Category: Week in Review

 

 

Option to Profit Week in Review –  January 5 – 9,  2015

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
2 / 2	2	8	1  /  0	0  / 0	0

    

Weekly Up to Date Performance

January 5 – 9, 2015

Although there was lots of economic news to be digested this week, it’s not really clear that any of it had much of an impact on anything that we saw. None of the plunges and none of the surges, and there were plenty of each, could easily be attributed to anything tangible.

Sometimes stuff just happens.

The 2 new positions added this
week ended the week 2.0% higher and beat the unadjusted S&P 500 by an unusually large 2.7%. However, as compared to the unadjusted S&P 500 that difference was a much smaller 0.8%, as the market took a large decline on Monday, but no new trades were opened on that day.

The market itself lost 0.7% on an unadjusted basis, but gained 1.2% an unadjusted basis when Monday was not considered.

That relative performance advantage was again seen in the existing positions, this week as they finished the week 0.2% lower, but still surpassed the S&P 500 for the week by 0.4%, although there were again no real stand-outs among the positions.  Instead, it may have been more a situation of being able to take advantage of some of the spikes in the market and selling options contracts on 10 positions this week, adding to the income flow, as every little bit helps.

This week, there were just lots of little helping bits.

The first position for 2015 was also closed this week, as the weakness on Friday removed the chance to also see two other positions get assigned. So far, that single position was 0.9% higher, as compared to the 0.2% advance for the time adjusted market.

< span style="font-family: arial, helvetica, sans-serif; font-size: medium;">With more than 200 positions closed last year and the year before, there’s still a long way to go in that regard, but as long as open positions can collect premiums and be productive members of a portfolio, I can wait for them to be assigned and added to the closed list.

Well, this was another interesting week, for sure. That made for two of those in a row.

Heading into the close of the week there was every reason to believe that the sudden upsurge that had come to replace the intensely strong decline seen in the first two days of the week, would continue.

That was especially true since the Employment Situation Report this morning was good.

Importantly, it wasn’t “too good,” and didn’t create fears of interest rate increases among traders who are programmed to panic when what we all know is going to have to happen eventually, actually happens. 

In fact, the early reaction during the pre-open futures trading was to take a moderately lower market to one that was moderately higher.

As much attention turned to the unfolding events in France, you would have been excused for believing that a relatively good outcome, given the possibilities, would have sent the market higher in relief.

But this was a week in which there just weren’t any real antecedent events, as markets just went where they seemed to want to go.

Luckily, there were those two days of strong buying and somehow over the course of the week there were numerous opportunities to sell calls and execute rollovers, even being able to again develop a little bit of diversity in terms of the expiration dates.

That was welcome, as there are already enough positions expiring next week, without adding to many more to that exposure.

While I was reasonably happy with the performance this week, owing to the ability to make more call sales than has been the case for quite a while, there was very limited ability to add to cash reserves. Other than for the early assignment of Campbel
ls Soup, which thus far is the only assigned position of 2015, the cash reserves are lower than I would like to see.

While that cash is helpful in order to generate recurring weekly income, it isn’t absolutely necessary, as long as existing positions can either have new call contracts sold or can be rolled over.

Hopefully, that will be the case next week, as I enter that week just like this one and not particularly enthused about adding new positions. Instead, this week looked forward to the next in hoping that it would help to put those positions expiring next week to be in a better position to be assigned, or rolled over, yet again.

The 5 days of triple digit moves this week, along with their sizes doesn’t give too much reason to be very daring with remaining cash.

Next week, does however, hold the possibility of uncovering the next catalyst to drive the broader market forward, as earnings season starts once again.

What makes this earnings season different is that there may be some signs of an unexpected bonus coming from reduced energy costs and more discretionary dollars in the pockets of consumers.

While it may be too early to see much of an impact on last quarter’s earnings, where the real catalyst may be is in the forward guidance that will be given. It’s been a long time since there has been an overly optimistic picture painted regarding future prospects across the broader market and I think the market may respond very positively if that kind of picture can be painted.

As we await the beginning of earnings season we’ll see whether this week’s volatility and absence of any theme or association to real events will have any carry through as European events will soon come to a head and the ECB’s hand may get forced much sooner than Draghi or Germany were prepared to act.

All in all, aIthough,  wouldn’t mind if the rest of the world was simply placed on mute, and we could focus on earnings and the weather.

 

 

 

 

 

 

 

 

 

   

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:   BAC, CPB

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  GDX, HAL

Calls Rolled over, taking profits, into extended weekly cycle:  BAC (1/23), EMC (1/23), GDX (1/23), GPS (1/23)

Calls Rolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle:  BX, LXK

Calls Rolled Up, taking net profits into same cycle:  none

New STO:  GDX (2/20), TMUS (2/20)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: CPB

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 (1/5 $0.22)

Ex-dividend Positions Next Week:  CHK (1/13 $0.09), FCX (1/13 $0.31), WFM (1/14 $0.13)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BP, CHK, CLF, COH, DOW, FCX, HAL, HFC, .JCP, JOY, LVS, MCP, MOS,  NEM, RIG, SBGI, 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.



 

 

Option to Profit Week in ReviewDecember 29 –  January 2,  2015

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
3 / 3	2	1	0  /  0	1  / 0	0

    

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.

