Category Archives: Week in Review

 

Option to Profit Week in ReviewJanuary 20 – 24, 2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
7 / 7	1	2	2 / 0	7 / 0	0

    

Weekly Up to Date Performance

January 20 – 24, 2014

New purchases beat the time adjusted S&P 500 this week by 0.8% and surpassed the unadjusted index by 1.0% during a week that saw the largest loss in the S&P 500 in over 18 months. They did so, however, while being at a net loss for the week themselves.

The market showed a large adjusted loss for the week of 2.4% and unadjusted loss of 2.6% for the week, while new positions fell  1.6%.

For 21 positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.2%. They were up 3.7% out-performing the market by 50.0%, a difference that I don’t expect to continue to be sustained.. 

I was right about something last week.

After the kind of week we just had it was a good thing that it lasted for only 4 trading days. It may be too bad that next week is a full trading week, especially since it will be a very busy week for earnings and as we’ve seen from this past week earnings finally matter.

But even with some decent earnings reported after Thursday’s close and before Friday’s open, there is a tone creeping into the market that is slowly, but not overly dramatically, being very cautious and being responsive to news overseas.

It has been a while since we really concerned ourselves much with what was going on in the rest of the world, other than an occasional pause to consider Chinese economic news reports which always seemed to come in right where projected.

For starters, the latest news from China wasn’t encouraging and increasingly more and more of our stock market is tethered to the Chinese economy. Putting on a cynical hat, we used to like it much better when we thought that Chinese economic data couldn’t be trusted, as opposed to when they may actually be telling the truth.

That’s something that we may not be able to handle.

It used to be that if the US sneezed, the rest of the world caught a cold. Now we’re all in close contact and no one really has immunity, especially when someone the size of China is doing the sneezing. 

 A constellation and convergence of news from China of slowing industrial growth and currency worries in Turkey, credit worries in Argentina and Brazil have placed a lot of pressure on a market that was beginning to shift to an emphasis on fundamentals at a time when the fundamentals weren’t so great.

Things also moved more quickly than we’ve been accustomed too lately. The deteriorations were swift.

News that a company like WW Grainger had disappointing earnings brings into question the strength of any economic recovery, much in the same way as when Fastenal disappoints. Coupled with almost universally horrible retail statistics and it will be interesting to see what the next move
by the Federal Reserve will be, under its new leader, and then how that will be interpreted by the markets.

I felt happy to see the week end and to be able to escape with a handful of assignments and even a rollover. Plunging Fridays are my least favorite kind of days, unless everything I owned was about to be assigned otherwise. My expectations, even this morning was for more assignments and more rollovers, but the market never gave that a chance.

Looking forward, with less cash in hand as I would like to start the week I’m still not fully bowled over by some lower prices. I do see some volatility sneaking into some forward week premiums which indicates an expectation that the decline will continue.

During a period of decline there is sometimes opportunity to take advantage of weakness in existing positions by selling calls even if the strike price represents a loss, if assigned. The reason that becomes appealing is that as volatility increases, so do the premiums and you may be able to find an appealing premium that is a strike price or two out of the money.

The key, however, is to not let that assignment happen, unless a tax loss is a competing objective. Some may have noticed that as personal trades the past three weeks that is what I had done with shares of Anadarko, as its premium was moving higher. With today’s rollover the strike price has crept up with each sale, going from $82.5 to $83 and now to $84 while collecting net premiums of $1.04, subject to the need to trade again next Friday.

In such cases, if assignment looks likely, the call contract is bought back, sometimes at a loss. That looked like it might have been a possibility with Anadarko shares on Wednesday, as it went higher on word of David Einhorn taking a position.

But the anticipation is that assignment won’t happen and instead, while there is systemic weakness you hope to add some additional income stream to your positions. Essentially  you are adding reward when you believe the additional risk, that is losing the position at a price lower than your purchase, is tolerable.

While this is entirely premature and would be an over-statement, that is the kind of trading that was very instrumental in dealing with the declines of 2008 and 2009. Doing so is sometimes a little more stressful than a straightforward trade, but can really feel very rewarding when successfully managed.

I’ve often said that the best times are when the market is either non-committal or going lower. The use of a more aggressive trading strategy with existing positions is one way to make it so.

Get ready and keep your cash reserves safe, but at hand.

