All in all, if you think about the man made tragic events of the past week in Brussels, the very rational and calm manner in which world markets reacted was really re-assuring.

When we sometimes scratch our heads wondering whether the market will this time interpret good news as being bad or whether it will deem it good, you know that something is amiss.

It’s nice when clear and rational heads are in charge of things.

So often the way the market seems to react to events it’s not too easy to describe the action as having been rational and you really do have to wonder just who is running the place.

The same may be said for the Federal Reserve and its Governors.

It wasn’t always that way, though.

We always knew who was running the place.

While dictatorships may not be a good thing, sometimes a benevolent dictatorship isn’t the worst of all possible worlds.

There was a time that the individual members of the Federal Reserve and the FOMC kept their thoughts to themselves and knew how to behave in public and in private.

That is, up until about 11 years ago when newly appointed and now departed President of the Dallas Federal Reserve Bank, Richard Fisher, had made a comment regarding FOMC monetary tightening policy and was subsequently taken to the woodshed by Alan Greenspan.

That error in judgment, offering one’s opinion, wasn’t repeated again until the new Federal reserve Chairman, Ben Bernanke, ushered in an era of transparency, openness and the occasional dissenting vote.

At that time, Fisher didn’t even disagree with Federal reserve policy. He was simply giving his opinion on the timing left in an existing policy, or perhaps just disclosing what he knew to be the remaining time of that particular approach.

Still, that kind of behavior was unheard of and not terribly well tolerated.

Now, under Janet Yellen, it seems as if the various Governors are battling with one another over who gets the most air time and who can make the most noise.

Clearly, inmates can be intelligent people, but there may be a very good reason why they’re not running the show.

Why the market often latches onto the words of an FOMC inmate or one who’s not even in that inner circle, particularly when those words may run counter to the Chairman’s own recent words, is every bit of a mystery as why those words were uttered in the first place.

But that is where we seem to be at the moment as the crystal clear clarity that we’ve come to expect from the Federal Reserve is sounding more like the noises coming from the Tower of Babel.

And we all know how that worked out.

As usual, the week’s potential stock selections are classified as being in the Traditional, Double Dip Dividend, Momentum or "PEE" categories.

When there is so much confusion abounding, sometimes it makes some sense to get right back to basics.

There isn’t a much more basic approach to stocks than looking for safe and reliable dividend paying companies, especially when the waters are murky or choppy.

While I don’t disagree with those who point to the out-performance of the universe of dividend paying stocks to the universe of non-dividend paying stocks, I’m not a big fan of the dividend itself and it’s usually fruitless to argue the belief held by many that it is the dividend that makes the company a worthwhile investment that is prone to outperform others.

Ultimately you pay for that dividend by virtue of your share price having gone down the amount of the dividend and you may have to pay taxes as well, on that distribution.

What I do like about dividends is how some of that inherent decline in the share price may end up being subsidized by an option buyer and that can boost the return.

Most of the time, my preference would be to be able to get the premium from having sold the option, most often of weekly duration, and also to be able to collect the dividend.

What i especially like, although it doesn’t happen too often, is when a stock is ex-dividend on a Monday.

In such cases, if the option buyer is going to exercise his right to snatch those shares at a pre-determined price, he must do so no later than the previous Friday.

What I like to do with those Monday ex-dividend positions is to sell an extended weekly option and then I don’t really care too much if those shares get taken away from me early. 

That’s because the additional week’s premium offsets the loss of the dividend while being able to take the cash from the assignment to invest in some other position.

Maybe even an upcoming ex-dividend position.

While not every position that I’m considering in the coming week will be ex-dividend the following Monday, that does characterize most of the potential trades for the coming week.

To put them all of those into a single basket, Cisco (CSCO),  Comcast (CMCSA), Deere (DE) and JP Morgan Chase (JPM) are all ex-dividend next Monday.

They each have their own story to tell and since 2016 has been an incredibly quiet one for me in terms of adding new positions, there is virtually no chance that i will be adding all of them.

At the moment I do own shares of Cisco, but none of the other positions, all representing different sectors.

