Apr42014

Week in Review – March 31 – April 4, 2014

Daily Market Update

 

Option to Profit Week in Review
March 31 – April 4, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
3 / 4 3 5 6  / 0 6   / 0 0

    

Weekly Up to Date Performance

March 31 – April 4 2014

New purchases beat the time adjusted S&P 500 this week by 0.7% and the unadjusted S&P 500 index by 0.2% during a week that once again saw no over-riding theme, pattern of trading nor news.

It started with a bang and ended with a bang and ended the week almost where it had started, but did set some records along the way, although left us with some quasiness.

The market showed an adjusted loss for the week of 0.1% but an unadjusted gain of 0.4% for the week, while new positions gained 0.6%.

By contrast, existing positions out-performed the market by 0.5% for the week after an unusually large 1.2% beat last week, deriving some further benefit from rollovers and newly covered positions. 

For positions closed in 2014 performance exceeded that of the S&P 500 by 1.6%. They were up 3.6% out-performing the market by 90.9%. So far, that wide beat continues, although I continually expect that margin to decrease and will do so once the market strings together a few strongly positive weeks.

Sooner or later I will learn that any week that offers an Employment Situation Report should have the proverbial farm bet on it.

Well, maybe not. So much for a sure thing.

At first it looked like today was going to be no different from the past 20 months or so of report releases that has seen not only the day of the report move in a positive direction, but the entire week, as well.

Well, one for two isn’t bad, as the bottom fell out from the market in the early afternoon after a week of strong market performance and more market records.

Those are always diffciult to keep up with when using a covered option strategy, which puts a limit on the upside.

But if you ever wanted an example of the perverse nature of this approach to investing, this was the day for it.

Going into today’s trading the new positions for the week were flat with the market on an adjusted basis and about 0.1% behind on an unadjusted basis (for those not aware of the difference, teh adjusted basis looks only at new purchases compared to teh market for the days at risk. So for ewxample, a new purchase made on a Thursday would not be compared to market performance on the preceding days, while a purchase on a Monday would be compared to the entire week.)

However, with the market turnaround so too did comparative performance turnaround for new and exisiting positions.

Not only did the new positions end up out-perfoming the market as a result of today’s strong sell off, but exisiting posit
ions, which were lagging for the week to date  by 0.5% yesterday, ended the week besting the market by 0.5%.

Hopefully your personal portfolios also showed that reversal of fortune.

Today, closing out the week was a very frustrating one for me, that is now made a little bit better as I look at the final numbers for the week.

Some of you know, through communication with me today that I had gremlins gnawing at every peice of my electronic world today.

My trading platform wasn’t automatically refreshing on its trades and I had lots of trial trades placed today, especially with Anadarko and Marathon Oil and spent lots of time re-booting, clearing out Java cache and with technical support.

Then, the miracle of text messaging was possessed today, as I received a number of old text messages today, including one from earlier in the week from my wife, in addition to not consistently receiving confrmation of my text alerts, even though others acknowledged having received them.

The real frustration this week has been the extremely low volatility which has made premiums very low in forward weeks. That’s especially been the case with thinking about trying to rollover DOH trades in Marathon Oil and the surprise of the week, Anadarko. WIth volatility low, the deeper in the money shares had much less excess built into forward premiums. At times during today’s trading the reward for some rollovers would have been a net debit, rather than a net credit, but still staying at the same strike price.

That’s not a good combination.

Ultimately, while rollovers may be possible they may come at a price. That is tying up money that could likely be used better elsewhere.

When it was all said and dome this week, I feel very fortunate to have seen quite a few assignments and rollovers, especially knowing that the freed up cash will be welcome after last week’s dearth of assignments.

After a sharp fall, such as today’s, I like the idea of having some cash in my pockets. Who knows, there may be some relative bargains on Monday and the money to spend on them. That’s not a bad combination, but there’s also the option of holding on to some of it, just in case.

 

 

 

  

     

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

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



New Positions Opened:  BBY, BMY, GPS

Puts Closed in order to take profits:  none

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

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

Calls Rolled over, taking profits, into the monthly cycle:  FDO

Calls Rolled Over, taking profits, into a future monthly cycle: none

Calls Rolled Up, taking net profits into same cycle:  none

New STO:  C, FDO, TGT

Put contracts sold and still open: none

Put contracts expired: APOL

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:   APC, BBY, CHK, CMCSA, COH, MRO

Calls Expired:   C, EBAY, FCX, FDO, LULU, MA

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:  CSCO (4/1 $0.19), BMY (4/2 $0.36), CMCSA (43/31 $0.22), PBR (4/3 $0.36)

Ex-dividend Positions Next Week:  GPS (4/7 $0.22), MA (4/7 $0.11), VZ (4/8 $0.53), DRI (4/8 $0.5
5), FCX (4/11 $0.31), WFM (4/9 $0.12)

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, C, CLF, EBAY, FCX, FDO, GM,  IP, JCP, LULU, MCP, MA, MOS,  NEM, PBR, PM, RIG, WFM, WLT, 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.



Apr42014

Daily Market Update – April 4, 2014

Daily Market Update

 

 

Daily Market Update – April 4, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by noon on Sunday.

Today’s possible outcomes include:

Assignment: APC, BBY, CHK, CMCSA, COH, GM, MRO

Rollover:  EBAY, FCX, HFC, MA

Expiration:  APOL (puts), C, FDO, LULU

 

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

 

 

Apr32014

Daily Market Update – April 3, 2014

Daily Market Update

 

 

Daily Market Update – April 3, 2014 (Close)

This morning the only story was the press conference being given by the head of the European Central Bank, Mario Draghi. He is the counterpart of Janet Yellen and in the past when he has had something dovish to say his words had buoyed our markets.