 

 

 

 

 

     

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:  AIG, C, COP, CREE (puts), FAST, INTC, MOS,

Puts Closed in order to take profits:  CREE

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

Calls Rolled over, taking profits, into extended weekly cycle:  CSCO (2/7)

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:  CPB

Put contracts sold and still open: none

Put contracts expired: nonr

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  CHK

Calls Expired: HFC, LULU, MOS, MRO, WAG, WLT

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

 

 

.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, APC, CLF, DRI, FCX,  GPS, HFC, LB, JCP, LULU, MCP, MOS,  MRO, NEM, PBR, PM, RIG, TGT, WAG, 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.



 

Option to Profit Week in ReviewJanuary 13 – 17, 2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
6 / 6	1	6	4 / 1	7 / 0	0

    

Weekly Up to Date Performance

January 13-17, 2014

New purchases again trailed the time adjusted S&P 500 this week, this time by 0.1%, but beat the unadjusted index by 0.2%.

The market showed an adjusted gain for the week of 0.4%, while the market actually lost 0.2% for the week. New positions, by contrast, advanced 0.5% for the week.

For the 18 positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.1%. They were up 3.8% out-performing the market by 38.4% as the number of data points begins to increase. While very pleased with that level of out-performance, I don’t expect it to continue at that pace, particularly if the market continues higher and volatility remains so low.

For the second consecutive week I’m not really certain how I felt about performance.

As always, the bottom line is always the most important outcome, but it’s always good to look at the component pieces that create the bottom line and whether objectives are realized.

The biggest disappointment this week was the inability to get decent rollover opportunities on a number of positions after they opened lower today, distancing themselves from strike prices too much to make the trades worthwhile.

Those included Campbell Soup, Phillip Morris, L Brands, Transocean and Darden Restaurants. Three of those went up nicely just yesterday and gave me hopes of getting those trades done, perhaps even seeing assignments.

While the assignments could have been done yesterday the cost to buy back shares was just too high, especially due to the day’s buying strength. In hindsight it makes you think that it’s better to take what is there to be taken rather than risking the chance that it will be gone tomorrow.

On the other hand a fair number of rollovers and assignments occurred helping to replenish cash reserves and create the opportunity to seek new positions next week without necessarily digging into baseline reserves.

It was also a nice week for dividends, but by and large those positions had difficult times maintaining price, as they showed weakness after going ex-dividend.

With the market having ended the week so flat, I would have anticipated a better performance on new positions. While they did outperform the market, they fell short of the 1% threshold in a week that it should have been relatively easily attained.

The way the market lost steam as it headed into the final hour was deflating in any number of ways, but especially where it counted the most.

It may be good to have a little extra time off this coming week for everyone to get back on the same page.

Trading is listless and without theme and, as seen so often this week, marked by large and sudden moves that seem irrational for their lack of known catalyst.

This was a week, that if you followed closely, had lots and lots of intra-day swings in individual stocks, which is something that you don’t see terribly often. The swings went in both directions and weren’t very long lived, for the most part, so conclusions aren’t obvious other than occasional conviction in selling and then conviction in buying, but those swings can be disruptive to individual strategies.

As mentioned last week, the previous two quarters as a  guide, the financials did do quite well, with the exception of Citigroup, yet that didn’t really help the more broad market. Next week sees the non-financial beginning to report their numbers and it still surprises me that the call has been for a 6% increase in earnings, unless share buybacks can have so significant of an effect.

That’s not really a sustainable strategy for growth. Sooner or later there has to actually be economic activity that moves a stock’s fortunes forward.

I anticipate next week being one that will be responsive to earnings, in the absence of much other scheduled activity. I don’t anticipate being overly active in adding new positions next week, but would like to see some further weakness or at least tentativeness in trading to begin the week, as some prices are beginning to look a little more attractive.

I just don’t want to jump the gun and ask the same question asked when someone tells a tasteless joke.

“Too soon?”

 

 

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:  HFC, LB, LOW, VZ, WAG, YUM

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:  ANF, HAL

CallsRolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle:  FCX, HAL, LXK, WY

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

New STO:  LLY

Put contracts sold and still open: **

Put contracts expired: ANF

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  CY, FAST, MDLZ, MOS

Calls Expired: AGQ, CPB, DRI, GPS, LB, PM, RIG, WFM

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:  CHK (1/13 $0.09), FCX (1/13 $0.31), WFM (1/15 $0.12), YUM (1/15 $0.37), LOW (1/17 $0.18)

 

 

** Some people had early assignment of ANF puts on November 8, 2013. Subsequently OTP Trading Alerts were sent to sell new calls on ANF, as well as to roll over puts. The strike prices on the two trades differ, but the premium differentials have this far been virtually identical through a third round of rollovers, with strike prices adjusted on calls and puts to $36 and $35, respectively, from the original $35.50 put sale.

