| NEW POSITIONS/STO | NEW STO | ROLLOVERS | CALLS ASSIGNED/PUTS EXPIRED | CALLS EXPIRED/PUTS ASSIGNED | CLOSED |
| 3 / 3 | 3 | 5 | 0 / 0 | 5 / 0 | 0 |
Weekly Up to Date Performance
December 8 – 12, 2014
This was another in a string of weeks that oil trumped everything else and dragged everything down with it, making it the worst week of 2014 and the worst since 2012.
New positions did reasonably well, but only when compared to the S&P 500, which was down 3.5% on an unadjusted basis and 3.3% on an adjusted basis.
By comparison, the 3 new positions opened this past week were down 2.1%, beating the index by 1.4% on an unadjusted basis and 1.2% on an adjusted basis.
With Friday’s large sell off, there were no positions assigned for the week. Closed positions for the year to have finished 3.6% higher, as compared to 1.6% for the S&P 500 for the comparable holding periods. That 1/9% advantage represents a 83.%7 difference in return.
While it’s nice to have seen new positions out-perform the market for the week, it’s not much of a substitute for having been profitable on the week.
This was another week of only a single story controlling everything.Even if you weren’t over-extended in the energy sector, nearly everything was pulled much lower this week.
The plunge of oil has been so drastic and has extended well into the broader market in a way that so far is defying logic. Besides the portion of the S&P 500 that comprises the energy sector, what could be bad about falling energy prices?
Well, that’s what seemed logical, until came some data suggesting that oversupply may not be due to increased domestic supply, but rather due to decreased demand from overseas, especially China.
Although the falling market may no longer defy logic, it has also completely put the usual end of the year story, that of retail sales, off anyone’s list of topics. That, despite the fact that the Consumer Discretionary sector was the only one that could hold its head up high after the down draft experienced by all other sectors.
In hindsight, given the unexpected sharp decline on Friday, it turned out to have been fortuitous to have made some rollovers earlier in
the week than usual. Having waited until Thursday or Friday, as is typically the case would have resulted in far fewer rollovers. Only one potential trade that I tried doing earlier, Dow Chemical, couldn’t get done, as it was suddenly caught in a down draft that it didn’t deserve to be caught in.
As it was the number of rollovers and the number of new call sales was better than expected, particularly given how terrible of a week this was. Even if someone was under-invested in the energy sector, just by virtue of being invested in anything this was a terrible week.
Since I have considerable energy exposure I find myself holding my nose a little and trying to resist what seem like great prices week after week. That issue now extends to many more stocks, even outside the energy sector. The prices seem great, even though we are barely down 3.5% from the recent highs in mid-October.
But that’s the problem. They looked great last week and just got worse. Same for the weeks before that, as well.
As much as I like to buy when shares are down and try using them to offset some paper losses, it’s not easy to justify doing so until you see at least some evidence of “the whites of their eyes.”
It’s hard to have that kind of confidence, although it’s easier to have some confidence that energy prices will recover, as at some point the natural law of supply and demand kicks in as low prices can only serve as a fuel to increase business activity and increase demand.
That’s actually a lot more optimistic than the scenario that we had been seeing where we thought that there was simply too much production and seeing OPEC decide not to cut production. That would have resulted only in lower prices and an artificial intrusion on the natural order of supply and demand.
With no assignments this week and cash at fairly low levels, I’m not expecting to add many new positions next week.
With lots of positions set to expire I very much would like to see some of those be assigned or rolled over.
In addition to more oil related news, there is an FOMC Statement release scheduled next week.
However, coming off today’s less than robust Producer Price Index and the fact that the FOMC is purported to be data driven, it seems unlikely that they will drop the “considerable time” wording in the release, which may put investors at ease in that increased interest rates may not be happening sooner, rather than later. It would seem reasonable to believe that the FOMC would wait for an actual indication of things heating up before raising rates.
As volatility went significantly higher this past week any rollovers next week will look at extended the term beyond a week, as increasingly there may be some motivation to do so, as the premiums are rising. That was the case this week, as 3 of the 5 rollovers skipped next week’s expiration, going out to December 26th.
There is, however, still very little volume, but that too will likely change as volatility creeps back into the equation, as it has seemed to do on a regular basis every two months or so.
For those that watch or even trade volatility, you may have recognized that the best days are those that have lots of intraday ups and downs. Those days have increases in volatility without the need for a large net negative change in the market, which is normally requisite.
In an ideal world that’s the pattern that offers lots of opportunity if a little nimble in trading ability.
This week was certainly one that saw lots of ups and downs, including on an intraday basis. While volatility is about 90% higher than it was just a week ago, it is still historically low and still can climb another 40% just to get to where it was in October, so there may be more to come next week, especially if oil continues to be undermined by a dysfunctional cartel’s indifference to basic laws of economics and the FOMC fools us.
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: AZN, DOW, MOS
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: AZN, BX,
Calls Rolled over, taking profits, into extended weekly cycle: GDX, JOY, MOS
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 cycle: none
New STO: EBAY (12/20). GDX (12/20), LULU (12/12)
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: none
Calls Expired: DOW, GME, LULU, LVS, TMUS
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: GM (12/8 $0.30)
Ex-dividend Positions Next Week: LVS (12/16 $0.50)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, BP, CHK, CLF, COH, DOW, FCX, GME, HAL, HFC, .JCP, LULU, LVS, MCP, MOS, NEM, RIG, TMUS, 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.
