Week in Review – April 20 -24, 2015

 

Option to Profit

Week in Review

April 20 –  24,  2015

 

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.

 



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:   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 cycleBBY

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

Calls Rolled Up, taking net profits into same cyclenone

New STO:  BNO (6/19), MAT (6/19)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls AssignedANF, 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, LVSMCP, MOS,  NEM, RIG, 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.



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Daily Market Update – April 24, 2015

 

 

 

Daily Market Update – April 24, 2015  (9:00 AM)

 

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

 

The following trade outcomes are possible today:

Assignments:  Abercrombie and Fitch, Activision

Rollovers:  The Gap

ExpirationsAstra Zeneca, Best Buy, Whole Foods

 

The following were ex-dividend this week: Fastenal (4/24 $0.28)

The following will be ex-dividend next week: none

 

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

 

 

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Daily Market Update – April 23, 2015 (Close)

 

 

 

Daily Market Update – April 23, 2015  (Close)

 

The earnings keep pouring in this morning and the reactions were mixed, at least as far as the early bird traders were concerned..

With the general story continuing, that is that top line revenue is tending to be lower than expected, while bottom line profits are trending higher, for the most part those reports are being taken in stride.

Maybe even better than simply “taking it in stride,” as the S&P 500 was about 1.2% higher for the week as the morning was getting ready to begin and was within 0.5% of its all time closing high. By the time today came to its close, even off of its highs as ground was lost in the final hour, the market inched even closer to those highs.

Those highs are just a month old. Meanwhile the NASDAQ finally came to its new closing high some 15 years after the last one.

What this earnings season shows is that it’s amazing what can happen as you prepare yourself for the possibility of bad news. If you act adult-like, and the disappointments do come along as expected, there seems to be less of a reason to panic or over-react.

That has definitely been the case as this earnings season has gotten underway and is now in full swing. The expectations were low due to currency head winds and the relief has been palpable as the numbers are being released. Even decreasing forward guidance, which is usually a kiss of death, hasn’t been  keeping the market from moving forward.

When you are led to believe that the market values growth above everything else, it is a rare sight to see it moving higher even when prospects for growth are being dashed. But as long as that strategy of under-promising or having lowered expectations seems to be working, then imagine what the next earnings season could bring if results are better than we’ve been anticipating.

Interestingly, Caterpillar, which reported this morning and was up sharply in the pre-open trading said nothing about the singular factor that has been depressing top line revenues for just about everyone else.

With just about everyone else pointing a finger at currency exchange Caterpillar hasn’t said much about that and shares were soaring, perhaps because the market values immunity from natural laws.

That immunity seems odd, considering how much Caterpillar has a stake in all parts of the globe. That immunity didn’t last, though, as Caterpillar actually ended up spending a significant amount of time trading at a loss and closed almost unchanged.

Another form of immunity came as Dow Chemical reported its earnings this morning. Its CEO, Andrew Liveris, again reiterated that his company is essentially ambivalent about the price of oil. He said that a few months ago as Dow Chemical was getting caught up with the slide seen in energy prices, but based on its price actions, no one seemed to believe him.

It has been a case of “that’s my story and I sticking to it,” but lately it appears as if investors have come around to his logic, which presumably is based on more than just logic.

With now just 1 day left in this weekly cycle, there’s some opportunity remaining for some rollovers and perhaps even s
ome assignments. This morning’s early weakness in the futures made that prospect look less encouraging, but even with the gains having faded by the close, at least they were gains.

Without some continued strength, especially a strong pop higher, there’s not too much likelihood of being able to sell new calls on currently uncovered positions, so while I would like to see assignments, I may prefer now to have the opportunity to rollover some positions instead, so as to create the weekly income I’ve gotten accustomed to getting, as the bills won’t pay themselves.

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Daily Market Update – April 23, 2015

 

 

 

Daily Market Update – April 23, 2015  (8:15 AM)

 

The earnings keep pouring in this morning and the reactions  are mixed, so far.

With the general story continuing, that is that top line revenue is tending to be lower than expected, while bottom line profits are trending higher, for the most part those reports are being taken in stride.

Maybe even better than simply “taking it in stride,” as the S&P 500 is about 1.2% higher for the week and now is within 0.5% of its all time closing high.

It’s amazing what can happen as you prepare yourself for the possibility of bad news. If you act adult-like, and the disappointments do come along as expected, there seems to be less of a reason to panic or over-react.

That has definitely been the case as this earnings season has gotten underway and is now in full swing. The expectations were low due to currency headwinds and the relief has been palpable as the numbers are being released. Even decreasing forward guidance, which is usually a kiss of death, hasn’t been  keeping the market from moving forward.

When you are led to believe that the market values growth above everything else, it is a rare sight to see it moving higher even when prospects for growth are being dashed. But as long as that strategy of under-promising or having lowered expectations seems to be working, then imagine what the next earnings season could bring if results are better than we’ve been anticipating.

