Week in Review - May 14-17, 2013 (Reprint)

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
5/5	2	7	3	0	1

Weekly Up to Date Performance

May 13 - 17, 2013

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.



This week's details may be seen in the Weekly Performance spreadsheet or in the PDF file, as well as as in the summary.below

(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)





For the coming week the exisiting positions have lots that still require the sale of contracts:   CLF, EMC, FCX, INTC,  JCP, MCP, X, WLT (See "Weekly Performance" spreadsheet or PDF file)

Daily Market Update (Reprint)

(see all trades this option cycle) Daily Market Update - May 16, 2013 (10:30 AM) Last week it was a rumor of a rumor that caused the market to move down on Friday. This week, according to Eddy Elfenbein, who writes the newsletter "Crossing Wall Street," it was the fear that the fear that the market would go down was incorrect, that caused the market to go down late in the afternoon. You can't argue with that. While the last hour of today's trading was news of its own, with the Dow down 42 points, the most in two weeks, most of the rest of the day was predicated on the news of a single company, Cisco. Two companies that we own actually reported earnings in the last 18 hours. One consequential, one not so much. Both demonstrate the large reactions that you often see when earnings and guidance are released. Sometimes those reactions are logical and other times, they aren't. Most of the attention this morning is on Cisco, which in the pre-market was up 12%. Just as a side note, if you recall when similar companies announced their earnings recently, such as Oracle, BroadCom, Juniper and RIverbed Technology, their shares all went down. Not only when each had their earnings released, but also in sympathy when the others released earnings. For that reason, with options expiring tomorrow, I decided to rollover Riverbed Technology, in the event that Cisco would follow the same path as the others and that Riverbed would follow suit. As it turns out, Riverbed did follow suit, but Cisco didn't. Given the increased profits reported and the positive guidance, the share rise makes some sense. That's especially true in light of Oracle's recent disappointing earnings, which seem to confirm that their problem was solely their problem and not a reflection of an industry wide slump. Besides, Cisco has been under-priced for a while. I think it may be the only stock that I've ever bought in 3 successive weeks after assignment, as it has had a had time breaking out of the $21 range. That's a call buyer's delight, but sometimes the time comes to move on.Today Cisco moved on. On the other hand, Kohls which usually disappoints on earnings again reported disappointing earnings and flat guidance ahead. One would normally expect a negative reaction by the market, but instead, its shares were 7% higher in the pre-market. The best that was said about Kohls guidance was "it's not as bad as its been." While I'm not certain that Cisco will return to the $21 level anytime soon, unless part of a market downturn, there's not too much reason to suspect that Kohls will continue riding higher, likely having benefitted from a week where all major department store retailers, other than Wal-Mart, have had a great week. As the May 2013 option cycle comes to an end, there are likely going to be many assignments, similar to the July 2012 cycle. The key difference is that in 2012 the market was in a recovery mode from a large fall between May and June. It was easy to then continue riding the higher wave when July contracts expired and shift back to weekly options. That was an effortless transition. But here we are and the market just goes higher and higher. Despite new records every day, there's very little excitement. Given the fact that there is a greater percentage of new highs in the market than at any previous time and that usually indicates continued forward movement, the excitement just doesn't exist. So on Monday, with lots and lots of cash in hand, the challenge will be to decide on how much to redeploy and what time frame contract to use. Weekly? June? Maybe July? If premiums were high that would be an easy decision. But volatility is still low and so the premiums are, as well. The longer the option contract term, the lower the time adjusted ROI. Again, not to discuss technicals too much, but the S&P 500 is now 12% above its 200 Day Moving average. If you look at charts over various periods of time, you see that when you get to about 8% above that 200 Day Moving Average the market begins to drop. The real exception to that is from about 1996 to the beginning of the end of the dot com era. That's why you are now hearing whispers of "over-bought." So we are already in an outlier market, but there has been precedence, albeit with a nasty outcome at the end. This time, however, there's no wild frenzy as had occured in the dot com era, so I'm not certain that is really a precedent setting period. The catalyst was clear. Here it is not, unless it's been the Federal Reserve's pumping of money into Treasuries. With Cisco and Kohls shooting higher, there are now two less stocks for which rollovers are remotely likely today or tomorrow. When it's all said and done and the newly freed up cash is spent, I would like to increase my cash position to 40%. That still will leave enough to open new positions, but the process has to be even more discerning as all of these new highs are to be found. Real guts would lead you to under-performing sectors, in applying historical lessons. In normal times that doesn't take guts. But in markets that are blindly moving higher, no one really wants to waste time with losers. They just typically keep throwing money at the winners. So the coming week will be challenging, but at least it won't be terribly boring. As an aside, today there were a couple of rollovers. Normally, I don't like to do rollovers when we're looking at pre,iums like $0.35 as we did for Caterpillar, in exchange for a monthly $2.11 contract. But I don't think we are in normal times. My concern, as with Chesapeake Energy was that as the shares started getting near their strike prices that they would continue falling, perhaps putting them out of range of getting a good premium as options were getting set to expire. Additionally, with so many positions likely to be assigned, I was hoping for some longer term rollover opportunities and was anxious to grab them, not knowing what tomorrow may bring, especially watching a completely unexpected drop late in the session. If you looked at the price action, the differential between the ask of Caterpillar May 18 with the bid of the June contract was $1.75. However, as Caterpillar then started to join the rest of the market down the differential went to $1.60, as the June contract was more impacted than tomorrow's expiring contract. In other words, paying $0.35 to buy back the May 18 contract was a better deal than waiting and then paying only $0.16 to buy back the contract, as the June 2013 bid fell to $1.75 I won't bore you with the Chesapeake details, but those pennies add up.     OTP Sector Distribution* as of May 16, 2013   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Daily Market Update (Reprint)

