Option to Profit
Week in Review
|NEW POSITIONS/STO||NEW STO||ROLLOVERS||CALLS ASSIGNED/PUTS EXPIRED||CALLS EXPIRED/PUTS ASSIGNED||CLOSED|
|2 / 2||2||4||2 / 0||0 / 0||0|
Weekly Up to Date Performance
April 20 – 24, 2015
This was another nice week, although a little unexpectedly so.
That was the case despite seeing the 2 new positions opened for the week having trailed the S&P 500.
With Friday’s fall in shares of Best Buy, the new positions opened for the week trailed the adjusted S&P 500 by 1.5% and the unadjusted S&P 500 by an even larger 2.0%
Those new positions lost 0.2% for the week. The unadjusted S&P 500 had another very good week, keeping the April trend alive. It was 1.7% higher, while the adjusted S&P 500 was 1,3% higher.
After last week’s very strong advance of existing positions over the S&P 500, this week they trailed slightly, despite having closed the week 1.3% higher.
With 2 positions closed out this week by assignment, the 34 lots closed in 2015 continue to out-perform the market. They are an average of 5.5% higher, while the comparable time adjusted S&P 500 average performance has been 1.6% higher. That 3.9% difference represents a 253.9% performance differential. While I hope to see more positions closed, I would expect that differential to fall considerably.
Last week was a satisfying one despite the market being 1% lower, as the OTP portfolio’s energy positions had enough strength to offset the broader weakness. Of course, that wasn’t a good thing when those stocks were falling.
This week was satisfying, even though existing positions trailed the market a little, as it went 1.7% higher on the week. When using a covered option strategy, especially in a low volatility environment that typically uses strikes right near the share’s purchase price, it’s difficult to keep up with markets that exceed a 1% return on the week.
What made it satisfying is that there was a nice combination of trades for the week.
That combination was able to develop the income stream that I’ve become accustomed to and that causes me some stress if not seeming to develop.
Best of all, after the previous week’s 5 assignments, I didn’t have to dip too deeply into the cash reserves to generate that income and ended the week with enough assignments to bring that cash pile right back to where it had started.
The chance to sell some new call positions on some uncovered lots was something that’s always welcome, as I really do hate seeing positions not paying their way, but also hate the idea of selling their rights for too low of a return.
Additionally, the ability to rollover those positions not assigned and not having to add them to the “uncovered” pile, which is still far too large, made it a good week.
With a handful of positions set to expire next week and all being within the range of being assigned, I may look at both weekly options and extended weekly options for any new positions opened next week.
Volatility continues to head lower and lower, so that means it gets less and less lucrative to look beyond a single week for those contracts, unless earnings or some other event is part of the equation.
Next week, just as this one, will be a very busy one as far as earnings go.
There’s not too much doubt about it, but earnings completely monopolized this week.
Next week, however, as busy as earnings will be, won’t have the same absence of important economic news to send everyone’s attention to those earnings reports.
Next week has an FOMC Statement release due on Wednesday and that will be preceded by the GDP report.
That could make for a powerful combination, especially if the GDP report will reflect the lowered expectations that most have.
While lowered expectations have worked great as far as how stocks have reacted after this quarter’s earnings releases, it’s not so clear that a disappointing GDP report will be greeted with stocks finding another reason to party wildly.
At least I’m glad that the FOMC Statement release won’t be coming during the final week of a monthly option cycle, as it does so often, when there tends to be an accumulation of positions hoping to be rolled over or assigned.
There’s nothing like a disappointing market reaction to the FOMC right before a monthly expiration.
Not in a good way, though.
Hopefully next week will continue to see some market strength, as I would continue to like to continue building cash through assignments and the sale of new calls on uncovered positions over the purchasing of new positions.
In doing so, I don’t mind seeing paper gains grow, but would really like to be better positioned for the next buying opportunity, as every drop has brought that kind of opportunity over the past few years.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: ANF, BBY
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: GPS
Calls Rolled over, taking profits, into extended weekly cycle: AZN (5/8). WFM (5/8)
Calls Rolled over, taking profits, into the monthly cycle: BBY
Calls Rolled Over, taking profits, into a future
monthly cycle: none
Calls Rolled Up, taking net profits into same cycle: none
New STO: BNO (6/19), MAT (6/19)
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: ANF, ATVI
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: FAST (4/24 $0.28)
Ex-dividend Positions Next Week: none
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, BAC, CHK, CLF, COH, FAST, FCX, HAL, HFC, .INTC, JCP, JOY, LVS, MCP, MOS, NEM, RIG, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)
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Copyright 2015 TheAcsMan