 

 

   

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:   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)



* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



 

 

Option to Profit Week in ReviewDecember 22 –  26,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
3 / 3	2	1	3  /  0	2  / 0	0

    

Weekly Up to Date Performance

December 22 – 26, 2014

For once in the past month oil was not the headline story. All anyone cared about was “The Interview” and the fact that the DJIA hit and then surpassed the 18000 level.

While not exactly a week setting any records for opening new positions, the 3 added this week was much more than last week’s single new position and they ended the week 1.8% higher, beating the unadjusted S&P 500 by 0.9% and the adjusted index by 1.2%.

T
he market still put in a respectable week ending 0.9% higher on an unadjusted basis and 0.6% on an unadjusted basis.

An equal number of assignments occurred this week as the number of new positions and the closed positions for 2014 finished 3.6% higher, as compared to 2.1% for the S&P 500 for the comparable holding periods. That 1.6% advantage represents a 75.5% difference in return.

This was an interesting week in that there was very little news other than the GDP report, which helped push the DJIA past the 18000 level. Not that anyone really expected too much news in what is usually a very slow week, anyway.

Otherwise all anyone discussed was the goings on surrounding the film “The Interview.”

While all attention was focused on the story and the story behind the story, as well as the various games being played, no one really talked about oil and the market simply went higher every day, setting more and more closing highs, although just barely on Christmas Eve.

Still, it was record after record, with 2014 now guaranteed to close the year having set a new closing high record on average once a week.

You would think, that being the case, that the market would have been much, much higher than it is going into the final 3 trading days of the year.

This week was a good one, but I would have been much happier had there been more opportunities to sell calls on uncovered positions. There weren’t too many positions that required rollovers, so there weren’t too many trades for this trade shortened week.

Next week will be the first in about 2 months that there aren’t very many option contracts already scheduled to expire at the end of the week.That will limit the kind of strategies used as they will all likely focus on simply weekly options, without looking at forward contracts very much.

With the sudden turnaround when the market was about 5% lower and volatility was relatively high, at least by standards of the last 3 years, the attraction of suitable premiums to look at expanded weekly options has dried up.

That means that for the coming week, with some additional cash having come from assigned positions, the likelihood is to look for new positions with options expiring next week, rather than looking to far ahead into the future. The problem, however, is that next week is another trade shortened week and so the premiums are going to reflect the reduced time value, not to mention the reduced volatility.

That seems to set up the same kind of conditions that were around for this week. I wouldn’t mind if that were the case, as long as the market itself moved forward.

The exception to those low premiums is with any possible trades in the oil sector, where a longer term horizon may still be able to generate a decent premium and would be well suited for the kind of time horizon necessary to see some meaningful recovery in prices.

Next week may offer some opportunities to dip toes in a little more to continue adding some energy positions as there continues to be some evidence of some cautious buying going on as prices just seem so incredibly low.While there are still those calling for oil to go to $40/barrel, it’s not to easy to see how that happens unless some producers totally dismiss the laws of supply and demand and try to stab either their competitors or their fellow cartel members in the back before they can stabbed themselves.

With some cash being recycled I’m willing to redeploy it, especially since I want to have something to actually be in a position to generate some income. However, if there really is a Santa Claus Rally coming next week, I would much rather conserve that cash and have the opportunity to sell calls on uncovered positions.and would especially like to get a few more assignments in the process.

Given that I was definitely not on the “naughty list” this year, that’s the least I expect to close out the year.

 

 

 

 

 

   

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:   DNKN, DOW, HAL

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:  none

Calls Rolled over, taking profits, into the monthly cycle: GM

Calls Rolled Over, taking profits, into a future monthly cycle:  none

Calls Rolled Up, taking net profits into same cycle:  none

New STO:  GME (1/17/15), LXK (1/17/15)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: DOW, HAL, MOS

Calls Expired:  GDX, JOY

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: none

Ex-dividend Positions Next Week:  DOW (12/29 $0.42)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, AZN, BP, CHK, CLF, COH, DOW, FCX, GDX, GME, HAL, HFC, .JCP, JOY, LVS, MAT, MCP, MOS,  NEM, RIG, SBGI, TMUS, 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.



 

Option to Profit Week in ReviewDecember 15 – 19,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
1 / 1	2	2	5  /  0	6  / 0	0

    

Weekly Up to Date Performance

December 15 – 19, 2014

This was another in a string of weeks that oil was the headline story, but this week it got lots of competition for attention and, for now, at least, it lost its ability to drag the market into the mud along with it.

There was only a single new position this week and despite doing well it couldn’t compete with a market that was 3.4% higher, erasing almost the entire loss from the previous week.

The single new position was 1.9%higher, as compared to the 3.4% gain in both the the unadjusted and adjusted S&P 500.

As opposed to the previous week that had no assignments this week, marking the end of the monthly cycle had 5 assignments. The 199 Closed positions for the year have finished 3.7% higher, as compared to 2.1% for the S&P 500 for the comparable holding periods. That 1.6% advantage represents a 75.1% difference in return.

This was a fascinating week, just not one that offered too many opportunities to trade. Although the week actually closed on a whimper, it was anything but that, as we saw lots of big moves, sometimes on an intra-day basis and lots of stories that got everyone’s attention.