(see all trades this option cycle)  Daily Market Update - May 15, 2013 (Close) With yesterday's really unexpected rally, the technicians are now running amuck. Maybe they'll be able to explain the bear market that occured between 1 and 3 PM. There was a time when the only people that really understood numbers on Wall Street were the accountants. These days the most sought after people are mathematicians, physicists and statisticians. The algorithms had to come from somewhere and those are the people capable of creating mathematical models to assess the past and map the future. At the moment the technicians are split between the market being poised for a breakout higher and the market demonstrating internal inconsistencies that point lower. David Tepper, said to be responsible for yesterday's rally, is a throwback to a time when feely-good sentiment could create herd behavior, but that can only last so long. Certainly that's totally unlike technical induced moves in the market that can last as long as a single trading session. One of those internal inconsistencies has lately been the behavior of the volatility index. It hasn't been doing what it usually does when markets go higher. That is, the volatility index hasn't fallen as much as it would be expected, or sometimes has even gone higher in the face of a rising market. That was esepcially obvious in today's trading, when that discrepancy was really pronounced. In fact, in the early afternoon as the market was up about 0.5%, you might have expected the volatility index to be down 2% or more. Instead, it was up 2%. That is supposed to be a bearish signal. I'm glad that I don't follow, nor do I understand technical analyses. There are enough things to make you crazed and to ceate a battlefield in your mind. Besides, the various indicators and the various technical signs, besides being open to broad interpretation, can and do change on a dime. Along with the battlefield dichotomy of the mind is a developing divergence in behavior. Reportedly hedge funds, which by their nature under-perform during both melt-ups and surges are doing the unthinkable. They are increasing their level of risk in an attempt to play catch up and mortgaging their futures in return for feeling a little bit better today. They're now trying to follow the rally instead of proactively positioning the portfolios. In fact, the reversal of the volatility index may be due to hedge funds now purchasing call options to protect them in the event of a further market run higher. For the hedge funds it's a lose-lose proposition. They're already behind the eight ball and would need to take exceptional risks to catch up. If their timing is off and the market moves against them, they are doubly doomed and you can expect some doors to be shuttered. Those worthless call options cost money at one point and further erode comparative profit margins. The nice thing, though, is that for many, shutting the doors means starting with a fresh slate under a new marquee. Amazingly, only in the world of hedge funds and start-ups is failure a badge of achievement. On the other hand, among retail investors there is increasing talk about taking profits and going "flat," which is just another way of saying neither be long nor be short. That's another way of saying move into "cash." Or put in another way; "Don't be afraid to take profits," or "Don't be greedy," or "Trim back some of the winners." I could go on. Now if you're an investment advisor you don't want to refer to it as "going into cash," because nobody wants to pay you to have their money sit, especially while the world seems to be spinning off its axis into a higher orbit. For those that have managed portfolios how often are you looking at cash in your portfolio, other than what is necessary to make your quarterly fee payments? Then you still have all of this talk, not really validated, that there's an incredible amount of money sitting on the sidelines. Temper that with those that credit the recent gains with money that had been on the sidelines, although you would have to ignore the perpetually low trading volume, to believe an influx of cash to be occuring. The dichotomy in sentiment is further illustrated by a tale of two stocks; Apple and Google. One is discussed in terms of how low it will still go and the other is discussed in terms of high high it can go. Does the latter sound familiar. Weren't we all talking about another company and what heights it could achieve just 8 months ago? Apple is now said to be worth $240, at least according to David Trainer of Nashville's "New Constructs," because as we all know when we want a new approach to investing we go to the place where every song sounds the same. At the same time, Google passed the $900 level for the first time early in the session. While that sounds pretty good, it's up less than 250% from its 2008 low point, while Apple shares were up nearly 600% from its low point in 2008 to its high point last year. The way I see that is that Apple moved up more and faster and flamed out, as might reasonably be expected. Interestingly, the market seems to be more tuned into Google than it was to Apple during its hey day. The S&P 500 appreciated 56% during Apple's run and 106% during Google's run, although there is clearly overlap in the time frames. The real differences are tied to when the thesis on Apple came to a sudden conclusion in September 2012. Their relative fortunes aren't necessarily based on fundamentals, but they are certainly based on technical analyses and that ever popular herd behavior. Although it's possible for both camps to be right, especially if as many believe, the Apple money is now going into Google, thereby inexorably linking the two. As more firms are calling for a $1,000 price target on Google, you can't help but be reminded of its now less fortunate predecessor. How did that work out? But when it comes to the overall market, both sides can't be right, at least not during the same time frame. I'm also reminded that Apple's fate as a single stock could just as easily be applied to a market as a whole, although the relative numbers would be more muted when describing a broad index. The lack of confirmation of yesterday's rally, at least through the early trading, and a monthly expiration this Friday may have the makings of a large move in one direction or another. As the market started to move forward again at about 11 AM, the likelihood of Armegeddon on Friday lessened, but the final day's gain was tentative. Today we likely sit, maybe a trade here and a trade there, but no new positions. Tommorrow and Friday? We either sit or undertake as many monthly rollovers as can be done. Not quite flat and not quite all in. Just mindful of any possibility that may await.   OTP Sector Distribution* as of May 15, 2013   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Daily Market Update (Reprint)

