Careful what you Wish For

What's in the Szelhamos Portfolio?

There was a time, not that long ago, that a curse would visit me once each month. Sometimes those months had 4 weeks and sometimes those months had 5 weeks.

No this isn't that monthly curse that mothers must instruct their daughters upon, although many would call it a miracle, rather than a curse.

But in my case this was the curse of wishes and hopes.

Now, by my own choice, I've invited that one time monthly curse into my life every week.

The problem with selling call options is that you often find yourself wishing for stock movements that are inconsistent with human hopes and desires.

Unless you're a short seller.

But most normal people want to see an unabated rise in the stock market.

Up, up and away.

Although I'm an inveterate believer in covered call strategies, I certainly understand the flip side, particularly since I've lived through the agony of losing a stock to assignment after an unexpectedly large run-up in price.

My wounds are still fresh from having lost Green Mountain Coffee Roasters at $45 when it shot up to $65.

Did I mention that it was about $80 now? Although the cynic in me believes that there's still another accounting issue on the horizon and it's a much steeper drop from $80, than it was from $35 when Herb Greenberg first caught our attention with the peculiarities of their numbering system.

So when the unthinkable happens, there's only one thing that you can do, since ranting and breath holding isn't very adult-like.

Instead, you wish and hope for the price to fall. That's much more adult like.

Even though you don't really think of it in such terms, what you are really doing is wishing for financial pain to be inflicted on others so that you don't suffer the pain of missed opportunities.

To explain that in terms a child could understand, when you get to the window to order your ice cream cone and are told that they're all out of your favorite flavor, you secretly hope that the person next to you who got the last scoop suddenly drops theirs to the ground below.

Granted, that puts you at odds with everyone else and if your the kind the craves human acceptance, you really don't want to be lumped in with short sellers in the eyes of society, or the type of people that wish to see ice cream cones littering the floor.

Now that there are far more stocks that have weekly options available the wishing and hoping comes far more often and societal scorn just gets heaped on and on.

This week just so happens to be the end of the June options cycle, but these days, the third Friday of the month just doesn't carry the same cache as it once did.

Remember when triple and quadruple witching hours threw the fear of God into even the most hardened of traders?

Those too are just yawners these days.

Lots of people still talk about unusual price swings near the close of trading on options expiration, but really they're just rehashing memories of a time long ago. They can't face the reality of what their high school sweet-heart looks like at the reunion, so instead they remember the good old days, when men were men, screaming buy and sell orders at one another as the seconds were ticking away toward the close of another month's options cycle.

Those days are gone, too. There's not that much screaming anymore. Someone probably wished that away too, tired of all the noise and chaos, and ultimately ushered in electronic trading and settlement.

On Tuesday, after that beautiful day of gains across the board, I looked at where my holdings were standing relative to  their options' strike prices and I saw that I was now on track to lose many of them to assignment if they stayed at those levels.

Granted, I had purchased some of those stocks on Monday, with the express intention of holding the shares for just a few days. But now I had come to think of them as my own and really didn't want to lose them.

I bought Home Depot for the next day dividend. I also bought shares of Transocean, Google and JP Morgan and sold in the money options after they rose beyond their initial purchase prices.

So I did what the god foresaken short sellers do.

I hoped and wished for the market to fall.

Why not just my stocks? Why the whole market?

Because I have a well diversified portfolio. Unfortuntely, as smart as I was to diversify the holdings, I wasn't smart enough to foresee that I'd be at risk for losing most of my shares.

So I hoped for a nice little drop in prices. The key word here was "little".

In my ideal world, prices would drop just to the point that all of the holdings closed just below their strike prices and then we'd do the same thing over again.

Well, I got what I had hoped for, except a whole lot more than hoped for.

I just wasn't being careful.

Even poor Pandora suffered in it's IPO. Imagine pricing $4 above the high end of the expected range and then going as high as 60% above the IPO price, only to end up the day about 9%.

All in all, most people would be happy with with a one day 9% gain, but I don't think that was the case today.

I didn't wish that on Pandora and all the poor folks that got suckered into buying at at pre-debacle prices. The newly issued shares changed hands nearly three times. There are probably some very happy people and lots of very unhappy people.

Since I didn't hold shares in Pandora, I found today's minute by minute trading chart amusing. The rapidity of its fall from $26 was impressive and it just deteriorated through the day.

When the dust settled the day was just a mirror image of Tuesday. This time, it was a sea of red for all of my positions, no different from everyone else out there. Of course, the options sales offset some of those losses, just as they cut some of the gains on Tuesday.

I did get off a single trade yesterday. The same one that I had tried to do on Tuesday. I finally found enough buyers for the Sirius - XM Satellite Radio January 2012 puts that I had wanted to sell.

Puts are another strange universe, again hoping for market setbacks.

Since I sold puts I was actually banking on Sirius' stock price to rise between now and January. Wouldn't you know it, but Sirius actually went up yesterday.

Finally a position that went in the right direction, if only for a day.

So today, I'm hoping for a market climb nearly equivalent to Wednesday's loss.

And then as long as I'm hoping, Friday would just roll over and flatline.

Isn't that an uplifting image? But that's just part of the curse.

The power of hope is pretty amazing. I just wish I could make up my mind and know exactly what I should be wishing for. That would make me a better person, one much more in tune with society.

Nah. Maybe next month.

Invest like TheAcsMan

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How my Wife's Bra Saved us Money

I'm essentially retired.

