Hello my fellow traders,
Sorry for the delay here, body decided that the 2nd Dan Testing was pretty strenuous and has let me know about it this week. It seems that I kinda sorta fractured my big toe (probably during sparring) and hyperextended my knee. Along with a few other bumps and bruises that are par for the course. But as I said last week – I would not trade a minute of it. The testing was a culmination of a two year journey or improving my fitness, and endurance as well as learning more of the martial and spiritual aspects of Tang Soo Do. I find out this Friday if I passed my Dan Test. Hopefully I did.
Youngest cherub had a couple of volleyball games this past week. At this age when they are just learning and having fun the kids are just a joy to watch. The coach is a young girl just starting in her career as a teacher and has lots of energy and relates very well to the girls. The team is about even in wins and losses, but they are learning the game and having a good time doing it. That is what you want as a father for their daughter.
Eldest daughter passed her egg test. She had to cook an egg 6 different ways for her instructors at tech school. She has about three weeks of tech school left before heading off to her initial duty station. I am learning a new role as a parent of a kid who is out on their own in the world. I am so proud of her, and her accomplishments, my goal was to raise a free thinking strong young woman and it looks like that what I have.
Another great week for the weekly options trader in me! We had another successful week in the markets.
Ok now on to the trades:
ANALYSIS
Here is last week’s trade #1:
AAPL 685 Put $ 1.06
AAPL 680 Put $(0.69) This gave an Net Credit of $0.37 for a 7.40% ROI
This was the first week of IPhone 5 sales and there were lines, but not like before. More and more people are now pre-ordering. The backlog is out to mid-October for us slogs that didn’t pre-order. There are some issues, mapping being a big one. Apple got rid of Google Maps for the mapping App and came out with one of their own. It has a neat 3-D part to it, but sometimes the 3-D doesn’t work well. Further some places don’t quite show up yet or only partially show due to incomplete data in the database for the App. Apple says that every day more mapping data is being put into the App and over the next few months the App will catch up to where those of us used to Google Maps would like it to be.
1. We put this trade on Tuesday again after watching the price action continue to move upward while the premiums remained greatly decreased on the put side. This tells us that the market expects the stock to keep going up. Using our contrary bent we look to the put side for our trade.
2. The price was above the 20 day and 50 day SMA when I made the trade. On Thursday the price crossed the 20 Day SMA, but was still above the 50 Day SMA. When we made the trade on Tuesday with the price above both the 20 and 50 Day SMA this is an indicator for going to the put side for our spread.
3. Toward the end of the week when the price looked like it was starting to slip put the idea in our head for the week ending Sept. 28 that we might want to look at the call side for our spread.
4. We went out slightly more than 1 Std Dev from the strike price and used our probability to get a 90.1% success probability.
5. The IV > HV indicator also showed us that this was a good stock to put a spread on as IV>HV. But the gap is narrowing. So in the near future we may have to change the horse we are riding.
Trade #2:
GLD 168 Put $ 0.36
GLD 167 Put $(0.20) This gave a $0.16 Net Credit for a 16.0% ROI
GLD is continuing with the large price movements. GLD had a range of almost $4 last week. Usually GLD moves normally in a $2-$3 range. This high movement is especially weird since VIX went down for the week. The IV > HV indicator showed this was a great trade as the separation between the two was almost 24%.
1. The probability calculator gave this trade a 92.4% success probability.
2. At this trade we were just a little more than 1.5 Std Dev away from the underlying strike price.
3. Our new indicator the IV> HV was in our favor.
4. The trade was better than our minimum 3%.
5. The overall trend was up so we go put side.
PAPER TRADE
MS 13.00 Call April 2013 Qty=10 Cost=$4,200 Mkt Value $5,750 Gain=$1,600
We closed this trade out when we saw the gain hit $1,800. We ended up getting a gain of $1,600. Not bad for a two week investment. The beginning down trend that looks like it is coming in the market could give us another opportunity like this soon. I hope so. That $1,600 profit is a 38% gain. Gotta love it!
COVERED CALLS
We have been doing covered calls on Vivus and McDonald’s. We are continuing with these two stocks in our covered call adventure.
