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|Option to Profit Week in Review May 13 - 17, 2013|
|NEW POSITIONS/STO||NEW STO||ROLLOVERS||CALLS ASSIGNED/PUTS EXPIRED||CALLS EXPIRED/PUTS ASSIGNED||CLOSED|
Weekly Up to Date Performance
For the week, new purchases (or sales of Put contracts) trailed the time adjusted S&P 500 by an unusually large 1.0%, as well as lagging the unadjusted index by 1.0%, as the market just keeps going higher and higher.
Reminds me a little of 1995 and and not 1999, as the bears are trying to draw a parallel.
Back then, the market was up 34% for the year and never even had as much as a 2% correction. In the other years leading up to the dot com bust there were plenty of interim corrections along the way, although the market did advance by a cumulative 130% over 5 years before the party was over.
This week the market gained a sizeable adjusted 2.0% for the week, while the unadjusted S&P 500 also gained 2%. New purchases gained 1.0% for the week, meeting the 1% threshold target, but not even close to a market that is moving far and fast.
117 positions now comprise the "2013 Closed Position" results as lots of assignments hit the books today as the May 2013 option cycle came to its conclusion. For positions opened in 2013 and subsequently closed, performance exceeded that of the S&P 500 by 0.3%. They are up 2.3% besting the market by 12.8%. That margin is reduced from past weeks in reflection of market strength.
By mid-week I was beginning to get disappointed with how this week was working out.
It was setting up to be just another of those inexplicably higher moving weeks, with no limit in sight. Following an incredible reaction to the words of noted hedge fund manager, David Tepper, the market just kept right on setting new records.
Five, six or maybe 7 years ago I would have been very happy about that kind of boundless optimism. These days I accept it for what it is. Generally, a rare phenomenon that gets followed by an over-reaction in the other direction and then a reversion to the mean, while incrementally creating a higher baseline.
That simply means that ultimately the market tends to move higher, but does so slowly. Despite some steep moves in both directions the net result is a gain in the index.
The last few weeks, despite the markets having had great weeks, I was pretty ecstatic to have kept up and even surpassed the broad markets. This week, I'm just happy not to have been swamped and to have survived the week.
At least that's what I thought with just two hours left to trading , when suddenly the market just exploded higher, leaving me in the dust.
News? We don't need no stinkin' news.
Whatever happened to not going long into a weekend?
After beating the S&P 500 the past few weeks, despite strong markets, this week, principally on the performance of a single stock, US Steel, the new positions trailed overall. I suppose Facebook didn't help either, but as opposed to US Steel, all in all, Facebook has treated me well and has been all the "Friend" I'll ever need.
But arriving at the end of the monthly option cycle brings an expected outcome. Having shifted to the monthly options now heralds lots of assignments. The last time I saw so many at a single time was July 2012. The reason at that time was that the market had been well down from its high for the year and that presented an opportunity to lock in premiums for a longer period of time, rather than risking being unable to rollover weeklies and therefore, lose out on subsequent premiums.
I'm glad to see the May 2013 option cycle to come to an end, but that leaves the "now what?" question open for consideration. The dilemma on Monday is how to redeploy funds and to what extent.
Despite wanting to build up cash, I was actually happy to have had the opportunity to do some rollover trades. After all, there is such a thing as having too much cash when its coupled with a lust to re-invest the cash.
That kind of lust is not really a good idea when you're at highs. One of the tenets of investing, when you do have a large sum, is to not go all in at one time, lest you risk initiating your positions at the market top.
The challenge on Monday will be to balance the need to be invested with the need to be cautious and not over-pay to play.
If the recent market trend plays true to form, that is the markets opening lower on Monday and then moving higher on Tuesday, as it has done the latter for a remarkable 18 weeks in a row, I may consider some purchases on Monday and perhaps delaying option sales until Tuesday, but I would do so with some hesitancy.
While the rollovers were predominantly of the monthly variety, I still hope to identify some weekly contract trades in an effort to also smooth out the flow of cash to take advantage of opportunities that may arise in the event that this won't end up being a repeat of 1995.
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: CAT, CRM, FB, MRO, X
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: DE
Calls Rolled over, taking profits, into extended weekly cycle:
Calls Rolled over, taking profits, into the monthly cycle: CAT, CHK, PFE, RVBD, WNR, X
Calls Rolled Up, taking net profits into same cycle: none
Put contracts sold and still open: none
Put contracts expired: none
Long term call contracts sold: none
Calls Assigned: BAX, BCS, CHK, COH, CSCO, CY, DOW, EBAY, FL, HAL, JOY, JPM, KORS, KSS, BRO, MS, RIG, STJ, SXL, TYC, WFM
Calls Expired: FB, MCP, PBR
Puts Assigned: none
Stock positions Closed to take profits: none
Stock positions Closed to take losses: none
Calls Closed to Take Profits: JCP
Ex-dividend Positions: CLF (ex-div 5/15 $0.15), MRO (ex-div 5/14 $0.17)