Option to Profit Week in Review
June 30 – July 3,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
4 / 4 1 5 1  / 0 2  / 0 0

    

Weekly Up to Date Performance

June 30 – July 3, 2014 

New purchases for the week beat the unadjusted S&P 500 by 0.5% and surpassed the adjusted index by 0.6%

The market was on target to do nothing for this week until some unexpected words and better than expected data captured everyone’s attention.

Despite a week of really low voulme, or perhaps because of that really low volume, the market passed 17000 for the first time and then reasonablty decidedly added to that figure today, even as so many had already settled in for the long weekend in the Hamptons.

New positions, and there was still a minimal number of those climbed 1.8% higher while the overall market was up its own very healthy 1.3% on an unadjusted basis and 1.1% higher on an adjusted basis.

Existing positions were able to keep up
with the market despite its strong gains. I usually expect them to lag on market strength, but rollovers, dividends and additional option cover helped to equalize performance.

With only one assignment this week, and it again being Las Vegas Sands,  performance of positions closed in 2014 didn’t change very much, but they continue to out-perform the S&P 500 performance by 1.4%. They were up 3.4% out-performing the market by 69.8%. 

It’s a little difficult to characterize this week. It was so short and as has been the case lately, there really hadn’t been much newsworthy or market moving taking place.

The moves higher on the backs of Jenet Yellen’s message that lent further support of stocks over bonds and then the Non-farm payroll statistics reminds me of two weeks ago. Then too, it was a lackluster week until Janet Yellen’s Wednesday press conference, which changed everything.

But if you recall there was absolutely no follow through to the next week.

This week ends with a long, long weekend and so when trading begins on Monday, despite standing at even more new record highs, there’s a reasonable chance that the news and cheer of this week will be long forgotten or at least will not have much in the way of impact on anyone’s thinking.

While there was lots of excitement over the employment news, especially since previous months  were also revised higher, no one seemed to remember the GDP revision and the seeming disconnect between an economy slowing down on the services and production end of things, yet heating up on the emplotyment side of the equation.

The over-riding belief, nd it may finally be time to prepare for real expansion, is that the economy is improving.

Never mind that other measures of employment, that are also released along with the Employment Situation Report, such as the U-6 Report, which is sometimes referred to as the “real unemployment rate” is nearly double the more familiar U-3.

In other words, lots of people are still unable to contribute to economic expansion, yet the market is ignoring an aspect of reality that does have consequences.

Ignoring it may have its own consequences.

Still, it was a good week.

Certainly from the bottom line perspective, but it was also a decent week in terms of trading and generation of option premium, despite the ever lower moving volatility. It was also another nice week in which dividends kept piling on.

The one change of behavior that I see myself succumbing to was evident with shares of Kohls today and some other companies in recent weeks.

In the case of Kohls its shares dropped precipitously in the final 7 minutes of trading to go from about $53.06 to 52.95, with an expiring $53 option. I had been hoping that it would have joined Las Vegas Sands and I was also consiering re-purchasing shares next week, as this middle of the road company is a nice strategic position.

While I don’t want to make any trades in the final 30 minutes, so as to not catch anyone flat-footed and unable to execute a trade, this was also an example of not wanting to pay the premium to close the existing option, as well as incurring the transaction expense, while forward week volatility, and therefore, premium, is relatively low.

Sometimes, and certainly moreso lately, I’d rather take the chance of not being able to make the trade next week than getting into a trade where the net premium is quite a bit less than I would think is appealing, due to the added costs.

Otherwise, it was a good week for rollovers and at least a couple of positions gained new cover. There was a net drain on cash reserves, with four new positions opened and only one assigned, but at least it was a good week in which to put some money to work.

Next week has lots of expirations coming due. While I have funds available for new purchases the likelihood is that, where possible, I would look to the end of the option cycle, now just two weeks away, as the contract term.

The low volatiltiy, however, sometimes makes that hard to swallow, but uncharacteristically the cycle ending month is currently very sparsely populated, so next week may be a good time to fix that and diversify risk a little bit more.

For now, though, my only concern is that there’s a happy, health and safe July 4th holiday ahead for us all.







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Still, there were more new records and one of those inexplicable triple digit moves that really had no beginning, but did have an end.

This was another one of those weeks that the entire market should have just taken a vacation.



 

     

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, DG, HFC, WFM

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  BMY, DG, JPM, KSS

Calls Rolled over, taking profits, into extended weekly cycle:  EBAY (7/25)

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 cyclenone

New STO:  PFE

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  LVS

Calls Expired:   HFC, KSS

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: BMY (7/1 $0.36), JPM (7/1 $0.40), WFM (7/1 $0.12)

Ex-dividend Positions Next Week:  GPS (7/7 $0.22), MA (7/7 $0.11), DRI (7/8 $0.55), FCX (7/11 $0.31)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, BMY, C, CLF, COH, EBAY, FCX, HFC, JCP, KSS, LULU, MCP, MOS,  NEM, PFE, PBR , 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.