Symbol Company Stock Option Option Initial Annualized
VVUS Vivus 21.01 Oct 23 .32 2,676.00 18.3%
MCD McDonalds 93.66 Oct 100 .10 9,174.00 1.3%
VVUS closed out ok for us. The stock has dropped a bit since we started this ride, and so we are looking at part of the volatility of a biopharma stock. We will keep into this stock as we get very good option premium for it. But we are looking for a suitable replacement. WE need to be careful because with biopharma there can be some big swings. That is why we are still in the stock, we know there will be big swings so when we hit he 15% stop loss line we start looking, but don’t sell until we get a good replacement.
MCD continued the recent up trend so we bought the call back for .$0.07. We bought it back because I want to keep this stock. The long term prospects are great. Plus there is a dividend coming up so I want to capture it. The option premium has narrowed significantly so I am also looking for a stock to take MCD’s place as a covered call stock, but will move MCD into the Dividend Stock Portfolio when a good replacement is found.
Remember, unless we hit a 15% stop loss point we will continue to use these covered call stocks to generate income and not worry about the day to day or month to month price fluctuations. We will concentrate on getting the most premium we can safely from these stocks.
DIVIDEND STOCKS
Here is our Dividend Stock Portfolio:
Ticker Name Buy Current Date Div
Price Price Yield
KO Coke 38.17 38.58 08/27/2012 2.71%
AGD Alpine Global Dynamic Fund 5.76 5.86 08/27/2012 12.18%
AOD Alpine Total Dynamic Fund 4.37 4.40 08/27/2012 14.80%
MO Altria 34.26 34.17 08/27/2012 5.17%
Current Prices as of 09/14/2012 Closing Price
Each of these stocks carry a 15% stop on them, and we are nowhere near that on any of these stocks. If 100 shares in each stock is held that will generate $416 in dividend revenue assuming no reinvestment. This gives a 5.10% return. This is a pretty good return in this market and it is very safe. Two Blue Chips and two funds that are diversified in sectors and globally. If reinvestment is used that number goes even higher.
I have developed a watchlist for this Portfolio. These are stocks that basically meet the criteria we have: (1) a moat business model, (2) dividend of at least 3%, (3) solid fundamental analysis numbers. Here is our watchlist:
Ticker Name Recent Price Date Div Yield Target Price
PG Proctor and Gamble 69.45 09/21/2012 3.25% 62.50
JNJ Johnson & Johnson 69.08 09/21/2012 3.56% 65.00
INTC Intel 23.14 09/21/2012 3.85% 22.00
INTC – We will probably hit the buy price this week . This is great news for the dividend investor. INTC is transitioning to the tablet market but is still hands down the biggest chip maker in the world. They are generating gobs of cash. INTC pre-announced earnings that are lower than current estimates. But they are still hugely profitable. The announcement also reiterated INTC’s intent to continue the share buyback and dividend payment. Music to our ears!! Now I will just try to pick up this World Beater on sale.
JNJ – I am still looking to get into this stock at $66.00 or lower. The stock is on a slight uptrend again after a slight pull back. There is a recent run from $62 to $68 and so I would like to split the difference and get in at $66
PG – I might have to wait on this one a bit. It is continuing the uptrend and is closing in on a 52 week high. The slight pullback I saw was more of a quick consolidation. So now I just sit back and wait patiently for this stock to come back to Earth. The last thing I want to do is buy at the high and wait for another high to come along. I will be patient as the chart shows that $62 is long term support for this stock. Also at this level that would raise our Dividend Yield to 3.75% AND give us lots of upside potential.
QUESTIONS
None this week L
I encourage any and all comments so please keep them coming. Remember I cannot give you specific advice ( Don’t ask me if you should buy 33 shares of XYZ) but can offer general information (whether XZY is a good company fundamentally or if my interpretation of the charts look good or bad)
DISCLAIMER: Hashley Capital Management, LLC; as well as I are not giving any trading advice. All data is historical in nature and is intended for use as an educational tool. Trading in stocks and/or options is risky and can result in loss of capital. Stocks as well carry inherent risks and should be well researched before any buy decision is made. There is no attempt to sell any brokerage services or act as a broker or dealer by Hashley Capital Management, LLC. Any forward looking comments on this blog are not attempts to solicit business for Hashley Capital Management, LLC and are the opinion of Hashley Capital Management only. If you choose to follow the same path and invest in the strategies and trades used by Hashley Capital Management, LLC after doing your own due diligence, that is your decision and yours alone.
Reach me @:
Twitter: @awagel01
Stocktwits: awagel01
Or leave a comment on the blog
TTFN
Ash
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