Option to Profit
Week in Review
October 5 – 9, 2015
|CALLS ASSIGNED/PUTS EXPIRED
|CALLS EXPIRED/PUTS ASSIGNED
|2 / 2
|4 / 0
|0 / 0
Weekly Up to Date Performance
Following multiple consecutive weeks of indecisive trading, there was no question what the frame of mind was this week.
It was higher, higher and higher. Even if a given day didn’t really add much to the indexes, what they didn’t do was go much lower, as has been the case whenever the market was able to put together even just a single good day over the past couple of months.
There were 2 new positions opened for the week and they lagged the unadjusted and adjusted S&P 500 by 1.6%. They did well, but couldn’t keep up with the market, since they were capped by their strike prices in a week that the market just kept moving higher.
Those positions were 1.7% higher for the week while the adjusted and unadjusted S&P 500 finished a remarkable 3.2% higher.
Thanks to continuing strength in energy and materials, despite some give back to end the week, existing positions performed well and out-performed an already strong market. They were actually an unusually large 1.2% ahead of the S&P 500 for the week, but as with past weeks they also represent a liability in the event of their weakness.
For the year the 59 closed lots in 2015 continue to outperform the market. They are an average of 4.8% higher, while the comparable time adjusted S&P 500 average performance has been 1.1% higher. That difference represents a 350.6% performance differential.
If you were looking for a theme this week it was easy to find.
It looks as if we’re back to partying over the prospects of a delay in interest rates once again.
That’s a really sudden change from just a couple of weeks ago and is an example of what to do when life gives you lemons.
Maybe it’s not so hard to explain why the sudden re-embrace of what is beginning to sound like a weaker than expected economy, but that could mean having to go through the fear of a rise in interest rates again.
Sooner or later there has to be one, but it just keeps seeming later and later even after it seemed to be right around the corner.
This was a good week from just about every perspective.
There was finally a week that had a meaningful number of assignments and there were no stocks having options expire worthless.
Additionally, there was some opportunity to create new covered positions and to still be able to take some advantage of the mildly elevated volatility. There was even a chance to rollover a position that wasn’t due for a while, as its price just rocks back and forth with the energy complex and with each of those gyrations opportunity presents itself to make some additional return on a fundamentally sound position.
Next week marks the end of the October 2015 option cycle and uncharacteristically, there aren’t many positions set to expire next week.
What there is, is more cash than usual to put back to work, although I would really like to see the market consolidate just a little. It has gone up too much and too fast since the previous Friday, so that should lead people to believe that we’re either at a precipice of a break out higher or a drop back to reality.
That doesn’t really help, though.
Both are plausible, but I don’t think that I want to get overly reckless with the cash that will suddenly be available for re-investment next week.
Earnings will really get off the ground next week as financials begin to report, but as we’ve seen for the last couple of years, that sector can be strong, but nothing has to follow.
The real key will be whether we finally see retail reporting earnings that reflect the fall out from lower energy prices.
If really looking for a reason for markets to go higher, that is the best catalyst that I can think of and is definitely not one to fear, even if leading to increased interest rates.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: ANF, MET
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: HFC (10/30)
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: BAC (12/18), CSCO (11/20), GM (1/15/16)
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: ANF, BAC, GE, MET
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: GPS (10/5 $0.23)
Ex-dividend Positions Next Week: FCX (10/13 $0.05)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, AZN, CHK, CLF, COH, CY, FAST, FCX, GDX, GPS, HAL, HPQ, INTC, JCP, JOY, KMI, KSS, LVS, MCPIQ, MOS, NEM, RIG, WFM, WLTGQ (See “Weekly Performance” spreadsheet or PDF file)
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