Option to Profit Week in Review
August 11 – 15,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
5 / 5 1 6 3  / 0 5  / 0 0

    

Weekly Up to Date Performance

August 11 – 15, 2014

New purchases for the week trailed the unadjusted S&P 500 by 0.4% and the adjusted index by 0.2% during a week that the market was faced with no news and fairly inconsequential earnings reports, even with poor performance from DJIA components Wal-Mart and Cisco.

Of course, the lack of news changed abruptly Friday morning.

New positions opened this week went 0.8% higher, however the overall market was 1.2% higher on unadjusted basis and 1.0% higher on an adjusted basis.

After a few weeks in which existing positions significantly out-performed the market for the week by really unusually large amounts, this week was pay back time, as those positions fell by 0.1% in absolute terms, but fell a larger 1.3% in relative terms.

Performance of closed positions continued to out-perform the S&P 500 performance by 1.8%. They were up 3.9% out-performing the market by 96.6%. 

After the past few weeks of nice out-performance during a period of time that the market was either moving lower or flat, the market had its best week in the past six weeks. Or at least it was on that path until getting derailed by the news of a possible attack on Russian military vehicles inside Ukraine.

Up until that point the week was fairly abysmal, as is sometimes the case if the market moves higher by 1% as the likelihood is that a covered portfolio is going to lag the market.

As is also sometimes the case, the perversity of a covered option strategy becomes pretty obvious when you see your fortunes getting better when the market isn’t doing as well.

That was certainly the case at the depths of the day’s declines.

It was to the point that I had some disappointment as seeing recovery attempts. However, to be totally fair, it was the recovery that at least allowed some of the hoped for assignments to happen, just as the decline took some others away.

But while the decline was underway the gap between exisitng positions and the market was narrowing, so I didn’t mind that too much. They talk about corrections being “healthy,” and from my perspective the more covered positions I have the more healthy those kinds of backward steps are in the big scheme.

Even in the little scheme.

As is also the case, today was yet another good example of why nothing should be taken for granted. Although I wouldn’t, and didn’t, predict that today would have been the day for some kind of an event, the Ukraine/Russia/Crimea story has had a way of playing itself out on Fridays and that was something that I had already noted a few months ago.

Odd little coincidence, but I don’t really think that coincidence is at play.

While waiting each day for a nice pop higher, the week had very little activity, particularly the sale of new covered positions and in rollovers. Those are literally the bread and butter that help create an opportunity to beat the averages, but this week those opportunities were scant.

Fortunately some did appear today, but it was still a less than satisfying week.

Although a few assignments will help replenish cash reserves for next week, this week’s trading did absolutely nothing to inspire any confidence as looking toward next week.

Despite the comeback in the latter half of the day, that I could have done without, anyway, we are really on edge and subject to extraneous forces at the moment.

While some see opportunity in the unknown, I don’t mind the unknown that I know about. Things like earnings, same store sales, economic reports and even weather. Those a
re all fine. But when it comes to world events that can be manipulated and that occur at a moment’s notice, I’m not a big fan and neither is the market.

For lots of people there is lots at risk if they have been either actively or passively invested and there is a little bit of a feeling of helplessness when events take you by storm.

This Friday was an example of how quickly events can unfold, or even rumors of events.

We may find on Monday morning that the initial reports from Ukraine and not really verified by anyone may not at all have represented what occured or what may be nest to occur. But the fact that we react as we do is enough of a reason to be on the alert.

So with some cash still in hand and a decent number of positions set to expire next week, I’m not entering the week eager to add to new positions. I wouldn’t mind being a bystander, especially if the market moves higher and just watching existings hares go along for the ride.

What I would really like to see are some new covered positions established, as this week wasn’t terribly good for that and it showed in the bottom line. Some of those will represent rollovers that I elected not to make, as their cost was just too high, such as with Holly Frontier.

However, over the next few weeks there are a mumber of positions that will be going ex-dividend and while I do want to see them generate some option income I also don’t want to unduly put them at risk for early assignment because of the dividends. That includes General Motors and also Holly Frontier, so I’ll look at the possibility of using some expiration dates a week or more beyond the ex-dividend dates, as long as the volatility is there to create some attraction to the premiums.







 



 











 

 

 





 

     

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, DD, EBAY, SBGI, MUS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  BBY, DD, DG, DOW, MET

Calls Rolled over, taking profits, into extended weekly cycle:  TMUS (8/29)

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:  C

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  CY, JPM, WFM

Calls Expired:   BMY, CHK, EBAY, FAST, HFC,

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 (8/13 $0.15), DD (8/13 $0.47). IP (8/13 $0.35),

Ex-dividend Positions Next Week:  TGT (8/18 $0.52), RIG (8/20 $0.75)

 

 

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