(see all trades this option cycle)  Daily Market Update - May 14, 2013 (Close) Within reason, no matter how high the market climbs, a triple digit move is still a big deal. Today's move can likely be attributed to some plain speaking from a person you probably have never heard from. Or maybe it was just the fact that today was Tuesday. More on that, later. The two stocks that I highlighted yesterday were at it again during the first 30 minutes of trading this morning. MolyCorp is always volatile, of course, but in a 2 minute period this morning it fell $0.52 or about 7%. That's beyond volatile. Don't bother looking for news. The only thing you'll find is a Forbes article that mentions that insiders at MolyCorp have been net buyers of shares in the past 6 months. On the surface that should be positive news, but as we all know, nothing is really ordained to follow a logical pathway. Because as you may know, insider buying is a pretty bad measure of anything, except to demonstrate that insiders often have as bad timing as the next person. Six months ago MolyCorp was at $11. That's double where it was just a couple of days ago and I doubt that the insiders were selling calls along the way. In fact, if you take the time to look at MolyCorp insider activity over the past year, they have been remarkably bad at their decisions, with the exception of a large January purchase, that still places a dingle individual at a large loss for the year, at the current price of shares. As a perfect example of timing, in a different 2 minute period and also occuring at a time that the general market was moving higher, Caterpillar fell about $0.50. Nothing changed in its story, nothing changed in the world, but Caterpillar took a sudden break, as it did twice yesterday. In this case, the timing was bad. Maybe the Caterpillar move was related again to concerns about China, as many such related issues were down strongly this morning. However, the only news about Caterpiller was actually fairly bullish and highlighted some very heavy options activity at the $92.50 level. So, you might be excused to be of the belief that the bias might have been to the upside, along with the rest of the market. That's because whereas those dealing in the purchase of a small number of option contracts are very often on the wrong side of the outcome, those taking significant positions are a totally different breed. They may not only buy the options but they may also have the wherewithall to impact share price by timely stock purchases. There's a reason you often see some frenetic price movements in the final day of option expiration, especially the monthly variety, in an effort to create a self-fulfilling prophecy. This morning the market, prior to the opening bell, was tepid, at best. Then came an interview with David Tepper, billionaire founder of the Appaloosa Management hedge fund. He is wildly bullish and has an enviable track record. He is also very plainly spoken and down to earth. While you can legitimately look somewhat askance at some others that start spouting fundamentals or technicals to support their thesis, Tepper is also a different breed. So the market went from tepid to Tepper in quick response. Of he was a raging bull, why would anyone beg to differ? When he said that his biggest holding was Citibank, its shares went from flat to up 2%. When he said that Apple was "OK" its shares went down a few dollars. Later, it inexplicably went down about $10, as one analyst indicated its shares were worth $240, not $440. My very imprecise math tells me that if you removed the entirety of their cash holdings, Apple shares would be worth about $275. Except, that if you did that, it's P/E would likely expand to something beyond 10.5. In fact, if it got up to Microsoft's P/E, its cash stripped shares would be valued at about $460. Anyway, it must be nice to be David Tepper. It must be nice to have that kind of impact. Based on what shares of Caterpillar did after I sent a Trading Alert this morning, I have the opposite impact. That must be nice, too. Maybe I can get a seat on the MolyCorp Board of Directors.    OTP Sector Distribution* as of May 14, 2013   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Daily Market Update (Reprint)

