Weekend Update – October 23, 2016

This past week was the first full week of earnings for this most recent earnings season and you could be excused for wondering just how to interpret the data coming in.

The financial sector had fared well, but if you were looking for a pattern of revenue and earnings beats, or even looking for a shared sense of optimism going forward from a more diverse group of companies, you’ve been disappointed to date.

For the most part, this past week was one of mixed messages and the market really rewarded the messages that it wanted to hear and really punished when the messages didn’t hit the right notes.

With so much attention being placed on the expectation that the FOMC would have sufficient data to warrant an interest rate increase in December, you might have thought that companies would start painting a slightly more optimistic image of what awaited their businesses, perhaps based upon a building trend from the past quarter.

That optimistic guidance has yet to prevail even as some have been reporting better than expected revenues.

But no one should be surprised with the mixed messages that the market hasn’t been able to interpret and then use as a foothold to move in a sustained direction.

The mixed messages coming from those reporting just follows the wonderful example of streaming mixed messages that have been coming at us all year long from members of the Federal Reserve.

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Weekend Update – September 11, 2016

Sometimes you just get blindsided and even hindsight is inadequate in explaining what just happened.

There’s very little reason to ever get hit in the face, as human instinct is to protect that vulnerable piece of anatomy.

Yet, sometimes there’s a complete absence of anticipation or lack of preparation for fast, unfolding events.

Sometimes you just get lulled into a sense of security and take your eye off events surrounding you.

Granted, sometimes your inattention helps you to avoid doing the logical thing and missing out on something wonderful, but more often than not, there is a price to be paid for inattention.

When I first started writing a blog. there was a 417 point decline in the DJIA on the third day of that blog.

That was in 2007 when 417 points actually stood for something.

This past Friday’s nearly 400 point decline was minimal, by comparison.

Back in 2007, the culprit for the decline was a nearly 9% drop in the Chinese stock market. It was easy to connect the dots and honestly, you had to see some collapse coming in that market, at that time, as most everyone was beginning to openly question the veracity, validity and credibility of economic and corporate reports coming from China.

I suppose that there was some kind of identifiable culprit this past Friday, as well, but after a very quiet and protracted period following the recovery from the “Brexit” sell-off, there was little reason to suspect that it would happen on Friday.

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Weekend Update – November 3, 2013

Some things are just unappreciated until they’re gone.

If you can remember those heady days of 2007, it seemed as if every day we were hitting new market highs and everyone was talking about it when not busy flipping houses.

Some will make the case that is the perfect example of a bubble about to burst, similar to when a bar of gold bullion appears on the cover of TIME magazine, just in time to mark the end of a bull run.

On the other hand, when everyone is suddenly talking about perhaps currently being in a bubble it may be a good time to plan for even more of a good thing.

That’s emblematic of the confusion swirling in our current markets. Earnings are up. Better than expected by most counts, yet revenues are down. The stock market can do only one thing and so it goes higher.

In case you haven’t been paying attention, 2013 has been a year of hitting record after record. Yet the buzz is absent, although house flipping is back. Not that I go to many social events but not many are talking about how wild the market has been. That’s markedly different from 2007.

Listening to those who purport to know about human behavior and markets, that means that we are not yet in a stock market bubble and as such, the market will only go higher, yet that’s at odds with the rampant bubble speculation that is being promoted in some media.

I’m a little more cynical. I see the paucity of excitement as being reflective of investors who have come to believe that consistently higher markets are an entitlement and have subsequently lost their true value. No one seems to appreciate a new record setting close, anymore. The belief in the right to a growing portfolio is no different from the right to use a calculator on an exam. Along with that right comes the loss of ability and appreciation of that ability.

Without spellchecker, the editors at Seeking Alpha would have a hard time distinguishing me from a third grader, but spelling really isn’t something I need to due. It’s just done for me.

While many were unprepared in 2007 because they were caught up in a bubble, 2013 may be different. In 2007 the feeling was that it could only get better and better, so why exercise caution? But in 2013 the feeling may be that there is nothing unusual going on, so what is there to be cautious about?

AS markets do head higher those heights are increasingly met with ennui instead of wonder and awe. It’s barely been more than five years since we last felt the wrath of an over-extended market but I’m certain that the new daily records will be missed once they’re gone.

As a normally cautious person when it comes to investing, but not terribly willing to sacrifice returns for caution my outlook changes with frequency as new funds find their way into my account after the previous week’s assignment of options I had sold.