The one thing that was clear was that if oil stays at its current levels, or even just nearby, the market looks as if it is done over-reacting to the moves, especially if the moves are lower.

There is just too much good news at hand, and more to come.

While oil led the market for most of the week there was finally some evidence of de-coupling on Thursday as oil headed lower and the market exploded to a 400 point gain. But the same was noted today as oil moved nicely higher on Friday and yet the market was asleep for most of the entire trading session, until catching some buying in the closing hour. But even with that last hour flourish the market showed none of the reaction to changing oil prices that had marked the previous few weeks.

Next week will likely be a very quiet trading week, as the market will be open for only 3 1/2 days and Friday’s trading, the day after Christmas, will probably be very, very slow, despite what may end up being a busier than usual week as far as news stories may go.

With a nice number of assignments this week I am anxious to do more trading than was done this week, which turned out to be a nice one to watch some beaten down positions recover, without putting new capital at risk.

The additional trading that I would like to do would still be in line with the sale of more calls on uncovered positions, rather than opening too many new positions, despite the replenishment of cash reserves. It still remains those trades and the ability to execute new ones on a regular basis that serves as the primary mechanism to extract income in an attempt to enhance returns.

Along with the objective of raising cash, I’ve been anxious for a while to reduce the total number of holdings, so I’m not entirely anxious to replace every position that does get assigned.

Given the news from the FOMC and the lifting of trader concern regarding the imminent rise in interest rates and some stability in oil prices, there may still be some time for the “Santa Clause Rally” that everyone has had good reason to expect.

A little more strength in energy shares and there may be more reward on the risk-reward spectrum to warrant considering DOH Trades, with less fear of being on the wrong side of price gaps higher.

This year, there’s especially good reason to believe that a Santa Clause Rally may still be ahead because there’s also finally the realization that decreased energy prices can only be good for the economy, even if not entirely good for the energy sector.

The fact that the market has been very responsive to GDP reports all through the year offers reason to believe that when the upcoming report is released it will provide evidence of much stronger than originally projected growth and much of that growth will be at the hands of increased consumer spending.

With earnings season set to start in less than a month there is already the chance to start seeing some improvements in both the top line and the bottom line and the very real possibility of multiple expansion, which is what will take the broader market higher, as sooner or later stock buy backs will have run their course.

All of that makes me hopeful for the next few weeks and beyond, as 2015 is now just right around the corner.

With only a small number of positions set to expire next week, any new purchases for the week will probably look at both the weekly and expanded weekly expirations. As long as the volatility can remain at or above current levels there may not be too much to lose by looking at trying to keep the expiration dates diversified, as has been the case for the past few weeks.

Otherwise, it’s hard to imagine that the coming week will have even a fraction of the interesting news stories that came our way this week.

Those stories may have been varied, but they did demonstrate a lot of resilience contained in this market. It was  at the precipice of going beyond another in a string of mini-corrections over the past 32 months and challenging the 10% decline level that was almost seen just 2 months ago.

It resisted doing so and we closed the week just shy of another all-time high.

Not a bad way to close out the year.

 

 

 

 

 

 

 

 

   

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:   GE

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:  BX (1/22/15)

Calls Rolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle:  SBGI

Calls Rolled Up, taking net profits into same cycle:  none

New STO:  DOW (/17/15), LULU (1/17/15)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: EBAY, FAST, GE, K, TGT

Calls Expired:  AZN, GDX, JOY, LXK, MAT, SBGI

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: GE (12/18 $0.23), LVS (12/16 $0.50)

Ex-dividend Positions Next Week:  none

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, AZN, BP, CHK, CLF, COH, DOW, FCX, GDX, GME, HAL, HFC, .JCP, JOY, LVS, MAT, MCP, MOS,  NEM, RIG, SBGI, TMUS, WFM, WLT (See “Weekly Performance” sprea
dsheet or PDF file)



* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



 

Option to Profit Week in ReviewDecember 8 – 12,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
3 / 3	3	5	0  /  0	5  / 0	0

    

Weekly Up to Date Performance

December 8 – 12, 2014

This was another in a string of weeks that oil trumped everything else and dragged everything down with it, making it the worst week of 2014 and the worst since 2012.

New positions did reasonably well, but only when compared to the S&P 500, which was down 3.5% on an unadjusted basis and 3.3% on an adjusted basis.

By comparison, the 3 new positions opened this past week were down 2.1%, beating the index by 1.4% on an unadjusted basis and 1.2% on an adjusted basis.

 With Friday’s large sell off, there were no positions assigned for the week. Closed positions for the year to have finished 3.6% higher, as compared to 1.6% for the S&P 500 for the comparable holding periods. That 1/9% advantage represents a 83.%7 difference in return.

While it’s nice to have seen new positions out-perform the market for the week, it’s not much of a substitute for having been profitable on the week.

This was another week of only a single story controlling everything.Even if you weren’t over-extended in the energy sector, nearly everything was pulled much lower this week.

The plunge of oil has been so drastic and has extended well into the broader market in a way that so far is defying logic. Besides the portion of the S&P 500 that comprises the energy sector, what could be bad about falling energy prices?

