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Week in Review – May 5-9, 2014

 

Option to Profit Week in Review
May 5 – 9,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
7 / 7 2 8 4  / 0 3   / 0 0

    

Weekly Up to Date Performance

May 5 – 9, 2014   

New purchases for the week beat the time adjusted S&P 500 by 0.8% and also surpassed the unadjusted S&P 500 index by 0.8% during a week that showed lack of commitment and tentativeness, yet almost finished with a closing record on the DJIA.

The market continued its bizarre pattern of alternating weekly gains and losses for the past 10 weeks, posting an unadjusted  loss this week of 0.2% and with an adjusted loss  0.2%. On the other hand, new positions gained 0.6% during the time period.

For positions closed in 2014 the performance exceeded that of the S&P 500 by 1.7%. They were up 3.4% out-performing the market by 100.3%.

This was just one of those weeks that we could have done without. Although there was a fair amount of trading, with 17 trades, it still wasn’t very fulfilling.

It wasn’t really a bad week, at least if using the S&P 500 performance as an indicator, but the details of the week were not worth cheering about and my bottom line wasn’t the kind that I usually like seeing.

In addition to fizzled rallies and personal blows to shares like Whole Foods, it was a week that really pointed out the market’s vulnerability. In this case the vulnerability is shown first and foremost among the “high flier” kind of stocks like Tesla, FireEye and many others that have reported earnings that were light of expectations.

While that’s understandable, after all those who live by the sword know what their likely future holds, but the brutality has been fairly indiscriminate and sometimes without reason. It also took out some companies that had previously reported nice earnings, like YELP, but then got caught up by being in the wrong neighborhood at the wrong time.

It’s also understandable why some may have soured on Amazon, for example, but there really wasn’t any compelling reason to have jumped ship so effusively, even after earnings, but especially not afterward, when it, too, was lumped in with others.

While I tend to focus on the negative, it’s obviously the bottom line that matters and  how holdings are set up for future success.

At the moment that’s even more hard to know than usual as there’s really nothing to indicate where the market may get any encouragement and in what sectors that encouragement may be manifest. Even the more traditional corners of safety haven’t re
ally fared well other than for a day or so as the market just goes back and forth between tepidly embracing risk and running from it.

On a positive nore new purchases outperformed a slightly weaker market. It was also nice adding to the stream of dividend income, as thus far the annualized dividend rate on closed positions for 2014 is up to a personal high of about 4.1%. For the time being I think that chasing dividends may continue being a good idea as market uncertainty punishes secure dividend paying stocks less than it does the rest.

It was also nice seeing a nice number of rollovers, with a little more diversification in time than in the past month, but those forward premiums are still very low, as volatility hasn’t really climbed as the market has been wavreing.

At least those rollovers help to pay the rent and help to maintain my irrational tendency for lavishness.

While those were all and good, I would definitely have liked to have seen more existing positions get their covers, but the hope for some continued share gains when the market was showing some trading strength would just fade and take with it the opportunities to get decent premiums. Additionally, with the volatility again at their low points even consideration of “DOH Trades” takes a break as it’s hard to justify the reward, given the risk of missing out on some unexpected advances.

I’d very much like to see that risk-reward proposition be adjusted a little as I would be anxious to execute some more of the DOH trades to try and take advantage of any continuing flatness in the market with those existing positions and generate some additional revenue and ROI.

With some assignments this week to again fund next week’s activity and already having a fair number of positions set to expire next week, I’m not overly eager to open many new positions. With the cash reserves restored a bit I would much prefer to generate the income by selling calls on existing positions, rather than opening new ones.

Of course, eventually all actions are situational. Depending on what looks appealing next week ultimately determines how those plans work out. While I generally like seeing downward trading starts to the week this time around I wouldn’t mind seeing a positive open, and as if it wasn’t asking too much, not to see the rally fade before a buying frenzy sets in.

It has been a while since we’ve had one of those, but even if it was just a teasing dead cat, it would be welcome.

 

     

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:  BBY, EBAY, FAST, MET, PFE, SBUX, STX

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  BMY, GM, MET, SBUX, TXN

Calls Rolled over, taking profits, into extended weekly cycle:  EBAY (5/23), MA (5/23), PFE (5/23)

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:  FDO, JPM

Put contracts sold and still open: none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:   BBY, GPS, UNH, VZ

Calls Expired:   EBAY, FDO, LOW

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:  MET (5/7 $0.35), PFE (5/7 $0.26), SBUX (5/6 $0.26), WLT (5/8 $0.01), WY (5/7 $0.22)

Ex-dividend Positions Next Week:  STX (5/12 $0.43)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BX, C, CLF, COH, DRI, FCX, FDO, GM, JCP, LOW, LULU, MCP, MOS,  NEM, PBR, RIG, TGT, WFM, WLT, WY (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.



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Weekend Update – May 4, 2014

The instant the Employment Situation Report was released and news of the creation of 288,000 new jobs was known, the spin and the interpretations started like wild.

Even partisans have to notice how detached they and their counterparts are from a true grasp of reality as they contrive ways to take credit or lay blame without regard to truth, in the expectation that no one will notice.

Whenever substantive economic news is released you can be certain of the immediate race to blanket the media with a version of the "truth" and talking points to reinforce one side’s continuing infallibility over the other.

Never before has the "participation rate" received so much attention as those seeking to downplay the robust numbers found their voice. Others focused on having cake and eating it too, while pointing to increased jobs and increasing insurance enrollments under the Affordable Care Act.

It’s always the same and thrives in a world where classic comments like "I was for … before I was against it," barely get noticed and flip-flops are never considered as anything other than recreational footwear.

For those paying attention those flip-flops have been increasingly frequent in the markets as "risk off" and "risk on" are again concepts in vogue. They alternate with one another for investor favor on a very regular basis as there’s little indication of direction, other than the expectation by some that the relentless move higher will simply continue.

With better numbers than expected the initial positive reaction from the market quickly gave way to  the interpretation of their meaning with regard to the Federal Reserve’s Qualitative Easing taper and the forward momentum was quickly lost. As the day progressed it was clear that the thought process of the past, that "good news is bad news" and bad news will make us wealthy, was returning.

More importantly, however, in helping to shape up the day was the fact that it was a Friday. Just as Tuedays are once again pre-ordained to be market gainers, so too are Fridays recently consigned to the loss camp.