This past week I didn’t have as many assignments as I had expected owing to some late price drops on Friday, so I’m not as likely to go on a spending spree this coming week, as I don’t want to dig deeply into my cash reserve. This week I’m inclined to think more in terms of dividend paying stocks and relatively few higher beta names, although opportunity is situational and Monday morning’s opening bell may bring surprise action. I appreciate surprise and for the record, I appreciate every single bit of share appreciation and income that comes my way as a gift from this market.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum and “PEE” categories this week (see details).

I currently own shares of MetLife (MET) and have done so several times this year. MetLife reported earnings this past week. They reported a nearly $2 billion turnaround in profits, but missed estimates, despite strength in every metric. They re-affirmed that a lower interest rate environment, as might be expected with a continuation of Quantitative Easing, could impact its assets’ performance in the coming year. That was the same news that created a buying opportunity in the previous quarter, so it should not have come as too much of a surprise. What did, however come as a surprise was the announcement that MetLife would no longer be offering earnings per share guidance. According to its CEO “we will instead expand our discussion of key financial metrics and business drivers, creating a more informed view of MetLife’s future prospects.” The price drop and it’s ex-dividend date this week make it a likely candidate for using my limited funds this week.

I’ve long believed that Robert ben Mosche, CEO of AIG (AIG) was something of a saint. Coming out of comfortable retirement in Croatia to attempt an AIG rescue, he continued on his quest even while battling cancer and still found the time to re-pay AIG’s very sizeable debt to US taxpayers. Who needs that sort of thing when you can live like royalty off the Mediterranean coast?

AIG was punished after reporting earnings this past week. It’s hard to say whether the in line earnings, but slightly lower revenue was to blame for the nearly 7% drop or whether joining forces with MetLife was to blame. Not that they literally joined forces, it’s just that ben Mosche announced that AIG will no longer comment on its “aspirational goals,” which was a way of saying that they too were no longer going to provide guidance. I haven’t owned shares in 2 months and that was at a lower price point than even after the large Friday drop, but I think the opportunity has re-arrived.

Wells Fargo (WFC) goes ex-dividend this week and as much as I’ve silently prayed for its share price to drop back to levels that I last owned them, it just hasn’t worked out that way. To a large degree Wells Fargo has stayed above the various banking controversies and has deflected much of the blame and scrutiny accorded others. At some point it becomes clear that prices aren’t likely to drop significantly in the near term, so it may be time to capitulate and get back on the wagon. However, what does give me some solace is that shares have trailed the S&P 500 during the three time frames that I have been recently using, each representing a near term top of the market; May 21, August 2 and September 19, 2013.

In the world of big pharma, Merck (MRK) has shared in little of the price strength seen by some others. In fact, of late, the best Merck has been able to do to prompt its shares higher have all come on the less constructive side of the ledger. Only the announcement of workforce reductions and other cost cutting steps have been viewed positively.

But at some point a value proposition is created which isn’t necessarily tied to pipelines or other factors pertinent to long term price health. In this case, a quick 7% price drop is enough to warrant consideration of a company paying an attractive dividend and offering appealing enough option premiums to sustain interest in shares even if they stagnate while awaiting the next price catalysts. Besides, if you’re selling covered calls, there’s nothing better than share price stagnation.

What is a week without drawing comparisons between Michael Kors (KORS) and Coach (COH)? Coach has become everyone’s favorite company to disparage, although on any given day it may exchange places with Caterpillar. Kors, is of course, the challenger that has displaced Coach in the hearts of investors and shoppers. Having sold Coach puts in advance of earnings and then purchasing shares even after those expired, those were assigned this past week. However, at this price level Coach is still an appealing covered option purchase and well suited for a short term strategy, even if there is validity to the thesis that it is ceding ground to Kors.

Kors, on the other hand, is doing everything right, including entering the S&P 500. It’s hard not to acknowledge its price ascent, even after a large secondary offering. While I know nothing of fashion and have no basis by which to compare Coach and Kors, I do know that as Kors reports earnings this week the option market is implying approximately 7.5% price move in either direction. However, anything less than a 10% decline in price can still deliver a 1% ROI

Williams Companies (WMB) is one of those companies that seems to fly under the radar. Although I’ve owned shares many times there has never been a reason compelling me to do so on the basis of its business fundamentals. Instead, ownership has always been prompted by an upcoming dividend or a sudden price reversal. In this case I just had shares assigned prior to earnings, which initially saw a big spike in price and then an equally large drop, bringing it right back to the level that I have found to be a comfortable entry point.

