Friday, April 26, 2013

MAYDAY Post Script:

Afterthoughts to the previous blog:
I did a DITM B/W (buy/write) on CLMT (Calumet) using the 35 strike.

On the LEAP side, After a trade on NOK, I'm assuming (!) that it will again declare and pay its annual dividend (although again reduced) around the first of May. I had sold an April 3 1/2 Put, which was assigned so I sold the 2015 3 1/2 call, and another 2015 put (2 1/2) for a combined $1.25, which, along with two annual dividends - hopefully another $.50, will cover much of the cost of the stock, espec. if it is called at 3 1/2 in January 2015.
NOK would have to fall and STAY below 2 1/2 by then for me to be assigned another 1000.  

Thursday, April 25, 2013


Or as they say in France: m'aidez (help!)

Patience seems to have paid off - today, most of the energy sleepers that have (as mentioned in past posts) kept paying dividends and milking call premiums, have at least temporarily had a jumpstart. Even Cliff Resources (CLF) left for dead, has rebounded.

Also mentioned previously, although DITMers have not participated as fully with a portion of their assets as long marketeers, when events such as Safeway - today down 5 points, nearly 20%- tank, due to the cyclical Bull, it remains above water ( the Call strike) , garnering (so far) 100% of intended returns.

Also provisional, is the possible acquiring of the above-mentioned energy/resource stocks in the portfolio: erf, vnr, hl, swc, aa, aci, nem, qre, and pwe. Worth a look after doing Fundamental due diligence - or having some other service due it for you!

May is the fourth year (think Presidential or Kinchen cycle) of my DITM experiment; it also marks my silver birthdate anniversary, which I shall be celebrating at Lake Tahoe and Redding, CA. Hence weekly postings of this and the sentiment blog :, and column:
will be slightly offset.

Meanwhile, new candidates for the LEAPS strategy (selling 2015 covered calls and puts) include WU, FTR, GLW.

Monday, April 22, 2013


Just as with the stock market, the DITM blog has been at stall speed - mostly fully invested, taking in dividends and milking call option premiums. Of my many positions, only four are slightly "under water", so I am letting them sit there enjoying the above revenue sources, until I can again sell a call - this time above the current stock price, rather than 5-10% below.

The four were due to my less than expert analysis of Sector rotation - being in the energy and gold areas. The recent strong Bull market popped the remaining stocks well into the money so they could afford a retracing decline without a  loss - making up for the large profits given up by the ITM calls.

Instead of trying to time the decline, I have been initiating position in a second strategy - LEAPS. Looking for stocks in the $5 to 15 range that have LEAPS, I put on a Buy/Write with the 2015 calls slightly above the stock price and also sell a LEAP put slightly below. This defrays the initial expense of buying the stock while providing a hedge as well.

Positions (not recommendations) include: BAC, F, ACI, SWC, IAG, NOK, and AA.

Using the last one - AA - as an example, I bought AA at $8.00, sold the 2015 Call at 10, and the Put at 7. Combining the two premiums of $.70 and .85 with 7 dividends until expiry ( now less than two years) , at the same price it amounts to 22%, or 12.6% annualized over 7 quarters. If the stock goes to or above 10 by Jan. 2015, the return is 47%, or 26.9% ann. These stocks are pretty risky and oversold now - if they drop below the Put price, one must take on more stocks - assuming the company won't go out of business. Then another two year set of LEAPS can be sold, almost matching the total outlay.

Unlike Tim Martin's excellent LEAP presentation this weekend at the SF Options Group, using weekly options, this is a longer term strategy, with almost no monitoring or commission generation. It looks like Zero rates   will continue to 2015 !!!

Monday, April 15, 2013

T G I ditm

Veteran traders remember TW3 ( That Was The Week That Was) - what a way to start the end of Tax Season: First Gold tanks , after a steady drop from late last year; then the stock market tanks after a steady and boring rise. And, of course, capped off with the terrible tragedy in Boston!

Finally the frustration of lagging the huge Bull Run with most of AUM paid off with the Safety Net of DITM today. Of all my 20-something positions, only 4 went "under water", since the Bull's pushing stocks way  up above the Call-Away strike price. Only the Oil stocks - PWE, ERF, QRE, and, of course the recent  NEM buy are "temporarily?" under water, but still paying a nice dividend and milking option premium.

Although constant monitoring is required, this could be  a great buying opp. Since by being pretty much fully invested and rolling out calls has kept DITM activity in the blog dormant, I thought I'd incorporate some results from my new LEAP strategy as well.
In my column,

which I titled Leap Into the Future, I discussed a few $5 to 10 stocks - not recommendations, but examples. With gold down bigtime, I'm now looking at IAG and KGC to capture huge premiums. More risky stocks would be HL, HEK ( a water play), NOK. With only 7 quarters left until January 2015, annualized returns are substantial, and losses minimal - even if they disappear entirely (unlikely). If they don't rally, another set of 2-year Leaps could cover the entire cost of the stocks, especially with dividends rising.