Well, that’s what seemed logical, until came some data suggesting that oversupply may not be due to increased domestic supply, but rather due to decreased demand from overseas, especially China.

Although the falling market may no longer defy logic, it has also completely put the usual end of the year story, that of retail sales, off anyone’s list of topics. That, despite the fact that the Consumer Discretionary sector was the only one that could hold its head up high after the down draft experienced by all other sectors.

In hindsight, given the unexpected sharp decline on Friday, it turned out to have been fortuitous to have made some rollovers earlier in
the week than usual. Having waited until Thursday or Friday, as is typically the case would have resulted in far fewer rollovers. Only one potential trade that I tried doing earlier, Dow Chemical, couldn’t get done, as it was suddenly caught in a down draft that it didn’t deserve to be caught in.

As it was the number of rollovers and the number of new call sales was better than expected, particularly given how terrible of a week this was. Even if someone was under-invested in the energy sector, just by virtue of being invested in anything this was a terrible week.

Since I have considerable energy exposure I find myself holding my nose a little and trying to resist what seem like great prices week after week. That issue now extends to many more stocks, even outside the energy sector. The prices seem great, even though we are barely down 3.5% from the recent highs in mid-October.

But that’s the problem. They looked great last week and just got worse. Same for the weeks before that, as well.

As much as I like to buy when shares are down and try using them to offset some paper losses, it’s not easy to justify doing so until you see at least some evidence of “the whites of their eyes.”

It’s hard to have that kind of confidence, although it’s easier to have some confidence that energy prices will recover, as at some point the natural law of supply and demand kicks in as low prices can only serve as a fuel to increase business activity and increase demand.

That’s actually a lot more optimistic than the scenario that we had been seeing where we thought that there was simply too much production and seeing OPEC decide not to cut production. That would have resulted only in lower prices and an artificial intrusion on the natural order of supply and demand.

With no assignments this week and cash at fairly low levels, I’m not expecting to add many new positions next week.

With lots of positions set to expire I very much would like to see some of those be assigned or rolled over.

In addition to more oil related news, there is an FOMC Statement release scheduled next week.

However, coming off today’s less than robust Producer Price Index and the fact that the FOMC is purported to be data driven, it seems unlikely that they will drop the “considerable time” wording in the release, which may put investors at ease in that increased interest rates may not be happening sooner, rather than later. It would seem reasonable to believe that the FOMC would wait for an actual indication of things heating up before raising rates.

As volatility went significantly higher this past week any rollovers next week will look at extended the term beyond a week, as increasingly there may be some motivation to do so, as the premiums are rising. That was the case this week, as 3 of the 5 rollovers skipped next week’s expiration, going out to December 26th.

There is, however, still very little volume, but that too will likely change as volatility creeps back into the equation, as it has seemed to do on a regular basis every two months or so.

For those that watch or even trade volatility, you may have recognized that the best days are those that have lots of intraday ups and downs. Those days have increases in volatility without the need for a large net negative change in the market, which is normally requisite.

In an ideal world that’s the pattern that offers lots of opportunity if a little nimble in trading ability.

This week was certainly one that saw lots of ups and downs, including on an intraday basis. While volatility is about 90% higher than it was just a week ago, it is still historically low and still can climb another 40% just to get to where it was in October, so there may be more to come next week, especially if oil continues to be undermined by a dysfunctional cartel’s indifference to basic laws of economics and the FOMC fools us.

 

 

   

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:   AZN, DOW, MOS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  AZN, BX,

Calls Rolled over, taking profits, into extended weekly cycle:  GDX, JOY, MOS

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:  EBAY (12/20). GDX (12/20), LULU (12/12)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: none

Calls Expired:  DOW, GME, LULU, LVS, TMUS

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: GM (12/8 $0.30)

Ex-dividend Positions Next Week:  LVS (12/16 $0.50)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BP, CHK, CLF, COH, DOW, FCX, GME, HAL, HFC, .JCP, LULU, LVS, MCP, MOS,  NEM, RIG, TMUS, 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.



 

Option to Profit Week in Review December 1 – 5,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
3 / 3	5	3	3  /  0	2  / 0	0

    

Weekly Up to Date Performance

December 1 – 5, 2014

New positions opened this week out-performed the S&P 500 by 1.5% on an unadjusted basis and 1.6% on an unadjusted basis, as the overall market was only 0.4% higher for the week and the newly opened positions ended the week 1.9% higher.

Positions closed in 2014 have finished 3.6% higher, as compared to 1.9% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents an 83.7% difference in return.

Once again, this was a good week for those without an extensive exposure to the energy sector. History tells us that the pain to investors from low gas oil prices is usually far shorter lasting than the pain to consumers from high prices, but regardless of which side you’re on you can’t wait for the pain to end.

I think I’ll scream if I hear yet another person say that the cure for low oil prices is more low oil prices. I suppose that’s true, but for now I’ve had enough of that remedy and am really ready for some turnaround.

This was another week with relatively little occuring to move markets in either direction. Even 6 Federal Reserve Governor speeches, the ADP Jobs Report, the ECB Policy announcement and the Employment Situation Report were all essentially non-events.

As opposed to the previous week which ended in fairly dramatic form as the energy sector may have had  its capitulation, this week ended on the same whimper as it experienced all through the week, except for the one day when it was acknowledged that low energy prices would be beneficial to the economy.