Riverbed Technology (RVBD) reported earnings last week and I did not purchase additional shares or sell puts, as I thought I might. Too bad, because the company acquitted itself well and shares moved higher. I think that shares are just starting and while RIverbed Technology has probably been my most lucrative trading partner over the years, purely on the basis of option premiums, this time around I am unlikely to write call options on all new shares, as I think $18 is the next stop before year end, particularly if the overall market doesn’t correct.

What can anyone add to the volumes that have been said about Apple (AAPL) and Intel (INTC)? Looking for insights is not a very productive endeavor, as the only new information is likely to currently exist only as insider information. Both are on recent upswings and both have healthy dividends that get my attention because of their ex-dividend dates this week. Intel offers nothing terribly exciting other than its dividend, but has been adding to its price in a stealth fashion of late, possibly resulting in the assignment of some of my current shares that represent one of the longest of my holdings, going back to September 2012. While I have always liked Intel it hasn’t always been a good covered call stock because when shares did drop, such as after earnings, the subsequent price climbs took far too long to continually be able to collect option premiums. However, without any foreseeable near term catalysts for a significant price drop it offers some opportunities for a quick premium, dividend and perhaps share appreciation, as well.

Finally, in its short history of paying dividends Apple’s shares have predominantly moved higher after going ex-dividend, although there was one notable exception. Given the factors that may be supporting Apple’s current price levels, including pressure from activist investors and Apple’s own buybacks, I’m not overly concerned about the single historical precedence and think that the triumvirate of option premium, dividend and share appreciation makes it a good addition to even a conservative portfolio.

Traditional Stocks: AIG, Merck, Williams Companies

Momentum Stocks: Coach, Riverbed Technology

Double Dip Dividend: Apple (ex-div 11/6), Intel (ex-div 11/5), MetLife (ex-div 11/6), Wells Fargo (ex-div 11/6)

Premiums Enhanced by Earnings: Michael Kors (11/5 AM)

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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Weekend Update – July 7, 2013

Much has been made of the recent increase in volatility.

As someone who sells options I like volatility because it typically results in higher option premiums. Since selling an option provides a time defined period I don’t get particularly excited when seeing large movements in a share’s price. With volatility comes greater probability that “this too shall pass” and selling that option allows you to sit back a bit and watch to see the story unwind.

It also gives you an opportunity to watch “the smart money” at play and wonder “just how smart is that “smart money”?

But being a observer doesn’t stop me from wondering sometimes what is behind a sudden and large movement in a stock’s price, particularly since so often they seem to occur in the absence of news. They can’t all be “fat finger ” related. I also sit and marvel about entire market reversals and wildly alternating interpretations of data.

I’m certain that for a sub-set there is some sort of technical barrier that’s been breached and the computer algorithms go into high gear. but for others the cause may be less clear, but no doubt, it is “The Smart Money,” that’s behind the gyrations so often seen.

Certainly for a large cap stock and one trading with considerable volume, you can’t credit or blame the individual investor for price swings, especially in the absence of news. Since for those shares the majority are owned by institutions, which hopefully are managed by those that comprise the “smart money” community, the large movements certainly most result in detriment to at least some in that community.

But what especially intrigues me is how the smart money so often over-reacts to news, yet still can retain their moniker.

This week’s announcement that there would be a one year delay in implementing a specific component of the Affordable Care Act , the Employer mandate, resulted in a swift drop among health care stocks, including pharmaceutical companies.

Presumably, since the markets are said to discount events 6 months into the future, the timing may have been just right, as a July 3, 2013 announcement falls within that 6 month time frame, as the changes were due to begin January 1, 2014.

By some kind of logic the news of the delay, which reflects a piece of legislation that has regularly alternated between being considered good and bad for health care stocks, was now again considered bad.

But only for a short time.

As so often is seen, such as when major economic data is released, there is an immediate reaction that is frequently reversed. Why in the world would smart people have knee jerk reactions? That doesn’t seem so smart. This morning’s reaction to the Employment Situation report is yet another example of an outsized initial reaction in the futures market that saw its follow through in the stock market severely eroded. Of course, the reaction to the over-reaction was itself then eroded as the market was entering into its final hour, as if involved in a game of volleyball piting two team of smart money against one another.

Some smart money must have lost some money during that brief period of time as they mis-read the market’s assessment of the meaning of a nearly 200,000 monthly increase in employment.