(see all trades this option cycle)  Daily Market Update - May 13, 2013 (Close) Over the weekend the big speculation was how the market would react to the Friday night article in the Wall Street Journal by Jon Hilsenrath that the Federal Reserve had mapped out an exit plan from the stimulus known as "Quantitative Easing." For those believing that nothing other than QE has been responsible for the market's climb that was a pretty frightening thought. Todd Harrison, who is the founder of "Minyanville" tweeted that on Sunday evening the biggest selling t-shirts on the sidewalks of NYC were "I Survived the Sunday Night Futures Crash." By the next morning those would have as much value as all of those "San Francisco 49'ers: Super Bowl XLVII Champions." At least those could get sent to Sierre Leone and be put to good use, but who, even in a fifth world nation would want to wear a shirt with some obscure reference to a non-event on Wall Street? The reality is that in true Wall Street fashion, such a t-shirt would profess to being long the market on one side and having shorted the market on the other side, in the abiding belief that the same person would never see you from the front and from the back. I guess one of the signs of a healthy psyche is the ability to laugh about things, especially those things that haven't happened, but the belief that the weekend would herald a swift market reaction on Monday morning was rampant. Of course, that also included the traditional conspiracy theorists. One called the decision to wait until the markets closed for the week a "masterful stroke by the Federal Reserve." I thought that the last real masterful stroke by the Federal Reserve was when Paul Volcker demonstrated that sometimes a cigar is not a cigar. Andrea Mitchell confirmed, somewhat forlornly that there hasn't been much in the way of a masterful stroke for quite a while. As of this morning there doesn't seem to be much to worry about with regard to the floor being pulled out from underneath the market. In fact, the fact that the futures markets handled the fear so well  and didn't create a self-fulfilling prophecy, would indicate that the market is far more healthy than it should be. It may also indicate that the market has discounted the eventual end of Federal Reserve purchases of treasuries and an end to low interest rates. So, unless there is a drastic drop in the market this week I am faced with having a cash reserve greater than I had planned. My goal was to be in the 40% range, but with the end of the monthly option cycle this Friday, there is a good chance that the figure will end up being greater than 50%. What I really don't want to do is become a mini-Dederal Reserve and funnel that money in treasuries. For that reason, I'm adopting a slight relaxation on my reluctance to open new positions and am trying to find some weekly opportunities or even June 2013 opportunities so that there might be less pressure to find so many new opportunities next week. Of course, that assumes that we make it through the week reasonably intact. But even then, this certainly isn't carte blance for reckless buying. For a little while this morning it did look as if some of those relative bargains might appear in the first hour of trading, but they quickly disappeared. Then in the final hour of trading it looked as if those opportunities might come back. They didn't, but one very unexpected one did. That one was Caterpillar, which was assigned this past week. Following a large fall on Friday, it was falling further this morning and got down as low as $87.81 this morning. While I was entering a buy order it went right back to $88.25. However, the same exact thing happened at 3:15 PM. Except this time, instead of suddenly rising, it fell, albeit not as suddenly, but fast enough. I never saw the order execution coming. I had a buy order at $87.75, which had been sitting there since the morning, which got filled as shares suddenly went down from $88.01 and then just as suddenly spiked back to $88.07. At $87.75 the premium for a weekly $87.50 was good, but at $88.07 it was not, so I never sent that Trading Alert. You can see at about 10 AM, looking at minute by minute price changes how rapidly the price of CAT shares went higher. Then, at about 3:15 PM they quickly sank to their low for the day and quickly recovered. Then look at MolyCorp. After another rise early in the session it abruptly changed direction, as did basic materials, fertilizers and most anything with a China related thesis, despite the lack of any related news. There was a short lived opportunity to sell $8 calls on that January lot, but then there was also an opportunity to purchase additional shares and sell $7 calls. Just look at that vertical spike higher at noon. Very odd. No news to account for the reversals, although from a technical perspective following Friday's nearly 33% move higher, you might understand why shares would fall a bit today. Maybe even a lot. And then there were Baidu, YUM Brands, Joy Global and metals. Unifying thesis supported by data? Bird flu? No, but certainly herd behavior that can lead you to create a thesis. Yet, when I want to buy Facebook or Eli Lilly, they decide to go higher. Is there any justice? Maybe this calls for a t-shirt. At least those messages are easy to decipher and you can change them to suit your mood.   OTP Sector Distribution* as of May 13, 2013   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Week in Review - May 6-10, 2013 (Reprint)

