Option to Profit Week in Review
September 15 – 19,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
3 / 3 3 2 4  / 0 8  / 0 0

    

Weekly Up to Date Performance

September 15 – 19, 2014

New purchases for the week beat the unadjusted S&P 500 by 0.4% and the adjusted index by 0.6% during a week that had much more potentially critical news events than is meant to be digested over such a short time period.

It was a week of major unknowns and a market that did not really go according to script, other than to start the week off with some efforts to raise cash for Alibaba’s IPO by selling stocks, especially momentum stocks that had performed well year to date.

With all of the uncertainty and all of the potential factors that could have sent the markets much lower, and quickly so, instead it just went right on setting more new closing records.

New positions ended the week 1.7% higher, while the unadjusted S&P 500 was 1.3% higher and the adjusted S&P 500 lagged a little, but still rose 1.0% for the time period.

Performance of closed positions continued to out-perform the S&P 500 performance by 1.7%. They were up 3.6% out-performing the market by 88.1%. 

This was a week that brought surprises every day, when you consider the various potential obstacles that arose during the latter half of the week. The first surprise was the kind of strength that was shown in the early part of the week, especially after Monday’s sell off in momentum names that had compiled lots of gains that could be used for an Alibaba IPO allocation.

Otherwise, the first two challenges provided nothing at all and certainly not any challenges.

Nothing was provided in the FOMC statement, as its wording went unchanged. It was that change, that would have portended interest rate increases sooner than hoped, that worried so many..

All it took was the suggestion by someone who really shouldn’t have any basis to know other than an educated guess that the wording would remain unchanged for the market to run with it.

Then, the Scotland referendum proved to be a non-issue and had no influence on the market at all, as there was so much division over which way the decision would go that the market had been at a stalemate in discounting the result. The only likely result would have been if the referendum approved an independent Scotland. That wasn’t at all factored into the market’s level and could have caused quite a drop, but it wasn’t to be.

Finally, it was time for Alibaba to come to market and despite the nearly 3 hour wait for its first trade and an nearly 50% pop at its trading high, it really did nothing for the markets and it ended up being a really weak day, despite the closing DJIA at another new high.

In fact, while the S&P 500 did gains nicely for the week, not only did it lag the DJIA quite a bit, but the NASDAQ and Russell 2000 really trailed behind.

There were a number of people that boldly predicted that the S&P 500 would top out at the time of the Alibaba IPO and the trading to end the week did nothing to call those predictions into question. Certainly the IPO didn’t propel the market higher, nor did the suggestion that all of the selling on Monday that created cash held back for the IPO find itself going anywhere, other than perhaps Alibaba on the secondary market. 

All in all, this was a very disappointing week, despite the fact that the market could have easily tumbled. Yet, instead it set new records, but you just didn’t hear very many people cheering.

I think that the lack of cheering was due to the realization that for this week, at least, equities were the safest of all worlds, given the concerns over interest rates, currency fluctuations related to Scotland and plummeting precious metal and commodity prices.

Where else are you going to go with your money when everything else appears so shaky?

For me, the disappointment was due to the lack of many trading opportunities, especially rollovers.

However, as Wednesday and Thursday were survived without seeing prices tumble and rollover opportunities lost, the broad weakness on Friday didn’t too anything to help the rollover process along.

A number of the positions expiring were just too expensive to buy back as they were quoted in $0.05 increments. With relatively low premiums in forward weeks that $0.05 required to be paid to buy back those contracts was just too expensive relative to the potential premium received.

That has been a trend lately and while I hate adding to the list of uncovered positions it would be nice to actually have some profit to show for the trouble of a rollover.

Next week doesn’t have anywhere near the amount and intensity of news events on the calendar. But as much as I dislike really quiet news weeks, this past one was just too much with not only the amount of news but its character and how the news came at the markets from all different angles.

While I wasn’t too happy about the trading activity level I was happy to see some assignments occur and the chance to add a little to the cash pile. Getting a few uncovered positions back to work was nice, as well, but the premiums are still far too low and there is some reluctance to  put them at risk for assignment for relatively little in return.

With some recycled cash in hand for next week, which begins the October 2014 cycle, there are already a number of positions set to expire next week and the beginnings of some time diversification as other positions are peppered throughout the coming month. As much as possible I’d like to continue that diversification, but again the primary limiting factor are the very low premiums in forward weeks.

With all of this week’s events out of the way there is now a chance to take a deep breath. It will be especially interesting to see where the market picks up next week, which by comparison would be expected to be a boring one.

Once again, I don’t envision adding too many new positions as trading begins anew. My priority continues to be to find cover for uncovered positions, but that has been an elusive goal and has come in frustratingly low numbers as there has been very little in the way of sustained and broad strength even as the market goes higher.

For now, it’s just good to have survived the events of the past week and to be able to think about what’s still to come.

      

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:   CPB, EBAY, TMUS

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  none

Calls Rolled over, taking profits, into extended weekly cycle:  none

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

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

Calls Rolled Up, taking net profits into same cyclenone

New STO:  BMY (10/10), BX (10/31), GM (10/3)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned:  C, CCL, COH, PFE

Calls Expired:  CHK, EBAY, FAST, GM, HFC, K, SBGI, SBGI

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend PositionsLVS (9/18 $0.50
)

Ex-dividend Positions Next Week:  CY (9/23 $0.11), WFM (9/24 $0.12)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, CHK, CLF, COH, EBAY, FCX, GM, HFC, JCP, K,  LULU, LVS, MCP, MOS,  NEM, PFE, RIG, SBGI, 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.