Over the past two months you could be equally certain that the final trading day of the week was most likely a Friday and that the trading week would end with renewed concerns of some escalating conflict involving Russia. Why things seem to stay quiet during the week and then come to a head on Fridays is somewhat of a mystery, but that’s been the clear trend since the onset on the crisis in Crimea.

Amazingly, yet another week that was fairly quiet during the first four trading days saw a flare up of tensions overseas on Friday and again had an impact on the markets, taking some luster off what were otherwise predominantly positive weeks. The key is that it has only been the luster, thus far, as the market hasn’t been taken down to its bare, perhaps rusting metal base.

So powerful has this trend been that another well established trend is flailing by comparison. After an impressive run of nearly two years where the markets were statistically significantly more likely to have a higher move on the date of the release of the Employment Situation Report, this Friday marked the second consecutive month where that wasn’t the case, although the pattern of the entire week of the report release being positive continued.

While economic reports are released, the FOMC announces and Russia foments, earnings are being released. Thus far, there hasn’t been very much to suggest that there is a growing economy, yet we keep reaching new market highs. The recent GDP report didn’t add anything to that belief, either, although as the ever optimistic like to point out, "it is a backward looking measure," as if forward looking measures have greater validity than that which was actually measured, rather than fantasized about.

We’ve seen this scenario before. While there are signs of  tiring market the retreats to safety, such as utilities or consumer staples hasn’t lasted very long and risk is re-embraced after only the briefest of absences. While the most risky of all have been exhibiting some bubble-like behavior that brings back memories of days past and those memories aren’t necessarily good ones.

While the uncertainty continues, to me it also continues to be surprising of the relative confidence that exists that saw this Friday close with only  a modest loss. While the precious metals market was demonstrating some nervousness the equity markets thought it safe to go home for the weekend and discounted the likelihood of a meltdown in overseas decorum, despite the signs that it was already occurring.

In the past, that would have been unusual, but now it is just more of the same, as nothing can stop the relentless march higher.

We’ve all heard that before, too.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or "PEE" categories.

While I’m not thrilled about the prospects about buying Apple (AAPL) shares after their significant run higher fueled by the announcement of a 7 to 1 split and an 8% increase in the dividend, I do like its reasonably predictable pattern of behavior in its peri-ex-dividend period. While not a certainty, that behavior tends to see price increasing going into the ex-dividend date and then shortly thereafter. With that ex-dividend date this week I would like to consider a purchase and hopefully a quick exit from the position.

While many are of the belief that Apple shares will continue their appreciation after the split, I think those waiting for the split are likely to be disappointed as the money will have been made by those taking some profits by selling their appreciated shares to those clamoring for a piece of the pie.

Lately, pharmaceutical companies are hot. Imagine being so confident that you would consider a $100 billion buyout offer to be insufficient. Yet, while they are in play there are also concerns about even more regulatory pressure, but this time over sky high pricing for potentially life saving drugs.

Bristol Myers Squibb (BMY) straddles the worlds of "big pharma" and bio-pharma and its shares have found a nice home in this price range for the past 6 months. With earnings having been reported I think this is a good time to enter or add shares, not just for the option premium, but also for share appreciation as the sector is suddenly of interest. 

MetLife (MET) also just reported earnings and is currently trading a little above the mid-point of its recent comfortable range. It has actually held up nicely while interest rates have fallen and the 10 Year was testing the 2.5% level. MetLife would have been expected to also lose some luster in a falling rate environment, but it has shown very nice resilience. In addition to its usually attractive option premium shares are ex-dividend this week, compounding its lure.

Starbucks (SBUX) also is ex-dividend this week and I’ve resigned myself over the past month that shares won’t be returning, hopefully, to the levels that I previously thought represented fair pricing. I’ve only owned 3 lots of shares in 2014, but each time I hear Howard Schultz speak the more inspired I get regarding his vision for the company that goes well beyond ingestibles. It has become one of those companies upon which I like to use out of the money call options when adding shares, as I think there is always room for its short term appreciation.

eBay (EBAY) is one of those companies that so many people love to disparage. Of course it’s decision to repatriate foreign cash this week and pay taxes is somewhat puzzling, although perhaps should be cheered as being patriotic, it evokes policy discussion, particularly as other companies seek tax inversion benefits by moving offshore.

Certainly Carl Icahn can’t be terribly pleased with what eBay is doing, as he likely interprets the decision as a squandering of his billions, so I expect things to heat up at eBay. However, even without the tax issue and even without Carl Icahn as part of the equation, eBay has been as reliant of a covered option play as can be found and with some patience can be a very reliable partner in the creation of an income stream. The only thing that would make its shares more appealing to me would be the initiation of a dividend, so I hope Carl Icahn is reading.

Chesapeake Energy (CHK), speaking of Carl Icahn, reports earnings this week. It has long been one of my very favorite covered option trades, but my last lot was assigned more than $2 ago. As opposed to many trades that I like to make when earnings are announced and which are done through the sale of put contracts, with no desire to own shares, I wouldn’t mind ownership of shares.

As the week begins its trading it will simply be a question of whether a covered call position or the sale of puts provides a better rate of return and future prospects for continuing generation of income or quick closure. At the moment I’m more inclined to consider the sale of puts, however the initial market sentiment may shift my own, especially if shares open and stay higher.

Also reporting earnings this week is Nu Skin (NUS). Unlike Chesapeake, and much more like Herbalife (HLF), I’m not terribly interested in owning shares. NuSkin last reported earnings just 2 months ago after a delay of about a month in reporting its previous earnings. That;s never a good thing. In addition, its business practices are also occasionally called into question even by governments, as it has significant interests in China, which has alleged that the business ay be a pyramid scheme.

NuSkin, for its part, has re-started its distributor recruitment after nearly 3 months of abeyance in China. WHile earnings may  adversely impacted, and its shares certainly dived after the initial news in January 2014, I believe that it is already baked into expectations. What I do expect is positive guidance, even though there’s possibly reason not to believe much from companies in those kind of business. While I can’t make a compelling case for owning shares, there may be a case for selling puts prior to earnings or for the more cautious, doing so after earnings if there is a plunge in reaction to the report.

GameStop (GME) reports earnings later this month. Since January 2014 its chart looks very similar to NuSkin, which is not meant as a compliment. It is one of those companies that makes you wonder how it is that it still exists in this world of streaming data. it’s most recent challenge was news of Wal-Mart (WMT) getting into the used video game business in exchange for Wal-Mart vouchers. I sold puts at that time following the sharp drop in shares and happily saw the position quickly expire,as so often the initial response has little reason to  head in the same direction as cooler heads prevail.