Somehow that came as a surprise.

The problem, however, may be that history doesn’t have very many examples of recent drops in energy prices due to increased supply. What we do know is that when those drops come because of decreased demand the stock market hasn’t been a particularly inviting place.

To a large degree this is uncharted territory, but the hope is that all of this cheap energy will prompt a little fire under the nascently expanding economy and lead to even more and better paying jobs, which in turn leads to more spending and even a little bit of inflation.

All of that would be good for people and markets.

Expecting a quiet week it was a nice surprise to find it busier than I had been expecting, thanks to some opportunities to find some buyers for calls on uncovered positions and the ability to roll some positions over.

What was more helpful, perhaps, was having another week of lots of ex-dividend positions. I like those days when the surprise deposit into the account is made representing that dividend payment. Between last week and this week there will be lots of those surprises.

With a few assignments this week and some rollovers there are now positions set to expire in each of the next 5 weeks, with the majority of them in the next two weeks. With volatility so low there isn’t much incentive or opportunity to look at the longer term expanded weekly options unless trying to protect a dividend or taking advantage of an upcoming earnings report that drives premiums higher.

For the coming week with some additional cash to spend I would still like to replicate this past week, if possible and look more toward rollovers and new call sales, rather than committing too much of the assignment proceeds into new positions.

If, however, in doing so, I would look at expiration dates for either of the next two weeks in an attempt to have some assignments occur in each of those weeks, as well, in an effort to create some kind of stream of cash for either re-investment of for just hiding away for a rainy day.

Unfortunately, next week doesn’t offer the same kind of flurry of ex-dividend positions, so there may need to be some replacement for the passivity of the past two weeks, but I’m perfectly game if the market is willing to cooperate.

.

   

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:   DOW, MOS, SBGI

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  BX, JOY

Calls Rolled over, taking profits, into extended weekly cycle:  GPS (1/9/15)

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:  DOW (1/2/15), FAST (12/20), GM (12/26), JOY (12/20)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: DOW, GPS, MOS

Calls Expired:  EBAY, GDX

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: JOY (12/2 $0.20), HFC (12/2 $0.32), MOS (12/2 $0.25), COH (12/3 $0.34), HAL (12/3 $0.18), NEM (12/3 $0.025)

Ex-dividend Positions Next Week:  GM (12/8 $0.30)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BP, CHK, CLF, COH, EBAY, FCX, GDX, HAL, HFC, .JCP,  LULU, LVS, MCP, MOS,  NEM, PBR, RIG, 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.



 

Option to Profit Week in Review November 24 – 28,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
4 / 4	1	4	0  /  0	3  / 0	0

    

Weekly Up to Date Performance

November 24 – 28, 2014

New positions opened this week out-performed the S&P 500 on both an adjusted and unadjusted basis bu 0.8% this week, as the overall market was only 0.2% higher for the week and the newly opened p[ositions ended the week 1.0% higher.

With no positions assigned this week the 2014 total of 191 positions have finished 3.6% higher, as compared to 2.0% for the S&P 500 for the comparable holding periods. That 1.6% advantage represents a 83.1% difference in return.

For those with relatively little energy exposure this was a good week, but for those with an equal or disproportionate exposure, Friday was a brutal day, as the week may have ended on a note of capitulation for those stocks.

Other than speculation about what was going to come out of Thursday’s OPEC meeting there was very little going on this week and the market had essentially nothing to respond to, as even the GDP, revisions and all, was a non-event.

It had been a nice and calm week with some reasonable trading activity and results leading up to the Thanksgiving Day holiday.

With Thursday a day off, there was reason to think that today would be like many other Fridays after Thanksiving over the years and would be the beginning to what is traditionally an above average end to the year.

Instead, the week ended as a really good example of the power of individual sectors and how they can obscure what was happening in the much broader market.

The week ended in dramatic form, continiong a consistent erosion in oil prices over the past month.

While energy, in all forms, had an unbelievable response to OPEC’s decision to do nothing, it’s dramatic drop may not have met the traditional criteria to have been considered as having capitulated, its price drop was still stunning.

That drop basically came all at once anjd didn’t detriorate in any meaningful or frenzied way during a thankfully shortened trading session.

While logic says that  such a sharp drop in energy prices has to be good, that’s not necessarily the case for US markets.

Where this drop differs from other drops is that it is likely that growing supply has outpaced demand. In cases where the market has fallen as energy prices have fallen it has been because declining demand led to an over-supply.

So maybe this time around the market will do the logical thing and head higher as input costs can head significantly lower, unless companies are tied down by long term and expensive commodity contracts.

Of course, for the end use, the prospects of significantly decreased energy costs, esepcially as winter is here, could translate into more cash avalilable for discretionary spending. Who knows, decreased gas prices could also lead to more driving and increased federal and state gas tax revenues, too.

Those benefits, though, may not come close to offsetting share price declines that were really ourtageous today.

It was a good week to have opebned some new positions and it was also a good time to have executed some early rollovers, rather than waiting for the end of the week. Just witness the very hard decline in Dow Chemical today, that probably due to its petrocjhemical businesses was hit as hard as any other company solely in the energy sector. The move in Dow Chemical took it from being a “sure thiing” assignment, to one that ened the week far out of the money, but a logical stock to have some seller’s remorse kind of rebound.