With everything else being equal, I’d probably be more inclined to consider adding shares to a sector in which I may be under-invested.

For me, that would be the finance sector, which has been embattled all year as the expected interest rate climbs haven’t materialized.

For many, the decision by JM Morgan’s Jamie Dimon to buy $26 million in his own shares was the impetus to turn the market around from its steep 2016 losses.

That turnaround started on February 11, 2016.

Those shares are still far from their 2016 high and sooner or later the inmates trading stocks and the inmates making policy will be right about the direction of interest rates.

I still hold somewhat of a grudge against Comcast when I was a consumer of its services. However, it would be the height of irrationality to ignore it for what it could contribute to my non-viewing or non-internet surfing well-being.

Once a disruptor in its own right, Comcast is working hard to remain at the cutting edge or itself be displaced as the competition and the various means of delivering content are getting more and more complex to understand.

That may be its saving grace.

When you get right down to it, nothing is as simple as having a box, your television and your computer. While there’s decidedly nothing simplistic about what Comcast is doing and where it envisions going, at some point consumers may get overwhelmed by the growth in disparate and unconnected systems and may again long for bringing it all back together under a single roof.

Even if it is and continues to be challenged, Comcast is a few dollars below some resistance and I would feel comfortable adding shares in advance of its ex-dividend date.

I haven’t owned shares of Deere for a long time, just as I haven’t owned shares of caterpillar (CAT). The two of those used to be mainstays of my portfolio, if not both at the same time, then at least alternating, often with a new purchase being initiated as an ex-dividend date was approaching.

What appeals to me about Deere at the moment is that it is a little bit off from its recent highs and only a bit higher than where it stood on February 11th.

But more importantly, this week, as with all of the other potential selections, there is a nice dividend and an equally nice option premium. That combination lends itself to any number of potential contract lengths and strike levels, depending on one’s horizon.

While I especially like the Monday ex-dividend date, this is a position that i might consider wanting to hold for a longer period of time in an effort to either reap additional option premiums or some capital gains from shares, in addition to premiums and the dividend.

While I do already own shares of Cisco and it has bounced back nicely in the past 6 weeks, I think that it, too, has some more upside potential, if only to get it back to some resistance about 5% higher from its current level.

Like most others mentioned this week, there is a generous dividend and a generous option premium that make any consideration worthwhile.

As with Deere, while the Monday ex-dividend date may lead to one specific strategy, there may also be some consideration of utilizing longer dated contracts and further out of the money strike prices in order to capitalize on some anticipated price appreciation.

By contrast, I own shares of both The Gap (GPS) and Dow Chemical (DOW).

There has been absolutely nothing good that has been said about The Gap in far too long of a time.

There was a time that The Gap could be counted upon to alternated its monthly same store sales between worse than expected and better than expected results. as a result The Gap’s shares would frequently bounce back and forth on a monthly basis and it had periodically enhanced option premiums to reflect those consistent moves.

Lately though, the news has always been disappointing and the direction of shares has been unilateral, that is, until February 11th.

There’s not too much of a likelihood that The Gap’s recent performance is related to oil prices or interest rates, but it is certainly long overdue for a sustained move higher.

At its current level, i wouldn’t mind shares staying in the same neighborhood for a while and building some support for another leg. In the meantime, at this level there is some opportunity to collect the dividend and some reasonably health premiums, as well.

Finally, just as last week, I think that there may be opportunity in Dow Chemical.

While it has unjustifiably been held hostage by falling oil prices for more than a year, it has performed admirably. The market reacted positively when the announcement was made of its fairly complex merger and subsequently planned uncoupling with DuPont (DD), although the favor was lost as the rest of the market sank.

I continue to believe that there is relatively little risk associated with shares in the event the proposed merger runs into obstacles, as shares are trading at pre-announcement levels.

That combination of dividends and option premiums keeps making Dow Chemical an appealing consideration even as lunatics may be running around elsewhere.

