Option to Profit Week in Review
November 3 – 7,  2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
1 / 2 3 1 3  /  1 3  / 0 0

    

Weekly Up to Date Performance

November 3 – 7, 2014

This was another in a string of weeks with very little new purchase activity. Following two successive weeks of no purchases at all, even this week’s two new positions seems like a lot, but it is still far below the kind of activity I would like to see.

The two new positions were ahead 1.0% for the week and surpassed both the adjusted and unadjusted S&P 500, which was 0.7% higher for the week, by 0.3%.

 With this week’s 3 newly closed positions, bringing the 2014 total now to
180 positions, those have finished 3.5% higher, as compared to 1.8% for the S&P 500 for the comparable holding periods. That 1.7% advantage represents a 92.4% difference in return.

This is another week that’s hard to characterize.

There was lots of news but not very much happened. Where we knew what the outcome would be ahead of time, the elections, the market acted surprised.

When we really had no idea of what to expect, such as with the ECB decision and the Employment Situation Report, the market just yawned.

But still, it was a week, just like many before, that saw multiple closing highs, including eking out new closing highs to end the week.

What really characterized the week for me was again seeing how much the options volume is drying up on routine positions. The kind that aren’t associated with upcoming earnings or otherwise in the news. There is much less trading going on and the bid – asks spreads are wider than ever, as the ultra-low volatility is again making it less welcoming.

I interpret the lack of selling of call contracts as an expression of continuing bullish sentiment. When the market is on a trend moving higher and you don’t see people trying to sell their calls, it’s because they think that those shares are going to move even higher.

Of course, that also means that there are buyers, who are also bullish, and who look at the situation as almost ideal, since they can get options at low premiums due to the low volatility. The problem, however, is that in reality they can’t get anything at the low prices because no one is selling and the gap between bid and ask is unusually hard to bridge as no one wants to move toward a compromise on price.

What is especially unusual, though, is that potential sellers are taking that bullishness with them literally to the grave. A good example today, but there have been many over the past few weeks, was British Petroleum.

Absolutely no one was willing to sell contracts expiring today on the out of the money $42.50 option,  after an opening bell flourish. Finally, only in the final minutes did bids start popping up, as even the most optimistic thought they could squeeze a few extra cents out by selling their momentarily expiring calls to someone.

That expression of bullishness seems very bearish to me. It is a reflection of greed. It may, however, be a sign of some desperation, as well.

There has been lots of talk recently about how the vast majority of hedge fund managers are under-performing the index. With the year about to come to its close that may mean more and more unhedged activity on their part as they try to catch up and one of the things that may get tossed out the window are their offers to sell options, in the hopes of catching stocks like Whole Foods.

So that bullishness offers lots of frustration.

With the volume so hard to come by it has been very difficult to get trades, especially rollovers, accomplished. You need to have willing traders and fair prices on both sides to get anything done.

It was a week of lots of unrequited trades.

At least, however, there were some new call sales and a single rollover and it was alright just going along for the ride.

For next week there’s absolutely no indication of where the catalysts for anything may be, higher or lower.

There was some rumor of a Russian incursion into Ukraine, but that wasn’t confirmed and so next week may be a clean slate as earnings season moves into its tail end.

For yet another week I don’t plan on too many additions to the portfolio. This week did allow for some addition to cash piles and I would like to add even more. If the market behaves and sends prices higher I would again be very happy to find cover for uncovered positions and see some mix of assignments and rollovers of the positions set to expire next week.

However, as long as volatility stays so low and there is a seller boycott or unwillingness to converge on price, I may see fewer rollovers by choice, rather than because of adverse share situation. As with British Petroleum today, I think I would rather then take my chances on being able to sell a new call when the pricing is right and avoid some of the buyback and transaction costs, especially as the premiums are so low.

 

 

   

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:   BP, TWTR (puts)

Puts Closed in order to take profits:  none

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

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 cyclenone

Calls Rolled Up, taking net profits into same cyclenone

New STO:  FAST (11/22), GDX (11/14), JOY (11/14)

Put contracts expiredTWTR

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: F, INTC, WFM

Calls Expired:  ANF, BP, LVS

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: BP (11/5 $0.60), WLT (11/6 $0.01)

Ex-dividend Positions Next Week:  CLF (11/12 $0.15), IP (11/13 $0.40), RIG (11/12 $0.75)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, BX, BP, CHK, CLF, COH, EBAY, FCX, GM, GPS, HAL, HFC, .JCP,  LULU, LVS, MCP, MOS,  NEM, 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.