With well known short interest that is always mentioned in the same breath as its name, GameStop had fully recovered from its Wal-Mart induced loss, but has recently faltered again. It appears to have some decent price support within about $3 of its current price and the kind of option premiums that could make that risk – reward proposition appealing for some, although May 22, 2014 earnings do add to the potential risk.

Finally, I was watching the action of JP Morgan (JPM) closely during the final hour of trading on Friday. That’s because I was expecting shares to be assigned, but a late decline in shares was threatening to see it dip below the $55.50 strike level. Ultimately shares closed at $55.58, but after the closing bell immediately slumped about a dollar lower as it announced the expectation that its trading revenues would drop 20% in the next quarter and that it had some exposure in the Russian market. 

Part of the covered call strategy that I like to employ is the serial or recurrent purchase of positions. Nothing seems to work better than having shares assigned and then buying them back at lower prices.

Those kinds of opportunities are always serendipitous and you certainly can’t take credit when they occur, but they do occur with reasonable frequency. Any further erosion in shares on Moinday morning may be a good opportunity to welcome shares back after a weekend apart.

Traditional Stocks: Bristol Myers Squibb, eBay, JP Morgan Chase

Momentum: GameStop

Double Dip Dividend: Apple (5/8) , MetLife (5/7), Starbucks (5/6)

Premiums Enhanced by Earnings: Chesapeake Energy (5/6 PM) , NuSkin (5/6 AM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

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Week in Review – April 21 – 25, 2014

 

Option to Profit Week in Review
April 21 – 25, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
4 / 5 2 5 3*  / 1 4   / 0 0

    

Weekly Up to Date Performance

April 21 – 25, 2014

New purchases for the week beat the time adjusted S&P 500  by 1.2% and also surpassed the unadjusted S&P 500 index by 0.8% during a week that ended badly on more geo-political concerns.

The market lost all of its moderate gains for the week on its final day of trading and finished with an adjusted loss for the we
ek of 0.4% and an unadjusted loss of 0.1%. On the other hand, new positions gained 0.7%.

As often happens when the overall market is week the existing positions beat the overall market after trailing last week and disrupting a string of weeks in which it had beaten the market. This week it beat the overall market by a relatively large 0.7%

For positions closed in 2014 the performance exceeded that of the S&P 500 by 1.6%. They were up 3.3% out-performing the market by 93.9%.

While it wasn’t a good way to end the week, it was finally one that made sense, given the renewed tension overseas.

What is still surprising is that past periods of heightened tension, that coincidentally perhaps came on Fridays, didn’t really erode the market, other than for one time. That time, however, saw most of the losses recouped in the final 30 minutes of trading, which was really unusual.

This time around it was just a dour day from the beginning as the selling was much worse than the pre-open market would have had you believe was in store.

As usual, the real value of a covered option strategy becomes clear when the market is struggling or flat or even mildly to moderately higher. That leaves only truly strong market performance that’s difficult to match. While that was the norm for 2013 it may be time to remember that isn’t the historical norm. Generally stocks go up and down, only occasionally doing so in a sustained manner.

In case you haven’t noticed, this isn’t 2013.

In the past 5 years we’ve seen two of those large sustained moves, one in each direction.

I know which direction I prefer, but I also know which direction wasn’t as bad as it should have been.

I have mixed feelings about this week, especially with Friday’s disappointment.

Although it didn’t snatch any positions from the jaws of assignment, I wasn’t able to get much in the way of new coverage on existing positions this week. While there was some reasonable rollover activity and generating some income for the forward week, I still would have preferred more assignments and having more cash on the sidelines. I also would have liked more in the way of ex-dividend plays, but the past few weeks have been a combination of slim pickings and poor timing in terms of price movements right before those ex-dividend dates.

At least it was fortuitous, maybe serendipitous, that most of the week’s rollovers were able to get done on Thursday, especially since Friday is the much more common time to do so. For those following along on my personal trades the same goes for rolling over some of those puts.

What a difference a day makes. Who knew?

< span style="font-family: arial, helvetica, sans-serif; font-size: medium;">All in all positions faired reasonably well, but it’s really clear that companies are taking it on the chin when earnings aren’t meeting expectations, or even worse, when offering diminished guidance. That speaks to a very wary market and it’s not as if money from one sector is rolling into another one.

My sense is that money that’s fleeing is partially going into traditional safety areas, but also going off to the side. While I don’t generally want to be with the crowd, I have no argument with setting some money aside. I just wish that this week would have allowed me to join them in a more meaningful way.

The optimist sees that sideline cash as money ready to drive the market higher. The pessimist sees everything as a negative, so I won’t even venture a guess as to what degree they read this weakness and wariness.

Next week is already populated with a number of expiring positions so I will likely be looking for opportunities to sell contracts for the following week, as was done this week for all other than the Facebook puts.

What I don’t know is how willing I’ll be to add too many new positions as cash is available, but definitely beginning to run low and beginning to test my comfort level.

Hopefully it will be a quiet weekend and cooler heads prevail in Russia and Ulkraine, but no one can feel very secure when having to rely on the behavior of others.

That’s what I continually told myself when I would leave my kids home alone , telling them not to touch the fireworks and hypodermic syringes I would routinely leave scattered on the kitchen table.

I wonder if they listened?



 

     

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:  BX, FB (puts), JPM, KSS, TXN, UNH

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  BBY, GPS, LOW, MOS

Calls Rolled over, taking profits, into extended weekly cycle:  EBAY (5/9)

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:  BMY, RIG

Put contracts sold and still open: none

Put contracts expired: FB

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:   BMY*, CSCO, HFC (* will query subscribers on Monday to see if BMY assigned, having closed at $50.51)

Calls Expired:   C, LULU, MA, VZ

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:  LOW (4/21 $0.18), BX (4/24 $0.35)

Ex-dividend Positions Next Week:  none

 

 

For the coming week the existing positions have lots t
hat still require the sale of contracts:   AGQ, C, CLF, DRI, FCX, FDO, GM, IP, JCP, LULU, MA, MCP, MOS,  NEM, PBR, PM, RIG, TGT, VZ, WFM, WLT, WY (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.



