Week in Review – July 21 – 25, 2014

 

Option to Profit Week in Review
July 21 – 25,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
3 / 3 0 6 6  / 0 5  / 0 0

    

Weekly Up to Date Performance

July 21 – 25, 2014

New purchases for the week beat the unadjusted S&P 500 by 1.4% and surpassed the adjusted index by 1.6%

With 150 of the S&P 500 reporting this week it could have been an exciting one, but instead the market just vacillated day in and day out, barely budging from its starting point, at least until today.

There was some excitement today, but it was the wrong kind, at least for most, even though it turned out fairly well for the overall portfolio.

There were only 3 new positions opened this week and they climbed 1.4% higher while the overall market was virtually unchanged on an unadjusted basis and 0.2% lower on an adjusted basis.

Existing positions significantly out-performed the market for the week by an unusually large 0.5%.

Performance of closed positions continue to out-perform the S&P 500 performance by 1.4%. They were up 3.4% out-performing the market by 70.8%. 

Last week, up until Friday, was looking as if it would cap off a disappointing week, particularly compared to the previous week when there was so much trading activity.

This week didn’t have too much trading going on as we headed into Friday, with only two new positions open and no new call contracts written, and only a couple of rollovers. When it was all done, despite having a large drop as the back drop, there were some more rollovers and a number of assignments helping to replenish cash at just the right time.

With the market being basically flat for the week it was actually fortuitous to reclaim some of that cash with the potential to plow it back in without having to deal with across the board higher prices as has been the case the past few weeks as Fridays have closed
higher.

It was even more fortuitous that with the large decline seen on Friday the walls didn’t come tumbling down and turning those assignments into expirations.

Instead, it ended up being another good week from a number of perspectives.

But first, the negatives:

There were 5 covered positions that expired without getting rolled over. While I expect that for DOH trades, such as in HFC where the premiums are usually pretty slim and you don’t want to cannibalize the gains through unnecessary commission and buyback expenses, with volatility so low it’s also sometimes difficult to justify the rollover of other positions, such as Lorillard.

Also, no new STO trades were made for the week. That means the idle are still idle. I prefer to see them all working. Otherwise, they’re just stocks.

Now, for the positives.

While only 3 new positions, and one of them just today, they at least performed well. As usual, when there are so few positions to consider, whether they did well or not, you have to ascribe most of that to luck. This time we were lucky.

The existing positions significantly outperformed the market. Most often that’s the case when being able to do lots of rollovers. This time around there were some of those, but there was also price appreciation relative to the overall market.

For me, the best news were the assignments. Actually the best news was the bottom line, but I’m trying not to sound crass.

With prices ending the day near their lows that opens the potential opportunity to have some cash to spend next week at levels other than new highs, especially if there’s some further weakness or even a flat market to open the week.

Next week begins with a moderate number of positions set to expire on Friday. However, that number is not so great that more couldn’t be added to that list, as well as considering the use of some expanded weekly offerings.

With a nice boost to cash reserves I’m also less reluctant to consider new positions, especially with some price drops today. Even with some mild upside to begin the week there still may be some relative bargains to consider.

Among them may even be positions, such as Dow Chemical and eBay, which were assigned today. I especially like seeing some assignments right near their strike prices begin the next week below those prices. It has been quite a while since that has been the case, but in a market that isn’t simply going straight higher, that’s actually a fairly common occurrence and is the source for the accumulation of returns.

For now, it just feels good to have dodged a potential bullet today. Sometimes that luck that I think is so important
is also about the timing of the market’s moves. For us the timing of a drop like today’s turned out to be very fortuitous, just as last Friday’s nice gains were perfectly timed.

Can’t remotely take credit for that sort of thing, but it’s occasionally nice to be on the right side of randomness.

 

 







 

 

 





 

     

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, GM, LVS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycleKSS, GPS, RIG, RIG

Calls Rolled over, taking profits, into extended weekly cycle:  EBAY (8/8)

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

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

Calls Rolled Up, taking net profits into same cyclenone

New STO:  none

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  BBY, DOW, EBAY, HFC, JPM, LVS

Calls Expired:   FDO, FDO, GPS, HFC, LO

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: FAST (7/21 $0.25)

Ex-dividend Positions Next Week:  C (7/30 $0.01)

 

 

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



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Daily Market Update – July 25, 2014

 

 

 

Daily Market Update – July 25, 2014 (8:30 AM)

The Week in Review will be posted by 6 PM EDT and the Weekend Update will be posted by Noon on Sunday.