A couple of years ago he was adamant about how the ECB would be an aggressive player and not allow the kind of fiscal crises within the EU that many of us thought might cascade through the EU as Greece and Spain and other stories were unfolding.

That was a day when our markets skyrocketed.

Not so today, at least not in the pre-open trading, which is as flat as markets can come, as the DJIA is knocking on the door to set its first new record of the year, having been left behind by the S&P 500.

And not so the rest of the day either, as we just traded in a narrow range all day with a slightly negative bias. The broader market was worse than the DJIA and the NASDAQ was absolutely abysmal today, way out of proportion to the rest of the market.

As with most Thursdays my thoughts were predominantly on how to extricate and escape positions so that the coming week is one that has new opportunity.

One position that won’t need extrication is Anadarko. After a series of DOH trades, it looks like it will be assigned tomorrow at $87, despite a purchase price of $89.42. Yet it will end up with an ROI of about 2.2%.

While I knew that Anadarko was going to appear in court tomorrow regarding its Tronox environmental damages case, the gap between the government and Anadarko was so great, nearly $24 billion, that it was hard to imagine that there would be word of an agreement, especially since there was more than money involved. There was also the idea of being able to run from responsibility through the bankruptcy courts, as GM may be in a position to do, as well.

I guess the government preferred not to test that in the courts.

With a huge surge in the mid-afternoon on the rumor now it’s time to see if there is a “sell on the news” kind of wave ready to hit. If so, there may be reason to roll that position over in an attempt to add to the gains. But even what any reasonable person may consider to be a huge fine after any agreement may simply be looked upon as an incredible savings, not to mention the costs involved in the ongoing litigation.Reportedly, the agreement is for a payment of $5 billion.

If the goal is some combination of generating cash and growing assets it’s important to keep rolling over existing positions and having assignment of others. Thursdays and especially Fridays are the days when those things are hoped to happen.

Unfortunately, due to the low volatility the expirations aren’t as staggered as I would have liked them to be. The premiums for forward weeks are often so low that there is some risk with tying down assets for those time frames.

Instead, this week, for example, feels more like a monthly cycle ending week, while the actual cycle ending week has only two positions currently set to expire.

Even though I’ve started each of the past few weeks looking to diversify more on the basis of time that hasn’t always been the case in practice as some of those low forward week premiums have done a good job of sending me elsewhere.

With tomorrow’s Employment Situation Report at hand, the unveiling of news is always a risk factor to keep in mind. That’s even though that particular report has found itself to have a strong association with an advancing market, but you just can’t take anything for granted.

Where possible, I’ll try to look for rollover opportunities today, although I tend not to do too many on Thursdays, with last week being an outlier kind of week.

The factor most involved is price, in that with forward week volatility being lower than current week volatility, it can be relatively expensive to close some option positions and therefore, relatively unrewarding to open new ones.

That balance usually changes as time value begins to run out the closer and closer we get to the closing bell on Friday.

With so many positions set to expire tomorrow it has the makings of a hectic day unless some of that load can be shifted to today.

All in all, these are good problems to have.

 

 

Apr32014

Daily Market Update – April 3, 2014

Daily Market Update

 

 

Daily Market Update – April 3, 2014 (9:15 AM)

This morning the only story was the press conference being given by the head of the European Central Bank, Mario Draghi. He is the counterpart of Janet Yellen and in the past when he has had something dovish to say his words had buoyed our markets.

A couple of years ago he was adamant about how the ECB would be an aggressive player and not allow the kind of fiscal crises within the EU that many of us thought might cascade through the EU as Greece and Spain and other stories were unfolding.

That was a day when our markets skyrocketed.

Not so today, at least not in the pre-open trading, which is as flat as markets can come, as the DJIA is knocking on the door to set its first new record of the year, having been left behind by the S&P 500.

As with most Thursdays my thoughts are predominantly on how to extricate and escape positions so that the coming week is one that has new opportunity.

If the goal is some combination of generating cash and growing assets it’s important to keep rolling over existing positions and having assignment of others. Thursdays and especially Fridays are the days when those things are hoped to happen.

Unfortunately, due to the low volatility the expirations aren’t as staggered as I would have liked them to be. The premiums for forward weeks are often so low that there is some risk with tying down assets for those time frames.

Instead, this week, for example, feels more like a monthly cycle ending week, while the actual cycle ending week has only two positions currently set to expire.

Even though I’ve started each of the past few weeks looking to diversify more on the basis of time that hasn’t always been the case in practice as some of those low forward week premiums have done a good job of sending me elsewhere.

With tomorrow’s Employment Situation Report at hand, the unveiling of news is always a risk factor to keep in mind. That’s even though that particular report has found itself to have a strong association with an advancing market, but you just can’t take anything for granted.

Where possible, I’ll try to look for rollover opportunities today, although I tend not to do too many on Thursdays, with last week being an outlier kind of week.

The factor most involved is price, in that with forward week volatility being lower than current week volatility, it can be relatively expensive to close some option positions and therefore, relatively unrewarding to open new ones.

That balance usually changes as time value begins to run out the closer and closer we get to the closing bell on Friday.

With so many positions set to expire tomorrow it has the makings of a hectic day unless some of that load can be shifted to today.

All in all, these are good problems to have.

 

 

Note: If you haven’t seen it, I posted an article that looked at the rollover trade executed in Bristol Myers Squibb yesterday, dissecting out the rationale for having done so in an effort to retain the dividend.