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Week in Review – April 14 -18, 2014

 

Option to Profit Week in Review
April 14 – 18, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
2 / 2 5 7 3  / 0 5   / 0 0

    
Weekly Up to Date Performance
April 14 – 18, 2014
With only 2 new purchases for the week they badly trailed the time adjusted S&P 500  by 1.6% and the unadjusted S&P 500 index by an even bigger 2.1% during a week that surprised most everyone for its strength and resilience after a dismal performance the previous week.
The market showed a spectacular adjusted gain for the week of 2.3% but an even more spectacular unadjusted gain of 2.7%, while new positions gained only 0.6%.
After some unusually large beats of the overall market for several weeks existing positions trailed by 1.3% for the week.
For positions closed in 2014 performance exceeded that of the S&P 500 by 1.6%. They were up 3.3% out-performing the market by 90.9%.
What a week.
That’s what I said last week and it was even more the case this week, except this week was a rare one for 2014, in that the market showed incredible strength.
Not only did it show strength, but it showed it while everyone was getting ready for continuing weakness from the prior week.
The real difference is that last week I was still happy with the end result, but this week I wasn’t.
Just as the previous week had seen real substantive turnarounds that had to have come as a surprise to nearly everyone, especially since there were no catalyts to have turned everything around, this week just went higher from the first opening bell, yet nothing had changed from the previous Friday’s closing bell, that left a pall of pessimism.
Given just how strong the market was this week I was very disappointed with the personal outcome, starting with having made only 2 new trades for the week.
While there was some ability to open new cover for uncovered positions and rollover a fair number of exisiting positions, I would have liked to have seen more than just 3 assignments, as that didn’t do very much to add to the cash reserve that saw nothing added the previous week.
While I didn’t mind the bottom line performance, that’s always in the past, while assignments always have you looking toward the future thinking about how next to invest the money that it generates.
As I get older I don’t want to find myself dwelling in the past. I would much rather be looking toward the future.
With only a handful of assignments to work with it may mean another week of relatively few new positions, although cash reserves can still be called upon for upping the ante if anything truly looks worthy.
With a new monthly option cycle beginnng on Monday I am still looking for whatever opportunities there are to generate income from selling new covered calls on existing positions, as a primary goal and adding new positions as a secondary goal.
Of course, it’s hard to enter the May option cycle without being reminded of the adage that even school aged kids seem to know – “Sell in May and go away.”
That hasn’t exactly been a foolproof startegy the past few years, but there will no doubt be plenty of people pointing to data that shows that it is a sound way to go.
These days, the market never really sleeps, much less for 3 or 4 months at a time, so I think old adages are cute, but that’s about it for now, until proven otherwise.
What the market has proven, one more time, is that it seems to be completely resilient to what we used to think of as obligatory corrections. At least it may have simply re-defined what a correction is for this decade.
If l;ast week is any indication, it’s just another in what is becoming a long line of quick rebounds from relatively small drops. Those rebounds then become stepping stones toward even higher highs.
Will I be putting my money where my mouth is next week?
I hope so, although i wish my cash reerves were as big as my mouth.

 

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:  BBY, MET
Puts Closed in order to take profits:  none
Calls Rolled over, taking profits, into the next weekly cycle:  AIG, BBY, BMY, LOW, LULU
Calls Rolled over, taking profits, into extended weekly cycle:  CMCSA (5/2)
CallsRolled over, taking profits, into the monthly cycle:  none
Calls Rolled Over, taking profits, into a future monthly cycle: MET, SBUX
Calls Rolled Up, taking net profits into same cycle:  none
New STO:  CMCSA, HFC, LOW, MET, MOS
Put contracts sold and still open: none
Put contracts expired: none
Put contract rolled over: none
Long term call contracts sold:  none
Calls Assigned:   CHK, COH, MET
Calls Expired:   DRI, FDO, FDO, PM, RIG
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:  none
 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BMY, C, CLF, DRI, FCX, FDO, GM,  HFC, IP, JCP, MCP, MOS,  NEM, PBR, PM, RIG, TGT, WFM, WLT, WY (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.

Posted on

Week in Review – March 24 – 28, 2014

 

Option to Profit Week in Review
March 24 – 28, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
7 / 7 4 9 1 / 0 4  / 0 0

    

Weekly Up to Date Performance

March 24 – 28, 2014

New purchases beat the time adjusted S&P 500 this week by 0.2% and the unadjusted S&P 500 index by 0.4% during a week that saw no over-riding theme, pattern of trading nor news. However, before jumping up and down, that beat was only relative, because new positions fell by 0.1% for the week.

The market showed an adjusted loss for the week of 0.3% and unadjusted loss of 0.5% for the
week, while new positions lost only 0.1%.

Only.

By contrast, existing positions significantly out-performed the market by 1.2% for the week, deriving some benefit from rollovers and newly covered positions. That, too, is in relative terms, as in absolute terms existing positions advanced 0.8% for the week. That was an unusually large beat and it’s not the sort of thing that I would get accustomed to seeing, although I could easily get used to it.

For positions closed in 2014 and only one such position was added this week, performance exceeded that of the S&P 500 by 1.6%. They were up 3.6% out-performing the market by 87.4%. SO far, that wide beat has continued, although I continually expect that margin to decrease and will do so once the market strings together a few strongly positive weeks.

For a week that really had nothing going on it was fairly busy and confusing for most everyone.

While much was made of the air being taken out of the higher flying momentum stocks, for three of the days this past week the S&P 500 trailed the Dow Jones by quite a margin. The market was weaker than many would have guessed based simply on the most common measure. It wasn’t only those high fliers that took a beating last week. Basically anything that had shown a recent gain was fair game and the price corrections were fairly large when they did take place and were also fairly indiscriminatory.

The markets kept looking for direction and there really wasn’t any to be found. Whatever optimistic tones there may have been on some mornings as trading started basically dissipated as the trading sessions wore on.

It could be because we’re just at that awkward time of the year when there’s nothing much going on and we’re still also a few weeks away from the beginning of the next earnings season.

The market really doesn’t like being in a vacuum. It needs something to bounce off of or to react to. Leave it on its own devices and nothing good can come of the situation.

Yes, there’s an ECB meeting next week and there’s also next Friday’s Employment Situation Report, but there’s really not much going on and neither of those should offer any real surprises.

While the market did give up most of its gains to close the week, it was still impressive that it was able to ignore the late news coming out of Ukraine, suggesting that Russia has amassed even more forces along the Ukraine border.

When the Crimea news broke at the same time of the day on a Friday three weeks ago the market gave up a very significant rally in fear of the unknown.