Option to Profit Week in ReviewMay 6 - 10, 2013

NEW POSITIONS/STO	NEW STO	ROLLOVERS	CALLS ASSIGNED/PUTS EXPIRED	CALLS EXPIRED/PUTS ASSIGNED	CLOSED
5/5	1	0	2	0	0

Weekly Up to Date Performance

May 6 - 10, 2013

For the week, new purchases (or sales of Put contracts) beat the trade time adjusted S&P 500 once again by an unusually large 1.7%, as well as beating the unadjusted index by the same 1.5%, as the market continued its advances.

Only 5 new positions were opened this week but they all performed well, in addition to delivering some dividend payments.

The market gained a sizeable adjusted 1.0% for the week, while the unadjusted S&P 500 gained 1.2%. New purchases gained 2.7% for the week, again well exceeding the 1% threshold.

Past purchase open positions, which do not include profitable closed positions significantly increased in value as the metals complex soared. That helped to beat the market's performance, as only 2 additional closed positions were added to the Closed Position List.

For the first time in a long time, the performance of previously open existing positions showed a positive value. Since the open positions are continually stripped of profitable positions as they are closed, it tends to reflect "losers" and most regularly will be negative in value, except during periods when the market trades in a narrow range over a prolonged period of time and there is frequent turnover of shares.

79 positions now comprise the "2013 Closed Position" results. For positions opened in 2013 and subsequently closed, performance exceeded that of the S&P 500 by 0.7%. They are up 2.1% besting the market by 54%

Did anything happen this week? Anything, Bueller? Anything at all?

Another slow week for trading into new positions. Only 5 this week and only two positions out of the entire portfolio had a May 10, 2013 expiration date, so it's safe to say that the transition to longer term contracts is complete.

No rollovers, either and lots of ex-dividend selections this week. Check and check.

That pretty much means we're done.

Well, not quite.

However, the problem is that most of those "longer term" contracts are now the equivalent of weeklies, in that they expire next week.

That means in the absence of a strong pullback next week there will be lots of assignments. A moderate pullback might mean lots of rollovers.

A strong week ahead? I don't even want to think about that possibility. You can figure that out on your own.

So far, the market is about 14% higher in 2013. Although most years don't do that well, there have actually been 16 years since 1970 that the S&P has done even better than a 14% gain.

So it could happen. I guess there's nothing mandated about requiring some kind of breather or even a correction, despite the fact that it's already been a year since the last one.

Even that one was a little on the small side, by most people's standard definition.

Missing a rally of epic proportion is definitely something that concerns me, so there is a balancing act between caution and adopting the life of a hermit.

This week was another of relatively few new positions opened, but my cash position fell, in somewhat of a compromise to the cautionary phase that's getting very tiresome for me.

WIth limited assignments this week not too much new cash is being added to replenish that reserve. For me, the real test will be next week. Deplete the reserve to add new positions or potentially watch the market enjoy itself without me.

I do like to be part of the party, although I often like to leave before the police arrive. But just like back in the old days, it's really hard to know when you've reached that threshold and someone is ready to pull the plug on the festivities.

But for now, I'm happy to see the catch up in the metals, as they certainly caused plenty of pain.

Funny how a macro-economic thesis can change so suddenly. But as quickly as the market soured on the metals complex, it seems to just as quickly be embracing the most elemental of sectors and its next generation offspring, the Industrials, as the sectors warranting the most attention. I do think that there is a secular bull at hand for the metals, including that rare earths. 

A single positive word from China and fireworks will hit many portfolios.

Hopefully, patience will have been worthwhile.