 

Traditional Stocks: none

Momentum Stocks: none

Double-Dip Dividend: Comcast (4/4 $0.27), CSCO (4/4 $0.26), Deere (3/29 $0.60), DOW (3/29 $0.46), GPS (4/4 $0.23), JPM (4/4 $0.44)

Premiums Enhanced by Earnings: None

Remember, these are just guidelines for the coming week. The above selections may become actionable – most often coupling a share purchase with call option sales or the sale of covered put contracts – in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week, with reduction of trading risk. 

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Week In Review – March 21 – 25, 2016

 

Option to Profit

Week in Review

 

MARCH 21 – 25, 2016

 

NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED EX-DIVIDEND
2  /  2 0 1 0   /   0 0   /   0 0 0

 

Weekly Up to Date Performance

March 21 – 25,  2016


This was supposed to be a very quiet week as much of the world was getting ready to celebrate Easter.

There was very little on the economic news front and one less trading day, but still, lots can happen. There certainly was a lot that happened, but the impact of events in Europe haven’t translated into markets gone out of control.

Before those events I saw fit to open 2 new positions and it wasn’t the horror in Brussels to blame, but instead the downdraft in oil.

As a result new positions trailed both the adjusted and unadjusted S&P 500 by 1.2%. 

Those new positions were 1.9% lower, while the S&P 500 ended the week 0.7% lower.

Existing positions were able to match the performance of the S&P 500 for the week as it was 1.3% higher, as the market finally undid the losses of the first 6 weeks of 2016.

This was thew first week in quite a while that the markets were lower.

Riding on the coattails of oil most all sectors have been moving higher since February 11th, but that came to a halt this week as oil was significantly lower and the market had to also deal with the kind of tragedy that we hope to never have to hear about, much less endure.

With news that more oil rigs were sidelined this week as inventories were rising, you can only imagine that the supply – demand cycle will continue to play out, as at some point the lack of drilling results in relatively lower supply and perhaps oil can find some footing again.

But predicting doesn’t usually work out very well, as anyone who had bet that interest rates would have by now been well on their way toward climbing higher and higher.

What this week did have was a rarity for 2016.

That being the opening of more than one new position.

Fortunately, despite the bottom falling out of the energy sector on Wednesday, there was still an opportunity to roll over that one expiring position and to at least generate a little more premium cash, while the volatility remains high.

What this week also will have, and it is another rarity, is the announcement of what may significant economic news coming on a day that there is no stock trading.

In this case, it’s tomorrow’s GDP, which could hold the keys to whether or not that next interest rate increase might be here before June.

Whatever will be that number, there’s not too much we can do but watch as the futures may react and leave us to wonder what Monday may bring.

Next week isn’t quite as quiet, particularly with a number of Federal reserve Governors hitting the streets to share their opinions, which often seem quite at odds with one another.

Beyond that, we do have another Employment Situation Report to contend with.

And then, there’s also that issue of oil and whether stocks will continue to follow, or perhaps do like they did this week and not be so predictable in their direction nor magnitude.

With some ex-dividend positions next week, but only one expiring position, I wouldn’t mind opening another new position or more, but I’ll be ve
ry curious to see what that GDP number will be like and how the markets may react if the number is surprising in whatever direction it may elect.

This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as in the summary below

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:  CY, MRO

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:  MRO (4/8)

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: none

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned: none

Calls Expired:  none

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   none

Ex-dividend Positions Next Week:  CY (3/29 $0.11), DOW (3/29 $0.48), EMC (3/30 $0.11)

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, ANF, AZN, BBBY, BBY, CHK, CLF, COH, CSCO,  CY, DOW, FAST, FCX, GDX, GM, GPS, HAL, HFC, HPQ, INTC, IP, JCP, JOY, KMI, KSS, LVS, MCPIQ, MOS, NEM, RIG, WFM, WLTGQ, WY (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 – March 24, 2016

 

 

 

Daily Market Update – March 24, 2016 (7:30 AM)

The Week in Review will be posted by 10 PM tonight and the Weekend Update will be posted by Noon on Sunday.