 

 

For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, APC, CLF,  CPI, DRI, FCX,  GPS, LB, JCP, MCP, MOS, NEM, PBR, PM, 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.

 

Option to Profit Week in ReviewJanuary 6 – 10, 2014

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
4/ 4	1	5	9 / 0	1 / 0	2

    

Weekly Up to Date Performance

January 6-10, 2014

For the first full week of 2014, new purchases trailed the time adjusted S&P 500 by 0.3% and also trailed the unadjusted index by 0.2%.

The market showed an adjusted gain for the week of 0.7% and unadjusted gain of 0.6% for the week, while new positions advanced only 0.4%.

For the 12 positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.1%. They were up 2.9% out-performing the market by 62.8% for the data-challenged year to date. I don’t expect that kind of out=-performance to continue, however, with the current low volatility.

I’m not really certain how I felt about this week.

While I suppose that the bottom line should be the bottom line and that was improved, it still felt very empty.

Prior to today’s assignments, I was at my lowest cash level for a while, yet don’t feel as if I have quite that much to show for it. Beside that, there were only four new position purchases for the week and they really didn’t fare too well, even with lots of cushion built into their strike prices.

On the other hand, there were all of those assignments and the ability to replenish cash reserves, as well as the ability to rollover all but one non-assigned position and to be more time diversified when it was all said and done.

But then there was that lost dividend in Verizon that spiked up for no reason at all on the day before ex-dividend.

Of course, the ambivalence is further reflected in the happiness that I wasn’t holding Verizon after it plunged the next day, also for no reason at all.

So, after all of that, there’s this emptiness that even with a week that had an FOMC release and an Employment Situation Report, not much happened.

Ordinarily, those are the best of all weeks and that might explain the emptiness.

On weeks that the market doesn’t do much other than tread water there’s every reason to expect out-performance. Not only out-performance, but also beating the 1% threshold for new purchases.

This week, as has occurred before, you do get to see how when only opening a small number of new positions it’s very easy to greatly out-perform or under-perform,on the basis of a single stand out.

Following this lackluster week, both in the markets and in personal performance, we’re faced with a monthly expiration, with positioned being well positioned for both assignments and rollovers, although anything goes.

Based on the market’s performance through the first week of yearly trading the idea that “anything goes” is well founded. There basically is very low predictive capability when the first week of an otherwise predicitive month is lower.

However, the market really wasn’t lower. It just felt that way and no one has done any statistical analysis based on the way things feel.

With cash coming and enough positions expiring next week, once again the focus will be on expanded options or February monthly options.

As earnings get underway in earnest next week the market tone may be set by the financials. such as JP Morgan, Citibank, Morgan Stanley and others that all report next week.

If the past two quarters are any guide, the financials will do well, but that won’t necessarily set the stage for the others in the S&P 500. As we’ve seen, retail has been incredibly weak of late and even Macys. which is widely regarded as the best performing right now, has announced large layoffs.

Still, with challenges and risk come opportunity.

I anticipate being a little more active next week, if only to be able to camouflage any under-performers for the week and will be mindful of when companies report earnings. Knowing those dates allows the option of either avoiding, embracing or dancing around those companies.

 

     

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:  CHK, DRI, EBAY, WLT

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:  CSCO, LULU, MRO, MSFT, WLT,

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

Calls Rolled Over, taking profits, into a future monthly cycle: &nb
sp;none

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

New STO:  ANF

Put contracts sold and still open: **

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  ANF, BMY, EMC, HFC, JPM, NLY, SBUX, WAG

Calls Expired: CLF

Puts Assigned:  none

Stock positions Closed to take profits:  CCL, M 

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  EMC (1/6 $0.10), GPS (1/6 $0.20), DRI (1/8 $0.55)

 

 

** Some people had early assignment of ANF puts on November 8, 2013. Subsequently OTP Trading Alerts were sent to sell new calls on ANF, as well as to roll over puts. The strike prices on the two trades differ, but the premium differentials have this far been virtually identical through a third round of rollovers, with strike prices adjusted on calls and puts to $36 and $35, respectively, from the original $35.50 put sale.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   APC, CLF,  FCX,  JCP, LLY, MCP, MOS, NEM, PBR, TGT, 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.