This week's details may be seen in the Weekly Performance spreadsheet or in the PDF file, as well as as in the summary below. NOTE: Links are not active in TheAcsMan.com reprint edition.

(Note: Duplicate mention of positions reflects different priced lots):



New Positions Opened:  ANF (puts),  CSCO, SXL, WMB, WY

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle:  none

Calls Rolled over, taking profits, into extended weekly cycle: none

Calls Rolled over, taking profits, into the monthly cycle:  none

Calls Rolled Up, taking net profits into same cycle: none

Put contracts sold and still open: none

Put contracts expired: ANF

Long term call contracts sold:  none

Calls Assigned:   CAT

Calls Expired: none

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  BP (ex-div 5/8 $0.54), PFE (ex-div 5/8 $0.24), SXL (ex-div 5/8 $0.57), WLT (ex-div $0.12), WY (ex-div 5/8 $0.20), X (ex-div 5/10 $0.10)





For the coming week the exisiting positions have lots that still require the sale of contracts:   CLF, EMC, FCX, INTC, JCP,  MCP, X, WLT (See "Weekly Performance" spreadsheet or PDF file)

NOTE: Links are not active on TheAcsMan.com reprint pages.

Daily Market Update (reprint)

(see all trades this option cycle)  Daily Market Update - May 9, 2013 (Close) Quite a turnaround in the final hour. As went the dollar so went precious metals and the markets. Opposite directions, actually. Although there was also a rumor of a rumor that JP Morgan had indicated that the Federal Reserve was preparing to taper its support of Quantitative Easing.That rumor may have been the real stimulus behind the sudden direction reversal. Up until that final hour, there was really only a single story today and it had to do with some really large price movements in certain stocks after releasing their quarterly earnings. Tesla, Green Mountain Coffee, Rackspace. The list goes on. That was just yesterday. LinkedIn, Whole Foods, Amgen and many more came in the days before. That is the list of companies that reported earnings and had moves, in either direction, that were at one time unthinkable. You don't have to be a stock with a high beta, either to be the kind that responds with the kind of move that used to take an entire year to traverse. Ever hear of IBM? In-between you have companies that routinely release very pertinent information in the weeks before earnings are released that often send the shares jumping all over the place. YUM Brands, Abercrombie and Fitch and Cummins Engine are great for that sort of thing. Even worse, those typically happen without much, or any advance notice. It's not like a scheduled earnings release. They just blurt it out and all hell breaks loose. Then, of course, you have the unexpected news. Like Baxter International, that reported some disappointing news about some European drug trials. Or a couple of months ago when Petrobras announced lower than expected price increases. Most of the time, unless there's something truly and structurally defective about a company, such as accounting irregularities, all you can be, if you want to have a long term edge against the market, is a passive observer, who follows the biblical wisdom of Solomon and realizes that "this too shall pass." That's really hard to do. One of the reasons that I maintain patience in the face of a losing position is that I am a short term pessimist, but a long term optimist. In the case of a losing position, after deciding that there remains a possibility that all can be well at some point still within my life expectancy, I ask only one question. "What are the chances that the same idiot that selected this stock that's causing me so much grief can now go and sell it to use the moiney to buy a new stock that won't do exactly the same?" Of course, if you are a pessimist, the answer is "not very good." What's very difficult to do, besides looking at the paper losses, is to balance the lessons learned in many graduate business classes. The concept of "opportunity costs" is constantly a part of every analysis. "What is the next best thing you can do with your money, as an alternative to the stupid thing you're currently doing?" But that assumes that you'll be smarter tomorrow than you were yesterday or that you'll be doing the textbook thing and going into Treasuries. I stopped using opportunity costs a long time ago as a criteria leading me to change direction, although I still compare each trade to the S&P 500, as a reflection of possible opportunity cost. What's really clear to me is that the best way to offset paper losses is to first approach them without a sense of panic or hopelessness. Again, hard to do. But beyond that is the need to give up the belief that now you're smarter and can dump the loser in exchange for a winner. Other than taking advantage of tax losses, by and large dumping the losers is a good way to forever have mediocre returns. Or worse. So, speaking of mediocre returns, yesterday was another report of how hedge funds are scrambling to get investors and keep the old ones from pulling out. Due to their unique fee structures, the well known "2 and 20," trailing the index can mean that the hedge fund manager's kids don't get to eat in a year that trails the index. Since hedge funds do best when the market is either moving down or sideways, they haven't been very happy places to be this year and are probably rooting for a downturn even more than me. At least my kids are on their own now. For those that have enough money to be a client of a hedge fund, and who are old enough to have an historical perspective, the "2 and 20" is a bargain, especially since the frequency of trailing the market is pretty low. That's exactly why so much money goes into hedge funds. It's not necessarily to get great returns, but it's to beat the returns, especially in a down market. In terms of "opportunity costs" the hedge fund, during most market cycles is the standard to which to compare, except that it's unreachable for most investors. What will be interesting to see is whether the markets are in any way impacted by hedge funds starting to alter some of their hedging practices in response to a market that is single minded. To do so is to ignore another tenet of all of those business school classes. That is the concept of "sunk costs." The most common interpretation of "sunk costs" leads to the application that you shouldn't throw good money after bad money in order to rescue a flailing and failing position. However, another and less common interpretation is that you shouldn't let your failing position dictate how you proceed forward. Instead, take the opportunity to re-evaluate the processes that led you to success, without abandoning them. One last time, but that's hard to do. However, even dogs like Walter Energy and Cliffs Natural Resources aren't quite ready for the tax loss heap, quite yet. And those hedge fund manager's kids? Don't worry. Things will be so good that they'll be back on their way to developing Type II Diabetes before you know it.  OTP Sector Distribution* as of May 9, 2013   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Daily Market Update (reprint)