Not so today.

Anyway, each week leaves me with some disappointment, even if the net result s positive.

This week it’s that only one position was and 7 new positions were opened. Since I’ve been actively trying to reduce the total number of positions, that is a set back, but as far as set backs go, I can deal with this one.

It does, however, also put a little bit of a crimp into how much I’m willing to spend next week on new positions. When trading closed on Thursday, on the downside, I was seeing what looked like lots of bargains awaiting on Monday.

In a way, I was glad to see a number of them become less appealing by taking on their gains on Friday, particularly since I won’t have quite as much in reserve when trading begins next week.

When it’s all said and done my cash reserve will likely settle in at about 37% and I will be willing to take that down to 25%, or about 5 or 6 new positions for next week.

While maybe not trading quite as much next week, I would be happy to see the same kind of results with next week’s expiring positions occur as we saw this week.

What was positive for the week, besides the bottom line, was the ability to rollover 9 positions and find new cover for an additional 4 positions.

Every little bit helped this week, including those aggravating DOH trades, for those of you playing along.

With a fair number of positions set to expire I would certainly like to see some of those assigned and the rest rolled over, but as you’ve probably noticed by now, there’s really very little likelihood that any one week is like the one just past or the one next up.

 

 

.

 

 

 

 

 

 

 

 

 

 

 

 

     

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:  BMY, CMCSA, COH, EBAY, FDO, HFC, MA

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  APC, EBAY, FDO, GM, MOS, MRO

Calls Rolled over, taking profits, into extended weekly cycle:  AIG (4/11), CSCO (4/25), VZ (4/11)

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:  CHK, CSCO, FCX, LULU

Put contracts sold and still open: none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:   COP

Calls Expired:   C, FDO, TGT, WFM

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:  PM (3/25 $0.94)

 

 

.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, C, CLF, FCX, FDO, GM,  IP, JCP, MCP, MOS,  NEM, PBR, PM, RIG, TGT, WFM, WLT, WY (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.



Posted on

Week in Review – March 10 -14, 2014

 

Option to Profit Week in Review
March 10 – 14, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
4 / 5 1 5 3 / 0 6  / 0 0

    

Weekly Up to Date Performance

March 10 – 14, 2014

New purchases lagged the time adjusted  S&P 500 this week by 0.3% and matched the unadjusted index, both languishing for the week.

The market showed an adjusted loss for the week of 1.6% and adjusted loss of 2.0% for the week, while new positions lost 2.0%.

Existing positions performed surprisingly well actually outperforming the market by 0.4%, but they, too lost ground. Just not as much.

That may be the best I can say about things this week.

Although, for positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.5%. They were up 3.3% out-performing the market by 80%. Whereas I know that this figure will come down at some point, I don’t mind being able to continually look at it in an attempt to make me feel good about things while I can.

I knew there was something that I didn’t like about this week.

Besides the obvious, it turns out that this was the first week in which every day was a loser since May 2012.

That was also the last time we had a meaningful correction, although even that didn’t meet the usual definition.

This wasn’t a very good week in so many ways, but adding far too many positions into the “uncovered” category is always the worst, from my perspective. Stocks go up and stocks go down, but a week in which a stock isn’t generating some kind of income is a lost week and is never truly re-captured.

Additionally, more new positions were added than old positions were assigned, going counter to my goal of slowly reducing the total number of positions managed in the portfolio.

And let’s not forget, despite out-performing the market, there was still a net loss for the week.

No wonder my wife won’t talk to me.

On another positive note,  because I do have to occasionally be delusional, there was a nice flow of dividends again this week and at least some money will be returned to the coffers following assignment of an all too small number of positions.

The odd part is that I’m actually reasonably bullish about next week and have more than the usual number of potential stock selections on my preliminary list.

Part of the optimism certainly isn’t related to events, but it is related to the charts that I pretend to rarely refer to for guidance.

In this case, after some initial glances that will likely call for a bit more in-depth thought, is the chart of the Volatility Index, which may be indicating a temporary downswing in momentum and markets.

More on that in the Weekend Update, if warranted.

While there wasn’t too much positive for the week there were at least some opportunities to roll over some positions. However, as I discussed earlier in the week much of my own activity was focused on the sale of puts and I may look to increase that activity as part of regular Trading Alerts, as long as there appears to be some thought that there may be over-sold conditions in the development phase, as I believe we are currently trapped within.

That explains the Trading Alert sale of Twitter puts late in the session on Friday.

With a little bit of cash generated and still some uncertainty related to external events I don’t plan on plunging into markets on Monday morning. However, I think there may still be reasonable opportunities, as long as minor details like New York State Attorney General’s Office choosing to investigate any of my selections doesn’t occur too often.

On another potentially positive note and getting back to the topic of volatility, there has been a rise this week, as you would expect when markets are dropping.

That kind of increased volatility is a better environment for DOH Trades, to be certain and as there are uncovered positions there is more opportunity to look for those kind of trades, but again remembering that they tend to require greater vigilance and a little bit of prayer, too, such as may have helped Target to get back below $60.

Today that volatility worked a little bit against us as the premiums to buy back options in attempts to roll over reflected increased expectations for continued drops even during the remaining hours of today’s session. However, next week’s premiums were already beginning to show some increases related to increased uncertainty.

With a dozen position set to expire next week and seeing increased premiums may bring opportunity to finally return to the strategy of staggering expirations by time in order to get some better diversification and protection from a sudden movement in either direction.

In the meantime we can just sit back and see whether any events unfold this weekend that will set the tone for us on Monday morning. Although the market closed the week with a loss, the fact that the loss was really pretty mild going into such a weekend ewither indicates that traders are delusional or there’s little being signaled to fuel worries.

Either one of those is fine by me.

 

 

 

 

 

 

 

 

 

 

 

 

     

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:  C, CHK, GM, MPS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:   CHK, MSFT, WFM

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

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:  WFM

Put contracts sold and still open: TWTR

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  COH, KSS, SBUX

Calls Expired: AIG, APC, C, FDO, IP, VZ

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:  APC (3/10 $0.18), KSS (3/10 $0.39), NEM (3/11 $0.15), HFC (3/12 $0.30), FDO (3/12 $0.31), GM (3/14 $0.30)

 

 

.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, AIG, APC, C, CSCO, CLF, COP, DRI, FCX,  FDO,  IP, JCP,  LULU, MCP, MOS,  MRO, NEM, PBR, PM, RIG,  VZ, 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.