After having gone to my high school’s 25th Reunion a number of years ago, it seemed that the ones who thought they were the most cool turned out to be the least. Maybe smart money isn’t much different. Definitely be wary of anyone that refers to themselves as being part of the smart money crowd.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories. (see details).

As a caveat, with Earnings Season beginning this week some of the selections may also be reporting their own earnings shortly, perhaps even during the July 2013 option cycle. That knowledge should be factored into any decision process, particularly since if you select a shorter term option sale that doesn’t get assigned, since yo may be left with a position that is subject to earnings related risk. By the same token, some of those positions will have their premiums enhanced by the uncertainty associated with earnings.

Both Eli Lilly (LLY) and Abbott Labs (ABT) were on my list of prospective purchases last week. Besides being a trading shortened week in celebration of the FOurth of July, it was also a trade shortened week, as I initiated the fewest new weekly positions in a few years. Both shares were among those that took swift hits from fears that a delay in the ACA would adversely impact companies in the sector. In hindsight, that was a good opportunity to buy shares, particularly as they recovered significantly later in the day. Lilly is well off of its recent highs and Abbott Labs goes ex-dividend this week. However, it does report earnings during the final week of the July 2013 option cycle. I think that healthcare stocks have further to run.

AIG (AIG) is probably the stock that I’ve most often thought of buying over the past two years but have too infrequently gone that path. While at one time I thought of it only as a speculative position it is about as mainstream as they come, these days. Under the leadership of Robert Ben Mosche it has accomplished what no one believe was possible with regard to paying back the Treasury. While its option premiums aren’t as exciting as they once were it still offers a good risk-reward proposition.

Despite having given up on “buy and hold,” I’ve almost always had shares of Dow Chemical (DOW) over the past 5 years. They just haven’t been the same shares for very long. It’s CEO, Andrew Liveris was once the darling of cable finance news and then fell out of favor, while being roundly criticized as Dow shares plummeted in 2008. His star is pretty shiny once again and he has been a consistent force in leading the company to maintain shares trading in a fairly defined channel. That is an ideal kind of stock for a covered call strategy.

The recent rise in oil prices and the worries regarding oil transport through the Suez Canal, hasn’t pushed British Petroleum (BP) shares higher, perhaps due to some soon to be completed North Sea pipeline maintenance. British Petroleum is also a company that I almost always own, currently owning two higher priced lots. Generally, three lots is my maximum for any single stock, but at this level I think that shares are a worthy purchase. With a dividend yield currently in excess of 5% it does make it easier to make the purchase or to add shares to existing lots.

General Electric (GE) is one of those stocks that I only like to purchase right after a large price drop or right before its ex-dividend date. Even if either of those are present, I also like to see it trading right near its strike price. Its big price drop actually came 3 weeks ago, as did its ex-dividend date. Although it is currently trading near a strike price, that may be sufficient for me to consider making the purchase, hopeful of very quick assignment, as earnings are reported July 19, 2013.

Oracle (ORCL) has had its share of disappointments since the past two earnings releases. Its problems appear to have been company specific as competitors didn’t share in sales woes. The recent announcement of collaborations with Microsoft (MSFT and Salesforce.com (CRM) says that a fiercely competitive Larry Ellison puts performance and profits ahead of personal feelings. That’s probably a good thing if you believe that emotion can sometimes not be very helpful. It too was a recent selection that went unrequited. Going ex-dividend this week helps to make a purchase decision easier.

This coming week and next have lots of earnings coming from the financial sector. Having recently owned JP Morgan Chase (JPM) and Morgan Stanley (MS) I think I will stay away from those this week. While I’ve been looking for new entry points for Citigroup (C) and Bank of America (BAC), I think that they’re may be a bit too volatile at the moment. One that has gotten my attention is Bank of New York Mellon (BK). While it does report earnings on July 17, 2013 it isn’t quite as volatile as the latter two banks and hasn’t risen as much as Wells Fargo (WFC), another position that I would like to re-establish.

YUM Brands (YUM) reports earnings this week and as an added enticement also goes ex-dividend on the same day. People have been talking about the risk in its shares for the past year, as it’s said to be closely tied to the Chinese economy and then also subject to health scare rumors and realities. Shares do often move significantly, especially when they are stoked by fears, but YUM has shown incredible resilience, as perhaps some of the 80% institutional ownership second guess their initial urge to head for the exits, while the “not so smart money” just keeps the faith.