Next week may see some continuing fallout from OPEC’s unexpected, but logical decision to not cut supply, at least in the energy sector. It would be reasonable, though, to see some broader buying, both to be part of that traditional December rally and in the belief that falling energy prices are good for the economy, which in turn must be good for markets.

The latter has to remain to be seen, but I’m not adverse to adding some new positions next week, but again may look at trying to further populate the December 12, 2014 expiration, as there are already a fair number of positions expiring next week.

While this was a frustrating week if holding energy, it was at least a nice week for collecting lots of dividends. Next week will be the same and I increasingly do not want to put dividends at risk for early assignment as the contiinuing decrease in volatility is also reducing the reward from trying to double dip.

For now, I’m happy to have a few extra hours of no trading this week, especially after the demonstration of how punishing the market can be, even when the events aren’t really surprising.

I’m hopeful that the drop in oil and the entire sector will in fact be the same as a capitulation, but  that’s now far from certain as the dynamics of supply are very complex and the players are all, rightfully, distrustful of one another.

 

For anyone who has ever played the Prisoner’s Dilemma game, that is exactly what the world is looking at now, as producers will jockey fro what they believe will bring them an optimal outcome.

The likelihood is that whatever they choose it will be good for us, as people, but not bnecessarily good for us as investors, with or without exposure to energy. 

 

   

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:   GDX, GME, JOY, LXK

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  JOY

Calls Rolled over, taking profits, into extended weekly cycle:  GDX (12/12), GME (12/12), LVS (12/12)

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:  TMUS (12/12)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: none

Calls Expired:  BP, DOW, JOY

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: MAT (11/24 $0.38), HFC (11/25 $0.50 Special Dividend), K (11/26 $0.49), LXK (11/15 $0.36), SBGI (11/26 $0.16)

Ex-dividend Positions Next Week:  JOY (12/2 $0.20), HFC (12/2 $0.32), MOS (12/2 $0.25), COH (12/3 $0.34), HAL (12/3 $0.18), NEM (12/3 $0.025)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, CHK, CLF, COH, FAST, FCX, GM, HAL, HFC, .JCP,  LULU, LVS, MCP, MOS,  NEM, PBR, RIG, 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.



 

Option to Profit Week in ReviewNovember 10 – 14,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
4 / 4	2	3	3  /  0	2  / 0	0

    

Weekly Up to Date Performance

November 10 – 14, 2014

With 4 new purchases this week, it was still below the year’s average, but more active than in a while, even though there wasn’t too much going on in the markets or the world.

New purchases out-performed the unadjusted S&P 500 by 1.1% and the unndjusted S&P 500 by 0.9%. 

The new positions were ahead 1.1% for the week while the unadjusted index was 0.4% higher and the adjusted index was 0.5% higher.

 With this week’s 3 newly closed positions, bringing the 2014 total now to 183 positions, those have finished 3.5% higher, as compared to 1.8% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents a 92.3% difference in return.

This was yet another week that was hard characterize.

As opposed to last week when lots of things happened, this week had very little going and and for the most part, the market was very sedate all through the week.

This was another week with very little options volume and again with fairly large bid and ask spreads, following the pattern of the past few weeks and making it increasingly difficult to get trades, especially rollovers accomplished at prices that make them worth doing.

While getting those kind of maintenance trades done, there was some opportunity to open new positions. More than in the past month, but still below where I would like a typical week to be.

At least the new positions performed reasonably well in a week that itself was mildly to moderately higher.

There were also some opportunities, although still far from enough, to sell some new options on uncovered positions. Add a couple of rollovers and a handful of assignments and it was beginning to feel a little bit more like an acceptable week. Of course, ultimately it always has to be the bottom line that’s the judge.

With some recycled cash to begin next we
ek and already having about 10 positions set to expire, I wouldn’t mind adding some new positions, but would especially like to be able to get option contracts expiring during the upcoming December 2014 option cycle.

However, with volatility so low, it is again challenging to find premiums that make it worth going out much in time, especially if the market continues reaching new highs. That’s especially true because the dried up option volume also makes it very difficult to close out positions that are well within the money in an attempt to put the assets to work in something more productive. That has been the case for Bristol Myers Squibb and Campbells Soup and was the case for International Paper.

While there is an FOMC Statement on Wednesday, there’s not too much on the economic calendar next week and earnings season is coming to its end,. There are, however, some potentially interesting trades for next week in that area. With a little bit of cash being added to the pile and what may be a traditional good last 6 weeks of the year, there may be reason to test the waters with the cash, possibly sacrificing some premium for share capital gains.

The one caveat is that with the FOMC coming just 2 days before the monthly option cycle ends, there may be some reason to be cautious and consider rollovers a little earlier than usual, in the event the market has some distaste for what will be said.

That hasn’t been the case for a really long time, but you never do know.

Hopefully the market will either continue in an uptrend or trade at current levels, offering some opportunity to either capitalize on premiums or share gains until the end of the year, when by some miracle, an entirely new mindset seems to always take hold, particularly as hedge funds start with a clean slate.