Posted on

Week in Review (February 24 – 28, 2014)

 

Option to Profit Week in Review
February 24 – 28, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
5 / 5 4 8 4 / 0 2  / 0 0

    

Weekly Up to Date Performance

February 24 – 28, 2014

New purchases matched the time adjusted S&P 500 this week but fell behind the unadjusted index by 0.3% during a week that set another new closing high just a few short weeks after hitting the bottom of a correction attempt.

The market showed an adjusted gain for the week of 0.9% and unadjusted gain of 1.3% for the week, while new positions gained  1.0%.

For positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.3%. They were up 3.2% out-performing the market by 71.7%.

For a week that didn’t have much in the way of news it was one with some significant back and forth price shifts going on and one that seemed very tied to technical factors.

Sometimes even I become a believer in that sort of thing as it did seem to be more than a coincidence that the market was so responsive to the number 1850.

After those technical issues only in the final hour did current events sneak into the equation as worries about the situation in the Crimea temporarily took the market from a 120 point gain to a 20 point loss before closing higher to end the week. For the week there was really no impact from news nor data.

With the potentially critical news coming from Crimea and the market hovering at that 1850 level I was actually surprised that the selling didn’t continue as the old market axiom is to not go into a weekend of uncertainty holding long positions.

It has been a very, very long time since anyone has actually listened to that axiom. The pattern over the past five years is that nothing gets in the way of the market’s progress.

At least not for very long, so most have been unwilling to let go of their positions for fear of missing out.

The market being able to come back from the quick event driven sell-off can only be seen as another in a series of optimistic signs that point toward continued strength.

Otherwise, the biggest news of the week was the return of select retailers despite generally lackluster numbers that simply didn’t disappoint already lowered expectations.

In the absence of any really meaningful news the market simply kept its eye on the previous closing high on the S&P 500 and tested it a couple of times. The previous script for the past numerous attempts at a correction all read the same and Friday’s attempt at a strong close to end the week was perfectly in line with the past.

Despite coming off those highs the realization that the final hour’s fall was event driven should allow optimism to continue to reign, unless the event in Russia and Ukraine unfolds some more over the course of the weekend.

The week was another busy one with continued ability to rollover positions and find some new cover, as well.

The only regret of the week is having executed a DOH trade on Target, never imagining that it still had another 5% upside left in it after already having gone 5% higher after announcing its earnings.

Not
quite ready to take that loss at least there was an opportunity to try and wait shares out by rolling forward two weeks and perhaps seeing some price give back, thereby allowing a chance to participate in any further price strength in the future.

At least that’s the story that I’m going to go with.

With some assignments, although two fewer with the final hour drop in shares of General Electric and YUM Brands, there is enough replenishment of reserves to provide some security cushion when approaching next week and looking for new opportunities.

Other than the Target rollover, all of the other rollovers for this week were simply to the following week. Part of that was because the low volatility isn’t offering very many good premiums by going out in time.

While I would like to diversify the time expirations of the contracts some more, such as going to March 14, 2014, it’s hard to want to tie up the funds for more than a week when so little is achieved in return.

But as always, once the week begins anything goes.

 

 

 

     

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:  CHK, COH, HFC, SBUX, VZ

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:   AIG, APC, GE, LULU, MSFT, SBUX, YUM

Calls Rolled over, taking profits, into extended weekly cycle:  TGT

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, INTC, LB, TGT

Put contracts sold and still open: none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  LOW, MA, MOS, VZ

Calls Expired: CSCO, INTC

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:  LO (2/26 $0.615), WY (2/26 $0.22)

 

 

.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, C, CSCO, CLF, COP, DRI, FCX, INTC,  JCP,  MCP, MOS,  MRO, NEM, PBR, PM, 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.



Posted on

Week in Review – February 17 – 21, 2014

 

Option to Profit Week in Review
February 17 – 21, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
5 / 5 4  9 6 / 0 5  / 0 0

    
Weekly Up to Date Performance
February 17 – 21, 2014
New purchases beat the time adjusted S&P 500 this week by 1.8% and also surpassed the unadjusted index by 1.7% during a week that had no real news or no meaningful events.
The market showed an adjusted loss for the week of 0.1% and unadjusted loss of 0.2% for the week, while new positions gained  1.6%.
For positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.3%. They were up 3.2% out-performing the market by 70.5%.
It was a busier trading week than I had expected and that’s usually a good thing. In all, there were 18 positions traded, which is something that we haven’t seen for some time.
While there was little to move markets this week, they did move, but the alternating currents left it going nowhere. As you probably know, those tend to be the best weeks. When the market goes nowhere you’re much more likely to get to your own destination.
While I have no complaints about 2013, I would much rather see lots of aimless wandering going about. This was certainly a week of aimless wandering.
While 5 new positions were opened this week, there was an opportunity to gain additional cover on some positions and rollover a number of others. In addition to creating  the income streams that may be a primary goal for some and a secondary goal for others, the net number of outstanding positions was decreased, which has been a goal of mine for the past two months.
Best of all there were assignments to help replenish cash reserves bringing them to a level where it’s possible to establish new positions in the coming week as the opportunities arise, as well as maintaining enough in reserve to capitalize on a rainy day.
As an added bonus there were lots of dividends this week and a quick review of my holdings shows that there’s about an additional 0.3% ROI in dividends receivable over the coming couple of weeks. Unfortunately, the coming week doesn’t appear to have quite as many dividend opportunities, but that day will come again.
With the opportunity to restock cash reserves and no real sense of urgency from any direction, regardless of an overall listless appearing economy, I continue to have some short term optimism as the new monthly option cycle begins on Monday.
As long as am whining about the lack of new dividend plays in the coming week, I’ll also add to that bemoaning the sudden return of volatility to its already low levels. A week or two taste of the good times had me wanting more, but the market has ordained otherwise.
That means the likelihood of less reliance on longer term contracts as there is very little reward for going out in time, except for dividend paying stocks or as part of a strategy to cushion a position against potential earnings related shocks.
As much as I do want to be staggered in terms of contract times the lower premiums make that difficult to do right now.
While next week may not have much in the way of dividends and while I am currently focusing on less volatile positions, for the more reckless out there there may be some good earnings related trades. Those tend to be in the higher volatility names and the earnings event can make them even more so, so it is definitely an acquired taste.
However, some of the best recurring opportunities can come with these kind of trades, such as when puts are assigned, as long as they are done so while the shares trade in the neighborhood of the strike price used.
But even without those more adventurous trades there does appear to be some opportunities in more sedate names for next week.
With cash in hand to start the week and no obstacles obviously in the way I’m looking forward to picking up some replacement positions. However, while I normally prefer a weak opening to the trading week in order to secure some cheaper purchases prices, I wouldn’t mind the market continuing with its rebound from the lows of two weeks ago, as I would like to continue having the opportunity to find new cover for some positions, even if it means resorting to “DOH Trades.”
 
