Monday, August 4, 2014

Zero Dark 2000

In another futile attempt to breach the triple zero on the SPX the expected selloff last week was aborted today (so far) byt he old reliable McClellan Oscillator dropping below -50 Friday (minus 89!). August has not been very profitable the past three years, and the JASON (July-Nov.) period spells caution as well. A/D on the NYSE was terrible (-2288 net declines); Insider selling is still heavy, but steady - especially Gold, where commercial traders are huge.

Monthly figures for ETF flows for June finally arrived, with increases in all, except bonds - margin interest again rose to almost new highs, which is positive for the market, via correlation.

Here are the numbers:

Date> 8/1/2014 7/26/2014
Indices: DJIA  16493 16960
  NAZ  4352 4449
SPX  1925 1978
WklyVolume (Bshs). naz/ny 9.9/3.6 8.7/2.9
Specul.Ratio hi=bullish 2.8 3
Sentiment: put/call-CBOE  68 60
VIX>50-alltmlow=8.8 17 12.7
Advance/Dec-NYSE.. 484/2772 1503/1720
Weekly Net: -2288 -217
     Cumulative: 161470 163758
Weekly  NYSE hi/low 260/191 435/91
New Hi's/Low's Nasdaq h/l 149/254 201/145
McClellan  Oscillator -89 -31
McClellanSum .+750/-1000 287 599
Newsletter Inv.Intel -Bull:tues 55.6 56.5
Surveys Bear:-5yrs 16.2 17.2
AAII  -Bull :wed. 31.1 29.6
Bear  31.1 29.9
COT:SPX w/w large/small (net)k .3/5 .2/6
COT:gold  comm.hedg long-short.000 (149k) (160k)
CEOinsider selling 22:1 44:1
off.&bd b/s.vs. 10% holder b/s 175:25 175:20
3-box rev Bullish%-  74 83
US equity -ICI Fund Flows WeekDelay (1.4B)
MMF flows Change in $B (8.8B) (2.2B)
MargDebt- top (300M) monthly  464B MAY
ETF:mthlyEqty/ Int'l/Bond-$B 1116/440/274 MAY
2-yr Tsy Yield: Inflation 0.48% 0.49%

Monday, July 28, 2014

Endless Summer

Still waiting for a meaningful correction, but could not resist a trade on Calumet (CLMT) - DITM covered call of Feb 30, with the stock at $33 (10% protection through the best months of the year - Nov.-Jan.
Had to wait for it to go ex-dividend , which it just did. 8% plus some downward Insurance of a few pence.

N.B. as of May 1 - 2014  , 4(closed) trades have netted 14%  annualized; Including closed trades (8) started in 2013 - up 13.4%. No losses, but low Volatility (IV).

Also covered in this blog is the LEAP portfolio, which offers more safety and yield by selling covered LEAP (longterm) strangles - out-of-the-money covered calls and puts. One can put on a trade an just let it stand for months (years), or fine-tune it for more yield and safety (cash brought in.
In the latter case, I rolled my AA (Alcoa) puts upward and out to 2016 for a $300 gain, as the stock has jumped more than a double since I bought it. With the LEAP plan, although my covered calls of 2105 are at the 10 strike (now ITM) it will most likely be called away in January (rolling out deep in-the-money calls is seldom very profitable - extrinsic premium).
2017 LEAPS should be coming out in October, but why sit on a way ITM put that sells for $.02??

Finally, as an example of how DITM can act as a hedge as well as conservative yield-provider (consistently 10%), another trade rears its pretty head today. Just as an infrequent loss can be devastating (but less than just owning the stock) since one can keep from getting "shaken out" with the lower covered call, so can a pleasant outlier occur to the upside:

This week Kinder MLP (KMP) was called away from my IRA after 6 months - with 6 months left on the January 2015 call!!! Very unusual, but happens if the buyer wants to exercise it way ahead!
I bought KMP at above $80 and sold the in-the-money (ITM) call at 77.50; the stock immediately dropped 10 points, but I held on due to the June call, which became int the money again in June, and I rolled out to January '15. Called away at 77.50 I would have lost $300 - but with DITM (call premiums and dividends) I netted $437 after commissions, for a 10.85% annualized profit - right on its usual mark.  

Friday, July 11, 2014

QUICKIE

In my latest DITM trade the good news for FCX - Freeport Copper- is that the annualized return, net of commissions, spreads, and other slippage, was 11% - too bad it only lasted 3 months! Buying it in April and having the August call (the 31 ITM) exercised on my, with the stock over $38 it was too ITM to be rolled out in time.

Since this 200 share trade was in my small IRA, I shall probably do another DITM trade soon to keep this statistic "pure", not mingled with the LEAP Strangle plan, which I now prefer, with Volatility as low as it is these days.

Per my Schwab account statement for the semi-annual 2014 period, what with above slippage and sloth, Reg T-3 (3 day settlement of funds, etc.) the IRA gained 3.40%, making it an annualized 6/80%, unless the VIX picks up, and premium returns.

Keep the Faith!

Monday, June 23, 2014

Winner Winner, Chicken Dinner

This past weekend being option expiry (Saturday after the third Friday of each month), another stock was called away in DITM - since the Bull market increased the price of STX (Seagate Tech.) too high  to roll out another six months. Of course the appreciation would have been nice, had I just owned the stock, but the comfort of the cushion was pleasant as well.

Also nice to see was the overall profit for this 8-month holding period:
200 shares were bought at $9,636, ITM calls were immediately sold for $1105, and dividend received were $258, for a total profit  of $918, including the takeaway amount of $9191 (after all commissions).  
That amounts to 14.29% annualized to 12 months, making my 2014 total of 9 completed trades - 12% if annualized from YTD.

Wednesday, May 28, 2014

Semi Annual Update

Those of you still tracking the DITM strategy, as an alternative to Zero Interest rates (stocks with safety and yield), a pleasant surprise after six months of 2014.
Although the steadily upwards rise, thanks to the Fed ex Machina, has flattened option IV (volatility), which results in the price of the calls, after only 8 closed out trades in 2014 (not including rollouts) the results are in. With only one minor (-$57) loss, the average "annualized" gain was just over 10% - 10.22%.
The last one, today, was a call-away of LO, which jumped so far a rollout was not do-able - too far ITM (in the money) for "extrinsic" premium in the call option. The best measure of volatility - the VIX- is now at a recent record low - sub-12 (11.51), which is a bit worrisome if one looks at the 1-year and 5-year charts of the VIX when it breaks down below 12!
More data at:
  
http://mktsentiment.blogspot.com

Despite a fool's errand of trying to time the market, I'm waiting through the seasonally weak June to enter new positions. Possible candidates could be - CSCO, INTC, KKR, STO, even AAPL7 - which is the 10 share lot of APPLE.