 



 

 

 

 

 

 

 

 

 

 

   

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:   CY, INTC, MAT, SBGI

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  GDX, LO

Calls Rolled over, taking profits, into extended weekly cycle:  DOW (11/28)

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:  LVS (11/22), TGT (12/20)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: EMC, INTC, IP

Calls Expired:  JOY, TMUS

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: CLF (11/12 $0.12), RIG (11/13 $0.75)

Ex-dividend Positions Next Week:  TGT (11/17 $0.51)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BX, BP, CHK, CLF, COH, EBAY, FCX, GM, GPS, HAL, HFC, .JCP,  LULU, LVS, MCP, MOS,  NEM, RIG, TGT, 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.



 

Option to Profit Week in ReviewNovember 3 – 7,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
1 / 2	3	1	3  /  1	3  / 0	0

    

Weekly Up to Date Performance

November 3 – 7, 2014

This was another in a string of weeks with very little new purchase activity. Following two successive weeks of no purchases at all, even this week’s two new positions seems like a lot, but it is still far below the kind of activity I would like to see.

The two new positions were ahead 1.0% for the week and surpassed both the adjusted and unadjusted S&P 500, which was 0.7% higher for the week, by 0.3%.

 With this week’s 3 newly closed positions, bringing the 2014 total now to
180 positions, those have finished 3.5% higher, as compared to 1.8% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents a 92.4% difference in return.

This is another week that’s hard to characterize.

There was lots of news but not very much happened. Where we knew what the outcome would be ahead of time, the elections, the market acted surprised.

When we really had no idea of what to expect, such as with the ECB decision and the Employment Situation Report, the market just yawned.

But still, it was a week, just like many before, that saw multiple closing highs, including eking out new closing highs to end the week.

What really characterized the week for me was again seeing how much the options volume is drying up on routine positions. The kind that aren’t associated with upcoming earnings or otherwise in the news. There is much less trading going on and the bid – asks spreads are wider than ever, as the ultra-low volatility is again making it less welcoming.

I interpret the lack of selling of call contracts as an expression of continuing bullish sentiment. When the market is on a trend moving higher and you don’t see people trying to sell their calls, it’s because they think that those shares are going to move even higher.

Of course, that also means that there are buyers, who are also bullish, and who look at the situation as almost ideal, since they can get options at low premiums due to the low volatility. The problem, however, is that in reality they can’t get anything at the low prices because no one is selling and the gap between bid and ask is unusually hard to bridge as no one wants to move toward a compromise on price.

What is especially unusual, though, is that potential sellers are taking that bullishness with them literally to the grave. A good example today, but there have been many over the past few weeks, was British Petroleum.

Absolutely no one was willing to sell contracts expiring today on the out of the money $42.50 option,  after an opening bell flourish. Finally, only in the final minutes did bids start popping up, as even the most optimistic thought they could squeeze a few extra cents out by selling their momentarily expiring calls to someone.

That expression of bullishness seems very bearish to me. It is a reflection of greed. It may, however, be a sign of some desperation, as well.

There has been lots of talk recently about how the vast majority of hedge fund managers are under-performing the index. With the year about to come to its close that may mean more and more unhedged activity on their part as they try to catch up and one of the things that may get tossed out the window are their offers to sell options, in the hopes of catching stocks like Whole Foods.

So that bullishness offers lots of frustration.

With the volume so hard to come by it has been very difficult to get trades, especially rollovers, accomplished. You need to have willing traders and fair prices on both sides to get anything done.

It was a week of lots of unrequited trades.

At least, however, there were some new call sales and a single rollover and it was alright just going along for the ride.

For next week there’s absolutely no indication of where the catalysts for anything may be, higher or lower.

There was some rumor of a Russian incursion into Ukraine, but that wasn’t confirmed and so next week may be a clean slate as earnings season moves into its tail end.

For yet another week I don’t plan on too many additions to the portfolio. This week did allow for some addition to cash piles and I would like to add even more. If the market behaves and sends prices higher I would again be very happy to find cover for uncovered positions and see some mix of assignments and rollovers of the positions set to expire next week.

However, as long as volatility stays so low and there is a seller boycott or unwillingness to converge on price, I may see fewer rollovers by choice, rather than because of adverse share situation. As with British Petroleum today, I think I would rather then take my chances on being able to sell a new call when the pricing is right and avoid some of the buyback and transaction costs, especially as the premiums are so low.

 

 

   

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:   BP, TWTR (puts)

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  LO

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:  FAST (11/22), GDX (11/14), JOY (11/14)

Put contracts expired: TWTR

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: F, INTC, WFM

Calls Expired:  ANF, BP, 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: BP (11/5 $0.60), WLT (11/6 $0.01)

Ex-dividend Positions Next Week:  CLF (11/12 $0.15), IP (11/13 $0.40), RIG (11/12 $0.75)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BX, BP, CHK, CLF, COH, EBAY, FCX, GM, GPS, HAL, HFC, .JCP,  LULU, LVS, MCP, MOS,  NEM, RIG, TGT, 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.



 

Option to Profit Week in ReviewOctober 27 – 31,  2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
2 / 2	4	4	1  / 0	2  / 0	0

    

Weekly Up to Date Performance

October 27 – 31, 2014

After two consecutive weeks of no new purchases it was nice to finally do something, but following two consecutive days of gains totaling nearly 400 points it was hard to keep up.

