Friday, January 23, 2015

Hi, Ho, SILVER

Although Volatility (VIX) is back - hopefully- and DITM will return to its 10% return, I still like doing the Leap Strangles when I find them. Especially with high IVs (Implied Volatility). Last November I put on a covered call on PAAS (Pan Am Silver) a  Canadian company. I was leery of selling the put side, but after it fell from $16 to below $9 and started to rally, I thought it might be time to sell the other leg.

Leap strangles are not Risk-Free ( I found that out buying the 3X gold ETF: NUGT which I bought at $35, and saw it fall to below $10, but it is working out with fine tuning). The numbers on PAAS are this:
Bought 300 at $3220, sold a call (2017 at 12 strike) for $613; just now sold the put (10 strike also 2017) for $730; it should pay over 4% dividend before January 2017 - $338; and I hope to have it called away at 12 then ($3600). Profit over 27 months $2060 or 64%. Annualized over 12 months - 28%. Considering the safety of bringing in the $$ initially, plus the return, it looks good. The IV is only 50 - half the IV of the NUGT, which is over 100, on the puts and calls.

Wednesday, January 14, 2015

Timing Is Everything

Statistics show that mutual funds that outperform invariable underperform five years later - the same may be true of investment strategies. I started DITM in May of 2009, two months after the Fed-driven BULL market started in March '09, and was probably not the best strategy for that era, although for 5 years it did produce @ 10% with SAFETY.
According to Schwab Research, the Bull market is far from over but could get pretty choppy for awhile, raising the IV (Implied Volatilities) of stocks and necessitating more hedging.

Today I put on a trade of CQP - Cheniere - just below $30, with a June 28 call; should go ex-D end of Jan. with a nice dividend % and safety net (History record, not a recommendation!).

As I have not updated DITM regularly, readers might want to  "SUBSCRIBE" to my Examiner.com column, which has been regular on Mondays for over two years, with commentary on markets, Sentiment, Leaps and maybe more DITM:   http://www.examiner.com/stock-market-in-san-francisco/brent-leonard.
It is free with no obligation (occasional irritating commercials!). 

Tuesday, January 6, 2015

UGLY AVON

Not a great way to start the year, but I was forced to cut short my losses in the LEAP Strangle on AVP (Avon) which has been circling the drain for years. At a 2013 high of $24, I bought the stock at $14.45 but had to give up at $8.70! Chart shows no hope of this major old company surviving. It is the first time I have lost money on both the stock and the options, not being protected by the Leaps in all other losing cases. Loss on 500 shares bought just last May was $2898 on the stock and $1158 net on both Puts and Calls - Totaling $3996 after $60 back in dividends -whoopee!
Gold is starting to rally in 2015, but there is small hope there yet, with the $ so strong.

Friday, December 12, 2014

Game Stoploss

Despite aforementioned disappointment at the lower Volatility causing a switch after 5 years from DITM to the Leap Strangle strategy, I continue to test it in my small IRA, but with 1/2 of the funds in cash until the end of this downturn - which I expect any day, with an upsurge into NY Day and beyond. My Examiner.com column:   http://www.examiner.com/stock-market-in-san-francisco/brent-leonard, extols the virtues of 2015 technically and cyclically - feel "free " to read and even Subscribe weekly to it if you like. It is now in its third year, as the DITM is in its 10th.

A good example of why I like DITM as well as Leap Strangles for double digit returns as well as Safety! is the blood-letting in many metal and energy stocks, but also Gamestop - GME.
In my IRA I note that the stock is down from my buy price - $39- t just below $33 on 200 shares (normally a $1200 paper  loss! According to my Schwab EDGE platform, having sold the 2016 40 strike (actually OTM when sold) , the profit on "milking" the premium is $1130 - so, adding $265 in dividends, the position is actually about even, if closed out today. Strangles work the same way, but add Sold Puts to the equation.

Remaining DITM positions include GE and INTC. 

Thursday, December 4, 2014

LEAP Update

As the new year approaches, and the 2nd anniversary of my LEAP Strangle strategy implementation I am starting to record the results great and not-so-great as the first batch -2015- are due to expire. With the opening of the 2017 Leaps this Fall, almost all Calls and Puts have been rolled (Out, up and Down).
Today's rollout was on Ford (F) which was bought in January 2013 - 23 months ago:
Cost: 200 shares at $13.69 : $2738
Profit from dividends and options: $1330
Current Price $15.83: $3166
Profit if closed out: $1276, or 46.4%
Instead I rolled out both Puts and Calls for $214 and $268, respectively- another $482. So if F stays UNCH until January 2017, profit is $1758 or 64% over 4 years, or 16%/year with no monitoring or fine-tuning.
The best part is the safety net provided by funds brought in: there would be no loss unless F dropped below $7/share (dividends included).

Not so profitable have been my mistaken positions into Gold and Energy, which still have time to play out as they are rolled down and out.