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.

Tuesday, October 28, 2014

BEENAWHILE

Now that we are through (hopefully) the volatile Sept./Oct. period and into the best 3 months of the year for the markets -statistically, I put on three recent positions for the Leap Strangle.  I gave a talk last weekend to the San Francisco Bay Area Options Group on the results so far.
The concept is high yield with money brought in from both OTM (out-of-the-money) options for immediate insurance, which decay over time.
The Three trades were:

        LeapYear   #shares  stock Px Amount     Call          Put
2017 200 18.34 3677 366 490
2016 500 6.84 3426 396 187
2016 500 7.84 3929 941 1212

We shall see in the fullness of time!

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.