The two new purchases, both dividend plays, were ahead 2.2% for the week, but still lagged the S&P 500 which was 2.7% higher for the week and 2.6% higher on an adjusted basis, following a nearly 2% move higher in those same 2 days.

Unlike previous weeks that characterized the sharp upward climb coming after a ne
arly 9% drop, this time around there was news to account for the market’s movement, especially to end the week, with some very unexpected news coming from the Bank of Japan.

For the first time in 3 weeks there was an assignment, albeit just one. Closed positions finished 3.5% higher, as compared to 1.8% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents a 93% difference in return.

 

It’s hard to know how to characterize this week.

It ended on a real surprise, although it was the good kind of surprise.

No one expected the Bank of Japan to do what everyone has been saying was need to be done by the European Central Bank.

Everyone agreed that the unexpected action is what sent markets soaring from the outset on Friday and as opposed to the market’s sharp climb on Thursday, the week ending surge was broad and not confined to a very small segment of the market and not so wholly reliant on the performance of a single stock.

As has been the case with the majority of hedge funds in 2014, when you have a week that climbs so strongly, hedgers are left in the dust. That happened this week, especially if you have some significant energy holdings which continue to lag the market and may also be responsible for some of the broad advances as low energy prices are good for most everyone other than those owning energy stocks.

This week, though, was one where there was at least some more trading activity in the past few weeks, in addition to the 2 new purchases to get the flow of income moving once again, especially after a very fallow week last week.

This week there was a decent combination of rollovers and sales of calls on uncovered positions, in addition to the single assignment.

Of course, I still want more of each of those categories.

Next week already has 6 positions set to expire and with a little bit of cash replenishment I may be interested in adding some additional positions, but would still be far more interested in making what already exists become more productive portfolio members.

With volatility back to its very low levels, with very little mention by the very people that were shouting from the rooftops about its climb, the option premiums, especially for out of the money strikes, such as are used in the DOH Trades aren’t very attractive and just don’t offer much in the way of enticement.

For those that look at the daily updated spreadsheet, you may have noticed an additional column to the far left. coded in “Red” and “Green.”  That column represents the break even price on positions that includes all realized premiums and dividends and can act as a guide as to what strike price, if assigned, can be sold without incurring a net loss on a position. The guide may be helpful in identifying opportunities to capitalize on achieving premiums even at strikes below the original purchase price and that would still result in a gain for the position.

I may come to rely on those more frequently in order to accomplish 3 things:

     a. generate more premium income

     b. generate more cash reserves through increased assignments

     c. reduce the total number of holdings and lots

As is usually the case, the ideal time to try to do such trades is during upward moves in shares, despite the declining premiums that ensue.

As opposed to DOH Trades, in which you generally would prefer not to have your shares assigned, as it would represent a net loss, the decision to rollover positions that have a “Green” strike price may be done on an individual basis, depending on needs, such as “do I want to generate cash reserves?”

I don’t usually speak about individual stocks in the week end wrap up, but Intel warrants some comment.

 

Next week, for those that own Intel, which goes ex-dividend on Wednesday, you’ve probably noticed its wild swings on Thursday and Friday. With its generous dividend and shares being currently deep in the money, I may look to roll the position in one of two ways. Either roll the November 7, 2014 $33 contract to a $34 November 14, 2014 contract or roll the existing contract to a November 7, 2014 $33.50.

With Intel currently being deep in the money, either of those trades, even if assigned early and very likely to be assigned early, would add, at the current prices for options, an additional
$0.12 in premiums, to offset the likely loss of the $0.22 in dividend, while allowing the funds to be re-invested in some other income producing position.

So if that Trading Alert comes your way, don’t scratch your head, too much. Given the extremely heavy put option activity on Thursday, some of which expired today, anything can still happen with those shares, as someone made a very, very big bet that Intel shares would be heading lower.

Quickly.

So far, they are wrong and the large block of $33.50 in the money puts that expired today lost about $0.90/share in the 2 day transaction, as there wasn’t any evidence of them being rolled forward. It was simply a very big bet that was allowed to die, although the bet is still on for the week of November 14th.

But that’s just a single stock.

So as hard as it is to characterize this past week, it’s even harder to understand what next week may bring. It’s never easy, but if anyone has any clue as to what next week may bring, let me know, because I’m not a big believer that Quantitative Easing in other countries is necessarily good for the US markets, as it would do what our QE did.

That is, siphon money from foreign markets into our own, except this time we’re the foreign market.

 

 

   

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:   F, INTC

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  F, LVS

Calls Rolled over, taking profits, into extended weekly cycle:  DOW (11/14), EMC (11/14)

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:  ANF (11/7), K (12/20), LO (11/7), TMUS (11/14)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: WFM

Calls Expired:  BX, GM

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: F (10/29 $0.12)

Ex-dividend Positions Next Week:  INTC (11/5 $0.22), WLT (11/6 $0.01)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BX, CHK, CLF, COH, EBAY, FAST, FCX, GDX, GM, GPS, HAL, HFC, .JCP, JOY  LULU, LVS, MCP, MOS,  NEM, RIG, TGT, 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.