(see all trades this option cycle) Daily Market Update - May 8, 2013 (Close) My only thought for today is that this market is incredible and I'm not certain how I can keep believing otherwise. The only thing that keeps me going is the incessant peering at the bottom line and periodically taking profits from shares and adding them to the option premiums and dividends. Looking at how the day went from absolute mediocrity to a complete turnaround isn't really stunning in and of itself, but given how unlikely all of this seems and how little justification there seems to be, well, that's stunning. Maybe I just need to get out more. I don't often venture very far from my La-Z-Boy perch on Mondays through Fridays. I usually resent any need to do so because you never know when an opportunity may present itself in the markets. Lately, I haven't necessarily felt the same exact urgency to be glued to the La-Z-Boy as I'm not exactly eager to spend. In fact, as I look at the Cash-O-Meter right now, I don't have as much sitting around in anticipation of bargains as I would like. But yesterday was one of those few times that I didn't mind stepping outside of my comfort zone. Not the psychological comfort zone, the emotional comfort zone or the investing comfort zone. I already stepped out of the investing comfort zone by finally buying shares of Sunoco Logistics the other day. It's a company that I've been following for a year but was always reluctant to purchase and cover because the volume was so low. It, however, proved to be an excellent example of the Double Dip Dividend, as the differential, that is the difference between the share cost and the bid premium prior to going ex-dividend was about $59.11. However, after going ex-dividend $0.57 yesterday, the differential was $59.43. In other words, $0.32 of the decrease in price that occured as a result of the ex-dividend was offset by the option premium. Someone paid you to get a dividend. How great is that? We'll see if the rest of the story plays out as they report earnings this evening. Parenthetically, I'm also a little surprised that shares of British Petroleum were not assigned this morning, as they were in the money by more than $1 and the dividend was $0.54. That would have given someone a more than $0.50 cushion if they exercised their option in anticipation of immediately selling their shares. But exercising an option is actually very much out of the comfort zone for many option buyers. That too, is to our benefit. Anyway, as you can see from the photo, it's not that difficult to have a travelling office and to transport the physical comfort zone. Although the law may be pretty clear that you can't text and drive at the same time, I don't know if it says anything about trading and watching the ticker. I also am not aware of whether there is any prohibition against a "selfie" while driving. For those that don't know, a "selfie" is a smart phone photo you take of yourself. Get your mind out of the gutter. For those that emailed or texted me yesterday, my responses were uncharacteristically brief as I'm not a big fan of texting and driving, especially at highway speeds and in the rain. But the reason for the little trip and what made it seem as if it would be alright to leave all of the comfort of the La-Z-Boy behind was to see Herb Greenberg as he spoke to a group of college journalist students. I always enjoy the opportunity to see or speak with him. I think he is one of the very few personalities that always makes you exercise a thought process in response to his appearances. Agree or disagree with his positions, he often gives great reasons to question orthodoxy and popular sentiment. He was spectacular yesterday as he presented a really great historical perspective on how journalism has changed over the past 40 years and how there are so many great opportunities, especially in business journalism. I have some attention deficits in addition to many other deficits, so sitting still in a lecture isn't easy for me. This one was easy, however. Interesting topic and a very relaxed presentation manner. Unlike with my own history of presentations, Herb didn't have to rely on joke slides to get people's attention. Turns out, I can get some credit for my past college courses, but I'm not certain I'll be looking to re-invent myself in the very near future as I didn't see many La-Z-Boys on campus. Now, if you are on Twitter, you may know Marek Fuchs. He was a one time stock broker, who amazingly knew my own broker who passed away very unexpectedly. Marek was for many years a contributor to TheStreet.com and currently writes for Yahoo Finance, in addition to being a book author on completely unrelated topics, including a great pictoral homage to firefighters and a really gripping true story of another murder in a small town that was no stranger to high profile murder.. He is also a Journalism professor and invited Herb to speak to his students. I went for the free coffee and to search for the patch of grass I think I had vomited upon some 40 years earlier. The patch was still dead. Believe it or not, neither before, during, nor afterward, not a word discussed about the markets or stocks, other than to illustrate journalistic processes. That alone made the trip worthwhile. DId I mention the coffee? But today is back to normal and still wondering just how long this market rally can really go on. What does please me a little is seeing some positions that lead me down now take the role of leading me higher. That is so often the case. Whatever momentary feelings I may have had about Petrobras, Caterpillar, Whole Foods and others, they're pretty much forgotten. It finally looks as if they will achieve my objectives in owning them, even if it sometimes means losing shares to assignment well above the strike price. Just look at Whole Foods. As unnecessary its price move was going down to about $81 and creating a sense of nervousness, especially as every talking head was criticizing it and forecasting its tenuous grip of the premium market. Now that earnings have been released and were very optimistic, those same talking heads have completely re-spun their opinions. It's all good now. Most likely, Whole Foods will fall somewhat from its new level and will offer another opportunity. It pretty much follows the ancient ashes to ashes cycle, except that there's a lot of life in-between. By the same token I've had an abiding faith that the beaten down shall lead us up, just as they led us down. Yesterday Petrobras, tomorrow Baidu. Today was a day to reward that feeling, but there need to be many more. There is a sense of rotation and new life taking place that will start pouring some favor in the direction of basic materials. Freeport McMoRan, Cliffs Natural and Walter Energy. A single upbeat whisper from China would do wonders. If the US can consistently revise numbers, China can do it ten-fold and the result would be sudden and swift, even if not necessarily accurate. Maybe journalists strive for that accuracy stuff, but I can take it or leave it.   OTP Sector Distribution* as of May 8, 2013 Click chart to see component positions or click here to enlarge * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Daily Market Update (reprint)

