BEATS MMFs

As I mentioned in my Examiner column:

  http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

DITM has gone into "Stall speed" - still beating Zero rates, but the Volatility caused by an artificially rising market has brought down the average return, as well as activity.

This time of year I usually go on weekly vacations, since it is the worst two months (usually) of the year, and I rather be underinvested, looking for better entry points.

Ergo, I let some positions get called away, rather than roll them forward:

DOW, which had been held for 15 months - usually this means lesser overall profits the longer it is held- actually returned a nice annualized 12.28%, around the average. It took a little tweaking, rolling down, and then up, scalping a few more $$.

My DVY position ran too far to roll, so was called after only 3 months,  with a 7% annualized return. ESV also expired its call, but it has dropped slightly below its call price, so I'll just keep taking the dividend until it rallies.

 Finally, August callaways were LO, for an 8% gains; LMT (only 5.4%); BBY 19% even though the callaways were in 3 staggered lots.  

For now, I am mostly concentrating on my LEAPS strategy, now that the 2016 Leaps are out.

In October (26th) at Fort Mason I am giving a talk to the San Francisco Bay Area Options Group on both LEAPS and a DITM wrapup. 

DITM update

Yet another first for DITM: on Feb.21 of this year I bought 300 shares of BBY @$17 for $5133; they have now been called away in separate tranches of 100, making accounting complicated - so I averaged the time period at 6 months, surrounding Aug. Here is the result:

Bought: $5133, sold 3 June16 Calls for $685

100 called for $1591; rolled UP to Sep.22 for a debit of  $1122 - one must be very careful about rolling up for debits, since they can come back down for a loss. Another hidden benefit of a Bull market is additional profits by rolling up the strikes, and BBY really ran up.

Aug.30 and Sep.5 (just before ex-D) 2 100 lots were called, each $2191 (times 2) - provoking 3 commissions, not one. Dividends received were $85. Net profit for 6 months (sic): $488, for a % of  9.5%, annualized at 19%. (The $1122 is built into the debit). Not bad.

Still, it falls short of the new strategy that I'm using for another portion of assets - the LEAPS strategy that I wrote about this week in:

http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

LEAPS offer 20 to 60% with less monitoring, fewer commissions - still using the safety of covered calls.

MEA CULPA

After celebrating a four year DITM run of an annual 11% return in my small IRA ( the microcosm of the DITM with 6-7 dividend stocks), the fifth year began with the May 22 top in the market, sending DITM into "Stall Speed", going basically sideways. The main reason was poor Sector selection on my part, not DITM's, going with natural resources and gold. This is now paying off, as we go into another correction. Another reason is that the cyclical rally has pretty much killed volatility (call premium) with the VIX going to 11.

Other than option rollouts, the only recent trade was UVV, underperforming my average with its 8.38% annualized return, but still better than cash ( one account I manage had a muni  bond mature which I refuse to renew at current zero rates - estimated annual return by Wells Fargo for $250,000 - $15!!!

Other than selling puts on NEM which expire worthless today, I sold some puts on POT hoping to take it on before ex-Dividend. As mentioned elsewhere, this is the time I normally take vacations, as well as the market swooning into the "Fall". Ergo, I shall let positions play out, without new ones.

BTW - this weekend I'm writing a review of the Money Show at: Examiner.com.

 http://www.examiner.com/stock-market-in-san-francisco/brent-leonard

DANGER STRANGER

I just cannot get out of Gold! After taking a loss (sic) on NEM recently, today I sold 2 Sept. 29 puts to cover just before ex-Dividend in Sept. Beats MMFs.

Recent research has me worried about this slamdunk market - that most large corrections are preceded by a huge last minute rise. Being dividend-oriented, I took a position in Annaly Mtge (NLY) buying at 13.38 and just selling the 13 Call. Down from its recent  $16 high, I thought it might be oversold, but it keeps slipping. Now at 11.60, if I sold the loss would be: $5361 less 293 for Calls sold, less $160 dividends, less a Sale price of $4600 (using $11.50). Net: ($308); where the ORP (lawyereze for Ordinary Reasonable Person) would have lost more than twice that - $752 ( if selling before dividends).
Another benefit of DITM! /

OUCH!

After a wondrous string of double-digit gains in DITM so far in '13 (see previous columns), I decided to take my first loss - NEM (Newmont) which was more of a gold play than DITM . As it seems to happen more often than not (Behavioral Finance) it appears that after declining since last Oct., it may have bottomed and MIGHT be a good chance to enter NEM,with its dividend and gold prospects (!).
Thanks to DITM, however, the loss was mitigated by the calls sold on 200 shares. Bought for $7903.sold for $5404. But since I bought NEM at $39.47 and sold for $5404, having sold the DITM 37-strike calls for $792 and receiving $155 in dividends, it wasn't as bad as losing 12 points on 200 shares.
After such a large run up in the market, I probably will sit tight on my 25 positions ( some LEAPS to be discussed later); I go into my vacation cycle next month, and the market goes into its bad cycle in Sept.-Oct.