Then again, unlike the white powder on the Benjamins you used to pay for that  fedora , no one will ask you whether you’re paying with money derived from those DOH Trades.
 
 
 
 

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, LB, LO, MOS, RIG
Puts Closed in order to take profits:  none
Calls Rolled over, taking profits, into the next weekly cycle:  APC, CSCO, LOW, MA, MSFT, YUM
Calls Rolled over, taking profits, into extended weekly cycle: 
CallsRolled over, taking profits, into the monthly cycle:
Calls Rolled Over, taking profits, into a future monthly cycle:  ANF, LB, RIG
Calls Rolled Up, taking net profits into same cycle:  none
New STO:  AIG, CHK, HFC, LULU
Put contracts sold and still open: none
Put contracts expired: none
Put contract rolled over: none
Long term call contracts sold:  none
Calls Assigned:  CHK, CPB, FAST, GPS, GPS, MSFT, VZ
Calls Expired: CLF, FAST, FCX, INTC, WY
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 (2/19 $0.15), GE (2/20 $0.22), LB (2/19 $0.34), MSFT (2/18 $0.28), RIG (2/19 $0.56), WLT (2/18 $0.01)
 
 
.
 
 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, C, CLF, COP,DRI, FCX ,INTC, LB, JCP, MCP, MOS,  MRO, NEM, PBR, PM, 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.

Posted on

Week in Review – February 10 – 14, 2014

 

Option to Profit Week in Review
February 10 – 14, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
5 / 5 4 2  6  / 0 3  / 0 1

    

Weekly Up to Date Performance

February 10 – 14, 2014

New purchases trailed the time adjusted S&P 500 this week by 0.5%, but lagged the unadjusted index by 1.1% during a week that saw a complete reversal of what had been considered to be the beginning to a correction.

The market showed an adjusted gain for the week of 1.6% and unadjusted gain of 2.3% for the week, while new positions gained  only 1.2% as premiums were reduced, reflec
ting the steep drop in volatility from just the prior week.

For the 35 positions closed in 2014, performance exceeded that of the S&P 500 by 1.5%. They were up 3.2% out-performing the market by 88.3%. Those results remain unusually high and will be reduced if market performance continues higher.

 While  it was another quiet week on the personal trading front I can learn not to mind that if the general trend is higher and the bottom line reflects that trend.

While new positions couldn’t keep up with a surging market that has almost completely erased the “correction” in just 7 trading sessions, it was a good week overall in total performance and the kind of trades that were made in order to put the portfolio into a better position for subsequent challenges.

For the first time in what has felt to be too long there was an opportunity to resupply the cash reserves thanks to 6 assignments. Coupled with some rollovers and new cover the week was an antidote to the cold weather and snow that’s befallen many.

Another nice aspect of this week that appears to be on track for next week as well is a decent number of ex-dividend positions and the downstream cash they will generate. Of course, I tend to focus on the one that got away, so I mourn the loss of Walgreen, still wondering what it did besides passively embrace cigarette sales, to warrant  its one week straight line climb higher. For the few that didn’t have their shares, or at least all of their shares assigned, you can’t possibly begin to understand.

Despite the fact that those shares fell about 2.5% today, I didn’t get too much satisfaction other than in knowing it may be drawing closer to a point that I would be willing to buy shares again.

Next week is a holiday shortened week and once again there isn’t really any reason to have a strong opinion in either direction. Unfortunately, volatility took a sharp decline in the past week, so there is little reason to look at longer term options, other than as a strategy to straddle expiration dates. The premiums just aren’t there, having disappeared almost overnight as the market just turned on a dime and demonstrated its resilience and resistance to correction.

With some more cash available to begin the week and the willingness to spend some of it, the only limiting factor is finding the cues to suggest that the market is a willing participant.and will, at the very least trade in a narrow range.

As with any week that the market rises very strongly, and 2.3% is pretty strong, it’s always a challenge to know where to begin the next week as relative bargains start to dry up. If the market can guarantee that it will keep going higher that’s not a terrible kind of problem to have.

Although there is no such guarantee, it’s still not a terrible problem to have. There is always something that has appeal, whether by virtue of recent under-performance, an upcoming dividend or fair option premiums.



While I’m still ambivalent about where assigned money will get recycled I am looking forward to next week, although premiums will be low due to a trade shortened week and the return to low volatility.

Additionally, as with many monthly cycles, as they come to an end there are many positions set to expire. Hopefully the coming week will continue with some additional strength in order to allow another week of assignments, rollovers and new covered positions for laggards.

 

 

 

 

  

.

 

 

  

 

     

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:  COH, IP, MA, MSFT, VZ

Puts Closed in order to take profits:  none

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

Calls Rolled over, taking profits, into extended weekly cycle: 

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

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

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

New STO:  APC, CLF, INTC, LOW

Put contracts sold and still open: none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  COH, HAL, IP, MOS, TXN, WAG

Calls Expired: AIG, APC, COP, WFM

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:  INTC (2/5 $0.225), MET (2/5 $0.28)

 

 

.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, AIG,APC, C, CHK, CLF, COP,DRI, FCX, HFC,INTC, LB, JCP, LOW, LULU, MCP, MOS,  MRO, NEM, PBR, PM, RIG, TGT, TXN, 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.