(see all trades this option cycle) Daily Market Update - May 7 2013 (Close) It's a little frightening when a well known (and fellow Hungarian) and other respected analysts are making comments comparing things to 1999. I don't see that no matter how hard I try. Maybe the early morning move in Yahoo! evokes some memories, but certainly the analogy can't be basedon the perfirmace of technology stocks, that are only now just beginning to awaken, after long under-performing the market. It can't be based on a deluge of over-subscribed IPO offerings and their subsequent meteoric rises. For the most part the process has been pretty orderly. Laszlo Birinyi, and no, my dog is not named after him, isn't one to exaggerate things, so it is at least worth listening when he makes comments like that. It is a interesting to note that Birinyi is still a bull, albeit a self-proclaimed reluctant bull. What is clear is that as stocks have moved up they have been punished if opffering weak earnings, especially if their matched by weak guidance. Emerson Electronics which is a bigger name worldwide than in the US reported earnings today. It was one of the companies that I was considering this week but didn't have a good enough risk/reward to warrant the trades. Emerson gave weaker guidance this morning saying that it saw no economic impetus for the next 6 to 9 months. Hearing reports like that from a company that deals in smaller applicances for the most part does make you wonder about growth. If the market truly discounts the future by 6 months or so, you really do have to wonder om what basis it is going higher and higher. Beats me, but it's hard to argue with reality.     OTP Sector Distribution* as of May 7, 2013   Click chart to see component positions or click here to enlarge   * Assumes equal number of shares in positions Intraday versions of the Daily Market Update are not archived. You may access prior day's Daily Market Updates by clicking here 
Friday? See Week in Review for summary statistics and performance Sunday? See Weekend Update for potential stock choices for coming week Any day? See Performance for open and closed positions 	The posting of these trades is not a recommendation to initiate positions nor to execute any trading positions, as they may represent time sensitive actions. Subscribers may see ROI statistics on all new, exisiting and closed positions on a daily updated basis.
	See all Trade Alerts for this monthly option cycle

Professor Marek Fuchs Plays Host to Herb Greenberg

And just for good measure, an obligatory self-promo