was reasonably good opportunity to execute a number of rollovers. Those rollovers helped to beat the market for the week, but again, it’s all relative. The week was still a net loser.
As it was, in relative terms it was a better week than for the next guy due to those hedges and the ability to get a decent number of rollovers done. It was also good to have some of the ex-dividend positions, but this week nothing was immune from the down draft that blew in from China.
Although the week started with the equally reasonable chance of seeing a number of positions get assigned, it feels lucky to be able to have gotten whatever rollovers could be executed.
While there were a number of expiring positions, with the exception of Intel, those all represented call sales made on positions that were well out of the money and just done in order to generate a little bit of additional revenue while praying for the unlikely to happen.
I think I would take that chance again if the opportunities rolled around next week, although the time frame on those options is going to be increased.
What will be interesting to see is just how those premiums will be enhanced by the very sudden and dramatic increase in volatility this week. That may make it more inviting to make some “DOH” trades, as the reward may finally start to be getting more in line with the risk of assignment at strike prices that are way too low for comfort.
Following a quick scan of premiums for the next week and beyond, there is already very tangible evidence of those premiums moving higher.
With no assignments this week and using only cash that is the equivalent of trading on margin, I’m very unlikely to want to add new positions next week, but some of these prices are just so appealing right now, especially in the finance sector.
The greatest likelihood is that if adding new positions or if being able to sell calls on existing psotions, I’m going to think more about selling into an extended weekly time frame, rather than a weekly contract.
That leaves the possibility of having absolutely no positions expiring next Friday, but using the extended weekly options may be able to lock into some better premiums and could also give some more time for the market or individual stocks to see a rebound following this week.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: BAC, CVC
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: none
Calls Rolled over, taking profits, into extended weekly cycle: ANF (9/4), CSCO (9/4), HFC (10/2), IP (9/4)
Calls Rolled over, taking profits, into the monthly cycle: none
Calls Rolled Over, taking profits, into a future monthly cycle: BBY, CVC
Calls Rolled Up, taking net profits into same cycle: none
New STO: none
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: none
Calls Expired: COH, FAST, INTC, LVS
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: MRO (8/17 $0.21), CVC (8/19 $0.15), RIG (8/21 $0.15)
Ex-dividend Positions Next Week: MAT (8/24 $0.38)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, AZN, CHK, CLF, COH, FAST, FCX, GDX, GM, GPS, HAL, INTC, JCP, JOY, KMI, KSS, LVS, MCPIQ, MOS, RIG, WFM, WLTGQ (See “Weekly Performance” spreadsheet or PDF file)
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