Finally, one place that the “smart money” has me intrigued is JC Penney (JCP). With a large vote of confidence from George Soros, a fellow Hungarian, it’s hard to not wonder what it is that he sees in the company, after all, he was smart enough to have fled Hungary. The fact that I already own shares, but at a higher price, is conveniently irrelevant in thinking that Soros is smart to like JC Penney. In hindsight it may turn out that ex-CEO Ron Johnson’s strategy was well conceived and under the guidance of a CEO with operational experience will blossom. I think that by the time earnings are reported just prior to the end of the August 2013 option cycle, there will be some upward surprises.

Traditional Stocks: Bank of New York, British Petroleum, Dow Chemical, Eli Lilly, General Electric,

Momentum Stocks: AIG, JC Penney

Double Dip Dividend: Abbott Labs (ex-div 7/11), Oracle (ex-div)7/10)

Premiums Enhanced by Earnings: YUM Brands (7/10 PM)

Remember, these are just guidelines for the coming week. Some of the above selections may be sent to Option to Profit subscribers as actionable Trading Alerts, most often coupling a share purchase with call option sales or the sale of covered put contracts. Alerts are sent in adjustment to and consideration of market movements, in an attempt to create a healthy income stream for the week with reduction of trading risk.

   

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Weekend Update – May 5, 2013

ADP. ISM. FOMC. ECB

They came one after another at us last week. Not to mention the Jobless Report and the Employment Situation Reports to end the week.

Following the previous week where I had temporarily gone on one of my wild and drunken spending ways buying new shares with assignment proceeds, I returned to a more cautious note this past week.

Maybe it was the soup. While I have much greater comfort when on a shopping spree, usually borne out of a bullish view of the world, this week even the comfort food was sending me some kind of misleading message, spoonful after spoonful. I don’t always listen to my soup, but when I do, I know that things are serious. This week’s message wasn’t exactly cryptic in nature. For certain, the message wasn’t “Buy, Buy, Buy.”

But to simply assume the message is correct is bordering on lunacy, so I just decided not to buy quite as much, proving that we can all get along. Besides, “sell, sell, sell,” seemed so draconian.

Although so often a drastically sharp move downward comes from unexpected or lightly regarded catalysts, there’s not too much of an excuse to overlook some potentially obvious catalysts when the market appears to be in an overbought condition. For me, already sensitized to a possible drop, the FOMC, ECB and Employment Situation were individually capable of initiating and speeding a sudden descent.

Aligned? Had the Federal Reserve given a strong hint of an end to Quantitative Easing, had they suggested an earlier timetable for interest rate hikes, or had the European Central Bank not lowered rates that combination had the makings of a nasty punch. Throw a second successive month of disappointing employment numbers, perhaps with downward revisions of previous months and now you’ve got a party.

For short sellers, at least.

While the market did have a slightly delayed reaction to the FOMC minutes, it was fairly mute, despite doubling the early losses. The following day, which is often the day the real action occurs after an FOMC meeting, had its tone already set earlier by the ECB decision to drop rates.

That just left Friday, with a little hint from Wednesday’s release of the ADP statistics. that job growth may be slowing due to some headwinds in the economy. Much of the talk on Wednesday was how fearful everyone was that the number on Friday would be terribly negative.

The fact that the number was, in fact, an indication of a growing economy and there were massive upward revisions to earlier months was the surprise that should never have been a surprise, as thesis changing revisions are routine.

So all of the important letters were aligned, as no one really cares about ISM, and there was reason for a party. The order of the day on Friday was “buy, buy, buy,” once again delaying the “Sell in May” crowd’s ascent and giving me cause to reflect as the majority of my monthly covered call positions are now in the money and do not stand to further profit in the event of a continued market rise.

Of course, if I wanted to continue the lunacy, I would simply rationalize it all and convince myself that I now have a nice cushion between share and strike prices to withstand a fall between now and May 18, 2013. Sooner or later my call for a significant market drop will have to take on broken clock qualities.

Yet, the rationalizations aren’t working. Maybe I need another spoonful of soup.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend or Momentum categories, with no selections in the “PEE” category, despite earnings season still going strong (see details). Additionally, this week the emphasis is once again on dividend paying stocks and still giving greater consideration to monthly contracts, in order to lock into option premiums for a longer period in order to ride out any pauses in the runaway train. Of course, after Friday’s run higher capping off a week when the S&P 500 moved 2% higher, good luck finding any bargain priced shares. Bargains may be justifiably so. Sometimes there’s a reason no one asks you to dance. You just refuse to look in the mirror, justifiably so.