The possible outcomes for today include:

AssignmentsBBY, EBAY, HFC ($44.50), JPM, LVS

Rollovers: DOW, GPS ($40), RIG

Expirations: FDO ($64.50), FDO ($66), GPS ($42), HFC (46.50), LO

 

Trades, if any, will be attempted to be made prior to 3:30 PM EDT.

 

 

 

 

 

 

 

 

 

 

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Daily Market Update – July 24, 2014 (Close)

 

 

 

Daily Market Update – July 24, 2014 (Close)

Along the lines of yesterday’s thoughts about the absence of market leaders, it’s too bad that advertising revenues aren’t the sort of thing that pick up everyone’s confidence and floats all sectors higher.

If that was the case then Facebook would be this generation’s IBM.

Facebook’s continuing ability to generate ad revenue, especially from mobile devices, is really incredible.

Yesterday was the company’s ninth earnings report since going public and investors have only once not rewarded existing shareholders after the very first time someone expressed negativity about the lack of a mobile strategy way back when.

While good news for Facebook it’s not really clear what their fortunes mean for anyone else.

It’s tempting to believe that increased ad revenues reflect increased optimism by retailers and increased interest by consumers. That could be good news for retailers.

Of course, it could also just mean that more people are on line with Facebook and spending more time when on line on the site, as Facebook ads can generate revenue simply by being served and not always requiring a click to bring in the bucks.

Facebook was one of those companies that I thought about selling puts in advance of earnings, but I rarely want to do so when there is a large advance in share price right before earnings. More often than not that kind of pre-earnings advance is an invitation to tumble after the data is released.

Not so this time around.

While the market has a mild upward bias in the pre-opening futures, it’s not too likely that anyone has to thank Facebook, although other individual stocks, like Twitter, may be getting some benefit by their loose association or resemblance to Facebook.

For things that really matter and are better reflections of the overall economy you have to look to companies like Caterpillar, which reported this morning. Their EPS figures are improving, thanks to large buy backs, which will be increasing. However, revenues were on the light side and projections for next year are on the low side of analyst’s reports.

So what does that mean?

Who know
s? Is the economy not growing? Is Caterpillar mis-firing?

A year ago the most celebrated and successful short seller, Jim Chanos, very publicly called Caterpillar his short of the year. Since that time shares are about 25% higher.

The Chairman was called the worst CEO of the year and widely criticized for executing buy backs at high share prices.

This one company just shows that no one really knows, no matter how good their thesis.

Business is not as good as expected, financial optics improving EPS data and the stock just goes higher.

Too bad there aren’t more of those. I’d gladly trade being right on my thesis for boatloads of profits.

I was hoping that this morning’s muted strength would translate into some of those profits, maybe getting a delayed Facebook initiated rally, but that wasn’t to be, as stocks stopped alternating between gains and losses after seven straight sessions. For the broader market while the gains were as small as you could make them, that was enough for another record on the S&P 500.

With next week’s weekly options trading beginning for those companies that don’t have expanded weekly options there was a chance of adding some positions, such as Texas Instruments, which goes ex-dividend next week, but my focus will continue to be finding opportunities for rollover. ‘t many and they were also fleeting.

At the moment there looks like there is the possibility of a fair number of assignments and some rollovers in the making especially if tomorrow holds true to form. That’s because the past seven or so Friday’s have closed positively, giving me some encouragement for this week, which has otherwise been bereft of activity and more importantly, income revenue.

 

 

 

 

 

 

 

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Daily Market Update – July 24, 2014

 

 

 

Daily Market Update – July 24, 2014 (8:30 AM)

Along the lines of yesterday’s thoughts about the absence of market leaders, it’s too bad that advertising revenues aren’t the sort of thing that pick up everyone’s confidence and floats all sectors higher.

If that was the case then Facebook would be this generation’s IBM.

Facebook’s continuing ability to generate ad revenue, especially from mobile devices, is really incredible.

Yesterday was the company’s ninth earnings report since going public and investors have only once not rewarded existing shareholders after the very first time someone expressed negativity about the lack of a mobile strategy way back when.

While good news for Facebook it’s not really clear what their fortunes mean for anyone else.

It’s tempting to believe that increased ad revenues reflect increased optimism by retailers and increased interest by consumers. That could be good news for retailers.

Of course, it could also just mean that more people are on line with Facebook and spending more time when on line on the site, as Facebook ads can generate revenue simply by being served and not always requiring a click to bring in the bucks.

Facebook was one of those companies that I thought about selling puts in advance of earnings, but I rarely want to do so when there is a large advance in share price right before earnings. More often than not that kind of pre-earnings advance is an invitation to tumble after the data is released.

Not so this time around.