Interestingly, Caterpillar, which reported this morning and is up sharply in the pre-open trading said nothing about the singular factor that has been depressing top line revenues for just about everyone else.

With just about everyone else pointing a finger at currency exchange Caterpillar hasn’t said much about that and shares were soaring, perhaps because the market values immunity from natural laws.

That immunity seems odd, considering how much Caterpillar has a stake in all parts of the globe.

Another form of immunity came as Dow Chemical reported its earnings this morning. Its CEO, Andrew Liveris, again reiterated that his company is essentially ambivalent about the price of oil. He said that a few months ago as Dow Chemical was getting caught up with the slide seen in energy prices, but based on its price actions, no one seemed to believe him.

It has been a case of “that’s my story and I sticking to it,” but lately it appears as if investors have come around to his logic, which presumably is based on more than just logic.

With 2 days left in this weekly cycle, there’s some opportunity remaining for some rollovers and perhaps even some assignments. However, this morning’s early weakness in the futures, although improving a bit as earnings have been coming in, makes it a little more tenuous.

Without some continued strength, especially a strong pop higher, there’s not too much likelihood of being able to sell new calls on currently uncovered positions, so while I would like to see assignments, I may prefer now to have the opportunity to rollover some positions instead, so as to
create the weekly income I’ve gotten accustomed to getting, as the bills won’t pay themselves.

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Daily Market Update – April 22, 2015 (Close)

 

 

 

Daily Market Update – April 22, 2015  (Close)

 

What started off with some promise as IBM reported its earnings after the closing bell on Monday turned into some disappointment as a handful of DJIA components also reported earnings prior to the open on Tuesday.

The net result was more of the same.

Companies reporting improved bottom lines but without meeting top line expectations, with currency exchange being top at the list for reasons given.

This time the market wasn’t too pleased, after having given a pass to those reporting similar experiences during the first week of earnings season. The displeasure was probably muted a little as the bottom lines were still better than expected, as those expectations were already lowered across the board.

As a result the DJIA had flirted with a triple digit loss going into the final minutes of trading, but was able to pare that down just a bit, but the broader S&P 500 didn’t perform as weakly as the DJIA.

With yesterday’s pullback, the DJIA is a full 1% away from its historical April performance since 2000, but if anything is really clear, it’s just how quickly sentiment changes and the markets move to keep pace,

This morning were more earnings reports from DJIA components, including Boeing and Coca Cola, but this time those early indications were positive, although those conference calls were scheduled to begin after the market opens this morning, so it could have been anyone’s guess as to where they could have pulled the DJIA and whether another dichotomy between it and the S&P 500 would occur today.

The market looked as if it may get off to a mildly lower start, but the kind that neither seems to have conviction nor to be based on any economic news or otherwise. As it would turn out before 11 AM could roll around the market turned higher and just continued along that way as both McDonalds and Coca Cola reversed their early negativity and move nicely higher. This time, however, the DJIA and the broader market stayed well aligned.

This morning Existing Home Sales were released and while I usually don’t think too much about that report, it comes during a very quiet week and may have a little more importance, as may the Petroleum Status Report.

Those sales showed a nice increase, actually the best monthly change in more than 4 years.

The Existing Home Sales were expected to be higher as the excuse of bad winter weather is thought to be fully exhausted at this point. A strong number, especially a very strong number could have been negative for the market if it would start to ignite interest rate concerns again. It’s been a few weeks since we’ve been so hyper-focused on interest rates, but sooner or later that issue will re-surface and it’s hard to imagine how that would be a catalyst for anything other than a short term move lower, despite the general consensus that a reasoned methodical increase in rates would be a good thing for all concerned.

The report, however, didn’t frighten anyone and may have been the impetus for the market’s turnaround.

With only 2 new positions added this week, despite having cash reserves replenished with last week’s assignments, I don’t think there will be too many reasons to consider dipping into cash to add additional positions.

While there’s still plenty of time left for the week to unfold, I’m hoping that the week’s income stream will find some help from rollovers, although I might be willing to forego the income if it meant assignments of some positions that are currently possible assignment candidates.

While I would still like to see some new covered positions created from those sitting idly and not earning their keep, this week doesn’t look as promising as the past two, unless something can spark a fire. While there’s a temptation to look at some longer time frame contracts to try and squeeze something out of those positions, the volatility just keeps getting lower and lower and the premiums follow in the same direction.

For now, the volatility seems to have gotten off of its pattern of the past few years and is over-due for a little spike. Until that day comes, unless there is also the opportunity to take advantage of some earnings related premiums, I think there’s reason to sit tight before committing to those longer term time frames.

Right now, I’d just be happy to get through the week.

 

 

 

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