I jumped the gun a bit on Friday afternoon and purchased shares of Pfizer (PFE). After a very impressive share run higher, which hasn’t really occurred in the post-Viagra era, Pfizer reported earnings last week and continued the weakness that immediately preceded the report, after some European regulatory disappointments. A case of too much and too fast from my perspective, but the shares appear as a reasonably low risk over the coming weeks, particularly with a safe and healthy dividend and an upcoming ex-dividend date this week.

Wells Fargo (WFC) has been a frequent purchase target. While I do like shares, it along with so many others is more expensive than I would like. However, it has proven resilient in defending its share price when tested and the test levels have been slowly climbing higher. That’s certainly a more healthy way to see appreciation and I think offers less risk in what may become a risky environment. Additionally, their new ad campaign, “At least we’re not JP Morgan” (JPM) speaks volumes with regard to superfluous risk. As often before, my entry point is not so coincidentally synchronized with an ex-dividend date.

Weyerhauser (WY) is not a stock that I buy very often, but in hindsight I wonder why. Not because it does anything spectacular, but rather because it is so unspectacular that it has the core requirements of being an ideal covered call stock. It generally trades in a narrow range, has an options premium that is more than symbolic and pays a competitive dividend. What’s not to like, especially this week as it also goes ex-dividend.

Although I don’t have any “PEE” selections this week, Marathon Oil (MRO) does report earnings on May 7, 2013. However, unlike the usual earnings related plays that I prefer, it isn’t expected to trade in a wide range after the announcement. It’s implied move is far less than the 10% or greater that I usually look for while still offering a 1% ROI. Instead, it’s just like any other stock that happens to be reporting earnings, except that it’s approximately 5% off of its recent high, satisfying another of the criteria I look for when considering the risk associated with trading around earnings season.

I already own shares of St. Jude Medical (STJ) at a price slightly higher than Friday’s close. I rarely think about adding additional shares unless the price has had a significant drop. However, St. Judes Medical has had a fall relative to the market and certainly to the heath care sector. I don’t envision it as being at undue risk in the event of a market downturn, due to its modest existence during the upturn.

Parker Hannefin (PH) and W.W. Grainger (GWW) both go ex-dividend this week. Although their share rise on Friday adds to some reluctance to add them to the portfolio next week, if the Employment Situation statistics and the revisions are any guide, there may be very good reason to suspect that industrials and the companies that support the industrials may be ready for a little bit of a resurgence. Neither offer incredibly exciting dividends, but share appreciation may be more a part of the equation than it is for most stocks that I consider due to their option and dividend income potential.

I’ve been looking for a re-entry point in Goldman Sachs (GS) for a while. Again, hindsight told me that may have been a couple of weeks ago as shares were a relative bargain. The fact that shares have greatly under-performed the S&P 500 over the past 12 weeks has appeal for me, as I believe it marks a company that may be better equipped to out-perform going forward, particularly in a downturn.

Finally, Abercrombie and FItch (ANF) is an always exciting stock to own, especially as earnings are approaching. In this case earnings aren’t expected until May 15, 2013, so there is a little bit of breathing space to consider shares before the added volatility kicks in. When it moves, the moves are spectacular and certainly the option premiums reflect that kind of risk. My bias at the moment is that if an opportunity will arise it will likely take the form of put sales. However, that is only something that I would do if emotionally prepared to hold shares going into earnings if assigned. If so, a bit of luck may be necessary to turn the tables and sell call contracts going into earnings or sell additional puts if you’re really adventurous.

Traditional Stocks: Goldman Sachs, Marathon Oil, St. Jude Medical

Momentum Stocks: Abercrombie and Fitch

Double Dip Dividend: W.W. Grainger (ex-div 5/9), Parker-Hannefin (ex-div 5/8), Pfizer (ex-div 5/8), Wells Fargo (ex-div 5/8), Weyerhauser (ex-div 5/8)

Premiums Enhanced by Earnings: none

Remember, these are just guidelines for the coming week. Some of the above selections may be sent to Option to Profit subscribers as actionable Trading Alerts, most often coupling a share purchase with call option sales or the sale of covered put contracts. Alerts are sent in adjustment to and consideration of market movements, in an attempt to create a healthy income stream for the week with reduction of trading risk.

 

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