While the market has a mild upward bias in the pre-opening futures, it’s not too likely that anyone has to thank Facebook, although other individual stocks, like Twitter, may be getting some benefit by their loose association or resemblance to Facebook.

For things that really matter and are better reflections of the overall economy you have to look to companies like Caterpillar, which reported this morning. Their EPS figures are improving, thanks to large buy backs, which will be increasing. However, revenues were on the light side and projections for next year are on the low side of analyst’s reports.

So what does that mean?

Who kn
ows? Is the economy not growing? Is Caterpillar mis-firing?

A year ago the most celebrated and successful short seller, Jim Chanos, very publicly called Caterpillar his short of the year. Since that time shares are about 25% higher.

The Chairman was called the worst CEO of the year and widely criticized for executing buy backs at high share prices.

This one company just shows that no one really knows, no matter how good their thesis.

Business is not as good as expected, financial optics improving EPS data and the stock just goes higher.

Too bad there aren’t more of those. I’d gladly trade being right on my thesis for boatloads of profits.

Hopefully this morning’s muted strength will translate into some of those profits.

With next week’s weekly options trading beginning for those companies that don’t have expanded weekly options there is a chance of adding some positions, such as Texas Instruments, which goes ex-dividend next week, but my focus will continue to be finding opportunities for rollover.

At the moment there looks like there is the possibility of a fair number of assignments and some rollovers in the making. Since the past seven or so Friday’s have closed positively, that gives me some encouragement for this week, which has otherwise been bereft of activity and more importantly, income revenue.

 

 

 

 

 

 

 

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Daily Market Update – July 23, 2014 (Close)

 

 

 

Daily Market Update – July 23, 2014 (Close)

As far as Wednesdays go this one looked to be exceptionally quiet as far as stimulants or catalysts for the market.

With the market being unable to string two consecutive days moving in the same direction for the past 7 days and also being unable to string two consecutive weeks moving in the same direction for the past seven weeks, the expectation was that today may be a lower moving day, despite some decent earnings news after the closing bell yesterday.

And while the market did erase some losses and finished the day at a respectable level, with in fact the S&P 500 reaching another new high, for the DJIA it was a down day. The relative performance of the two indexes being reverse their experiences of the previous week.

Even Apple and Microsoft reporting earnings after yesterday’s close seemed to have done nothing. Nether too much for their own stocks and certainly nothing to boost or depress the markets this morning. Ultimately, perhaps based on some comments from Tim Cook regarding the nature of Apple’s performance, its shares did come to a nice gain to end the day, however.

While there’s no shortage of earnings reports today the early ones don’t appear to have any impact either and the market was about as flat as you can get to start the day’s trading.

There were also virtually no economic reports scheduled to be released today.

So I didn’t have much expectation for doing much today in what is now officially the slowest week of the year, with only two trades thus far having entered the day. That ended up getting doubled with a couple of early rollovers.

With lots of positions set to expire on Friday there’s certainly a hope that something will happen between today and Friday, but that something really does need to be a higher move in order to get some rollover trades done. With some opportunity at hand in eBay and Transocean to execute rollovers for shares that seemed unlikely to be assigned, it was a way to fend off the continuing boredom.

While the expectation isn’t there even in the absence of any anticipated event you just never do know what the sentiment will be once things get going for real. While the pre-open trading can give you a pretty good clue if it shows large moves in either direction it really does little to alert you to what the trading session holds when the early moves are small.

That’s especially been the case the past few days, but has always really been the case. Eventually the day’s trading takes on a  life of its own. Today it showed little hints of life, though,
just as the futures predicted.

What has really been missing form the past couple of years of earnings is seeing blow out numbers from a company propel the entire market. There was a time when Boeing, IBM, Intel, Microsoft and others could do that. Of course, the flip side was that those same companies could drive the market lower, as contagion can spread in both directions.

While I suppose that’s good it would be nice to see something good spreading throughout, but no one company seems to be in a position to be perceived as a leader.

While Chipotle Mexican Grill’s earnings advance was great, I don’t think that’s poised to take on a leadership role. Nor Intuitive Surgical. Outside of people that hold those shares, or those that wish they held shares, no one cares. As once said, it’s “much ado about nothing.”

That no company is presenting itself as a leader is consistent with a market that has been one that has seemed to move sector by sector, with nearly each taking its turn in the sun and grabbing some glory, while not falling too far behind when the sunlight has dimmed.

Collectively, that keeps taking the market higher and higher, a sector at a time and under everyone’s radar, while eluding everyone’s attempts to predict the next winning sector.

Unless something big breaks soon, I can at least predict more of the same down the line.

 

 

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