The following trade outcomes are possible today:

Assignments:  none

Rollovers:  none

Expirations:  MRO

The following were ex-dividend this week:   none

The following will be ex-dividend next week:  CY (3/29 $0.11), DOW (3/29 $0.48), EMC (3/30 $0.11)

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


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Daily Market Update – March 23, 2016 (Close)

 

 

 

Daily Market Update – March 23, 2016 (Close)

When yesterday morning began, there was some reason to suspect that the calm expected for the remainder of this trading shortened week wouldn’t materialize.

Somehow, though, markets managed to pull it all together, even as man made disaster was at work.

This morning appeared to be another day of calm, although the full reckoning of what such a tragedy means in terms of disruption has probably not been calculated aside from the obvious sectors.

The hospitality and travel sectors were in focus yesterday, but other areas of the economy are at risk the longer heightened levels of security have to be maintained.

If, however, the rapid recovery in France, from their senseless tragedy nearly a year ago is any template, the recovery is fairly fast, at least on non-human terms.

This morning we heard of lock ups and enhanced security in Belgium and likely in other places to come, as well.

But life and work continue as the greatest and most overt signs of victory against those that would seek to tear down, intimidate and terrorize.

With this morning likely to be a quiet one, I looked forward to having just 2 days left for trading this week, but now, after the day is done, I wish that there were still 2 more days of trading to come.

All in all, it wasn’t really a bad day for the market, especially considering that oil dropped nearly 5%. Based on what had been happening with previous large moves, we got off pretty easily.

That is unless you had oil or commodities in over-supply in your portfolio, such as having added to your position this week.

Ahem.

With 2 new positions opened and one set for expiration this week, there was still some chance of more trading opportunity, but it wasn’t going to be too likely that i was going to be adding any new positions at this point.

Now it’s certainly less so, but so is the chance of a rollover, as the energy position expiring this week really took a big hit today.

With some ex-dividend positions next week, although none this week, there’s a little less pressure to create sources of income, but I’d still like to have that opportunity and wouldn’t be overly resistant.

Still, despite volatility dropping, I would also continue to welcome any opportunity to cover some of those uncovered positions, even it continues to mean longer term option expiration dates.

Waiting for shares to get assigned is much more palatable if you at least know that there’s some additional premium attached to that position while you do wait.

If there are dividends along the way, then even better.

However, it does take some marked broad moves higher or relative outperformance by individual positions for that to become the case and this week may not be the week for that to happen.

That won’t stop me from watching out for an increasingly rare chance this week, though.


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Daily Market Update – March 23, 2016

 

 

 

Daily Market Update – March 23, 2016 (7:30 AM)

When yesterday morning began, there was some reason to suspect that the calm expected for the remainder of this trading shortened week wouldn’t materialize.

Somehow, though, markets managed to pull it all together, even as man made disaster was at work.

This morning appears to be another day of calm, although the full reckoning of what such a tragedy means in terms of disruption has probably not been calculated aside from the obvious sectors.

The hospitality and travel sectors were in focus yesterday, but other areas of the economy are at risk the longer heightened levels of security have to be maintained.

If, however, the rapid recovery in France, from their senseless tragedy nearly a year ago is any template, the recovery is fairly fast, at least on non-human terms.

This morning we hear of lock ups and enhanced security in Belgium and likely in other places to come, as well.

But life and work continue as the greatest and most overt signs of victory against those that would seek to tear down, intimidate and terrorize.

With this morning likely to be a quiet one, I look forward to having just 2 days left for trading this week.

With 2 new positions opened and one set for expiration this week, there is still some chance of more trading opportunity, but it’s very unlikely that I’ll be adding any new positions at this point.

With some ex-dividend positions next week, although none this week, there’s a little less pressure to create sources of income, but I’d still like to have that opportunity and wouldn’t be overly resistant.

Still, despite volatility dropping, I would also continue to welcome any opportunity to cover some of those uncovered positions, even it continues to mean longer term option expiration dates.

Waiting for shares to get assigned is much more palatable if you at least know that there’s some additional premium attached to that position while you do wait.

If there are dividends along the way, then even better.

However, it does take some marked broad moves higher or relative outperformance by individual positions for that to become the case and this week may not be the week for that to happen.

That won’t stop me from watching out for a rare chance, though.


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