Posted on

Week in Review – January 26, 2014

What a Surprise.
Barely a week ago as the earnings season was about to begin it seemed perplexing that there was talk of seeing a 6% increase in comparable earnings. Based on retail earnings and performance from my personal barometers, Grainger (GWW) and Fastenal (FAST), there didn’t seem to be much adding to the integrity of the foundation.
As with the two previous earnings seasons the financials leading off the reporting season had reasons to be proud but there was little glory to be trickled down. It probably takes more than a growing Netflix (NFLX) subscription base to create optimism among traders, although there were some who were eager to use that news as being a sign of an improving economy, apparently believing that the first thing a newly employed individual does is to activate a Netflix subscription.
However, even with some favorable earnings reports to end the week the constellation of news coming from the rest of the world, including Chinese production disappointments, Turkey’s monetary woes and Argentinean debt had to come as a surprise as the DJIA fell over 300 points, never even making a feeble attempt to stem the flow of losses.
What we discovered about ourselves is that we much prefer the false security offered by believing that Chinese economic reports are accurate than their actual accuracy. Report after report that has final results perfectly aligned with projections should have been an early clue that perhaps the books are occasionally cooked. But as long as they supported a thesis of a growing worldwide economy there was reason to be optimistic.
That changed this week, and somehow we were surprised. What will be the ultimate question as the coming week begins is whether those new prices represent values or value traps.
Just a few days ago there was every reason to believe that the current market was beginning to settle into an historical mode, when earnings actually mattered and were what moved markets. With questions regarding tapering largely thought to have been resolved and with the worldwide economy, currencies and debt markets being reasonably calm, it seemed as if fundamentals would be back in vogue.
Surprise.
Never get too comfortable or believe what you are seeing. Increasingly, it feels as if everything that you believe to be the case should be considered as being on par with Chinese economic reports.
This week offers challenges that weren’t present last week. For the second consecutive week I had fewer positions assigned than I had anticipated and have less in cash reserves to take advantage of lowered prices than I would have liked.
However, I’m not anxious to go on a buying spree quite yet and will likely wait for some sign of stabilization in the overall market, rather than attempting to thread a needle with trades in the mistaken belief that outliers can be found in what may be a developing vortex.
As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum and “PEE” categories this week (see details).
Among companies beating analyst’s expectations and not having done so through the optics of share buybacks were Baxter International (BAX) and Bristol Myers Squibb (BMY). Both were included in Friday’s down draft and both appear to have been impacted out of proportion to their historical volatility. While that doesn’t preclude further journeys lower it does give me some basis for believing that new positions may be better suited to outperform the S&P 500 going forward. Both offer expanded options, thereby creating greater opportunities to diversify risk on the basis of time.
A frequent candidate for share ownership is Coach. It fell, as so often has happened over the past 18 months after its earnings report last week. That shouldn’t have been too great of a surprise. What is a surprise, however, is that despite universal condemnation, it has been incredibly resilient. I sold puts last week after earnings that subsequently expired and now believe that shares, if not bridled by a lower moving market, are going to stay at this level or move higher. As a covered option position either of those are perfectly acceptable outcomes and Coach has proven itself to be more than an acceptable covered option holding ever since it has fallen out of favor.
While retail has been an abysmal place to park money, it’s hard to not finally consider shares of Kohls (KSS). In the past I would typically only consider shares in advance of the dividend and was reluctant to do so otherwise, because Kohls only offered monthly options. However, it has now joined the growing number of expanded option stocks and has many more strike levels available than before, thereby offering greater flexibility in designing exit strategies. It’s shares have fallen over 12% in the past two weeks, reportedly due to concerns over weather related sales decreases.
Fastenal , which I often look toward as a measure of how well economic growth is trickling down to smaller value added components reported earnings recently. Since they had previously guided lower the results shouldn’t have been too surprising, yet they were. It didn’t take long for shares to recover from earnings. However, with Grainger reporting its own disappointments Fastenal felt the fury. With its ex-dividend date this coming week I see it as an opportunity to add shares at what has been a safe level. Despite a somewhat higher beta, it, too appears to have been disproportionately victim of the market decline and that may offer some relative immunity in coming days.
MetLife (MET) is one of those companies, as with most financials, that should benefit from a rising interest rate environment. Like others in the sector it fell mightily on Friday and is getting to a point of again being interesting. Like many other stocks this very recent fall brings them closer to appealing prices. In this case I would prefer getting even closer to the $48 level. However, I am considering a longer term option contract, such as the March 22, 2014, which would encompass both an ex-dividend date and earnings, which take place between now and February 12, 2014 and provide some time for share recovery in the event of an adverse reaction to the report.
International Paper (IP) is similar to MetLife insofar as its share price has come down to a more realistic level and that it will be going ex-dividend and reporting earnings during the February 2014 option cycle. Recently, shares appear to have been trading in a 4 month cycle from low to low and we are approaching that 4 month period again, just as shares are also heading toward its lows. As with many stocks this coming week there is heightened concern that they will break below support levels and International Paper is among that group. It’s attractive dividend, and again, similar to MetLife, the use of a longer term option may provide a nice combination of dividends, option income and price protection during a period that the market may be at risk to under-perform.
Texas Instruments (TXN) reported earnings earlier last week that were in-line with estimates. That alone was reason to reward shares, as the bar may be set increasingly lower. It didn’t fare terribly during the market meltdown and that may be its theme during any upcoming market weakness. Shares go ex-dividend this week and still offer a option premium that warrants attention in light of its low beta.
The coming week is a busy one for earnings. A more detailed look at this week’s earnings considerations provides some of the criteria used in filtering companies from one another. Of a number prospects that I screened for this week the two that stand out as opportunities by virtue of meeting my criteria (give link) are Facebook (FB) and Seagate Technology (STX).
Seagate Technology, rather than becoming a dinosaur, has had been envisioned in the post-PC world has been thriving, as has its share price. Its trajectory higher is alone cause for concern, whether at earnings, during a market decline or at any other time. The options market is implying a 6.5% price movement, which would envision a lower price strike of $55. Meanwhile, a 1% ROI can be potentially obtained at the $54.5 level. That’s not a terribly wide margin of safety, so any potential seller of puts should be prepared for the possibility of assignment.
Finally, as Facebook prepares to report earnings, its scant history of doing so has been a story of monetization of the mobile interface and in general the story has been continued surprise of how well they have been able to develop that revenue source. The options market appears to be expect significant price movement upon earnings, as the implied volatility is 11%, taking shares as low as $48.50. However, a 1% ROI can potentially be obtained at a strike level as low as $47 for those with some adventure in their character. Facebook’s more rationale price trajectory and occasional pauses may however make it a less adventurous earnings related trade than compared to Seagate Technology
Traditional Stocks: Baxter International, Bristol Myers Squibb, International Paper, Kohls, MetLife
Momentum Stocks: Coach
Double Dip Dividend: Fastenal (ex-div 1/29), Texas Instruments (ex-div 1/29)
Premiums Enhanced by Earnings: Facebook (1/29 PM), Seagate Technology (1/27 PM)
Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.