I work on rare occasions, today, coincidentally being one of those days. I have another 4 days lined up for the rest of 2011. If it weren't for the varied attendant body aches and pains, I'd be very happy, instead of just very happy.

Besides what Sugar Momma brings home, it's just me, my computer and my discount broker.

Today, she bought home a squirrel and some acorns, while I try to catch elusive trades. It would be nice if she actually bought home a pay check. Instead, it gets electronically deposited, which takes away a little of the excitement of fondling the money proxy.

I miss the days when I used to be paid in gold fillings. I admire the integrity and conviction of a toothless by personal choice Ron Paul.

So after giving up a very substantial income when I was on the dark side, we've had to learn to economize in all aspects of our lives.

First, we sent our youngest son to a state university. Much less expensive than our previous attempts at educating one of our kids. Although during my initial consideration of Altucher's treatise on why college is a waste, I dismissed his theory, now I'm not so certain.

Next, we insisted that he enlist in the army. Any army, as long as they had a tuition benefit. He's currently in basic training, having decided on the United States Armed Forces. They will be paying for his senior year of middle school.

Then we stopped checking the mail box and answering the telephone. I also conveniently forget to sign checks. There's alot you can get away with if you blame it on age.

Of course, you already know that I use a discount broker. No need to splurge there.

But even during times of belt tightening, man needs a respite from the daily grind, so in that mindset, Sugar Momma and I decided that we needed a vacation.

Rather than out typical luxurious retreat and pampering, oh how I loved the chocolate hydrotherapy of our past life, the hot and cold running prostitutes and other regal amenities, we decided to be one with nature and went camping.

Among the things that I love and respect about my Sugar Momma is her ability to see outside the box, even if that's no longer an accepted hip consulting expression.

The one thing that I would like to change about her is her inability to get out of the box when she accidentally gets entrapped.

Can't tell you how many times she'd been unknowingly placed out with the recycling.

Anyway, instead of buying an expensive tent, she suggested we use one of her bras for shelter. She was always good for such thoughts. Unfortunately, the royalties on her patented use of bras as 2 chinstrapped Yarmulkes for Orthodox Jewish people with hydrocephalus had by now gone dry, along with the CSF.

(Too many obscure references?)

Regardless, another bra was a sleeping bag for two and a third one was used as a fishing net and it helped to feed an entire village.

Priceless.

You've probably already figured out that Sugar Momma doesn't read my blog.

What prompted that line of thinking was her discussion with a neighbor last night regarding an upcoming "girls day" when they were going to go shopping for custom made bras.

I have no clue what a custom made bra costs, but I'm guessing that her material costs alone will be substantial. Much less so for the neighbor.

The two joked that they would tell the salesperson that they were sisters. I don't dare post their pictures, but trust me, they're not spitting images.

So as a result,  I'll have to trade more for those luxuries in life.

Trading more has come as a by-product of weekly options. The weeklies have been so nice to me, although they've complicated my life and made it harder to keep track of my holdings.

As has Twitter.

Specifically, its been a little more difficult to keep track of what positions have been hedged, which ones are weeklies and whether split priced positions were priced at different strikes.

Since I'm new to the weeklies, I haven't yet designed a simple color coded spreadsheet to help me mindlessly be aware of my envoronment. At home, I know to match my crocodiles with crocodiles and my lion clothes with other lion clothes, but it's not so easy when it comes to trading.

Yesterday was another one of those near perfect days that have been fewer and fewer recently, Although we had one of those jjust 3 trading days ago, it still seems so distant.

WIth the exception of a very small and new position in Bank of America and the predictable laggards AIG and RIMM, everything else was up today. Somewhat disappointingly, so were some of the positions I was hoping to pick up next week.

But there's still plenty of time. After all, whereas we had the great day 3 days ago, the very next day more than erased the jubilation.

What seemed different today was that there really was no jubilation. None of the talking heads seemed to be saying that we were heading even higher, or the typical "we've turned the corner".

That has to be bullish, but in my own proprietary indicator, I saw bearish signs.

So I did what I usually do when the market has a strong upward move. I try capitalizing on the bullish sentiment and sell those call options while the premiums move higher on bullish sentiment. As many as I can.

That's what I did today. Resold the Transocean options that I bought back yesterday and then sold calls for shares in Freeport McMoRan, British Petroleum and, yes, wait for it, my small position in Google.

Finally, "Mission Accomplished"

However, was not all joy, as I took a very small loss as I closed out my short put position in Yahoo.

But you're wondering what my proprietary indicator is, aren't you? No you're not, because in all likelihood you haven't even made it this far down in today's blog.

Who are you kidding?

Well, just for my own satisfation, that indicator is the number of clicks on Google ads on this site.

The more clicks I get, the more likely that we're at some kind of a top. Who clicks on these kind of financial ads anyway, unless they think there's an opportunity awaiting them?

Oh yeah, that and tomorrow's Pandora offering. Somehow, this great service, but lousy business model, got the much coveted single letter stock designation of "P".

No short term or long term prospects of profits, but just as with LinkedIn, the offering size and price per share have ratcheted upward.

That can't be good either.

But once again, I don't really care, since I don't play that game of chasing hot stocks. Even solid companies like VMWare, after a meteoric post-IPO rise cooled off pretty fast after liquid nitrogen got poured over it. A little too fast for normal people to bail.

Instead, I'm just going to take one of those idle bras and fill it up with today's trading profits and wait for the next boring opportunity.

Then I'll just perch my lazy boy on the La-Z-Boy to watch my wife run around the house trying to find all of her bras.

Priceless.