Hey all!
Ok, earnings season is now for the most part over…thank goodness!!! It was a strange time. Most companies had already lowered expectations for this quarter and/or the rest of the year. So earnings were down from a year ago, but for some notable exceptions – AAPL is a prime example – did ok.
AAPL once again offered an enticing target. The slide continued and I briefly thought of buying some puts. But that is not my system so I shied away. Good thing I didn’t buy any puts this week, because the price action was such that I would have been lucky to break even.
Option premiums have been tightening on both sides of the option chain. Finding a suitable spread to enter was extremely difficult this week. The market closing due to Hurricane Sandy made the window to enter trades very small. The option chains reacted swiftly to the compressed time frame.
GLD was our pick again this week. The premium in GLD is still holding and the ETF itself is still trading in a range bound manner. This was like our safety blanket in this very volatile week.
I completed week 5 of MAX10 this week. The workouts are getting harder as we are now half way through the 10 week program. But this time around I can finish most of them, where last time around I was having to stop and rest part of the way through the workouts multiple times. I am not losing as much weight as I did last time, but I can really see the effects of the bodyshaping. I feel better – the arthritis in my legs has more down days and I feel better in general. The one area I need to work on more is the eating portion. I eat pretty healthy already, but there is definitely room for improvement. I encourage all of you to find a program like MAX10. My concentration is better when I am working on trades, my health is better and I have less stress with the daily workouts. It is a sorry cliché, but health is the most important thing and a healthy lifestyle only adds to the years you get to enjoy your life with your friends and family.
The two youngest get back to school Monday. The second marking period gets under way with a bang as both kids have projects due soon. Little girl is now done with volleyball, but tumbling is going. Middle child has a drama production coming up at the end of the week – Nov 9 & 10. I always like the drama productions, the kids do so well and I am constantly amazed at how much they do with so little resources.
Eldest daughter is settling into her duty station. She gets to be a line cook for her first stop. She is in the middle of nowhere, but is adjusting. I guess they have lots of stuff to do on the base.
Ok, let’s get on with the analysis:
ANALYSIS
Here is the trade:
GLD 167.50 Call $0.155
GLD 168.50 Call ($0.095) This gave a $0.060 Net Credit for a 6.0% ROI
GLD 169.00 Call $0.10
GLD 170.00 Call ($0.06) This gave a $0.04 Net Credit for a 4.0% ROI
Total ROI for the week = 5.00% - Remember – we equally distribute assets among trades
We actually did this exact same trade last week. This is a ladder trade and worked out well for us again this week. This is a great way to earn some premium as the second ladder is above the trade that we put on that passes the tests established. The only requirement that we need to concern ourselves with on the second trade is trying to meet the ROI test. As you can see we did that here.
PAPER TRADE
No paper trades this week
COVERED CALLS
We currently are only doing covered calls on Vivus. I am searching for another opportunity to add to the Covered Call Portfolio.
Symbol Company Stock Option Option Initial Annualized
VVUS Vivus 14.33 Nov 23 .41 2,676.00 18.38%*
* Changed this calculation from using the stock price at call option sell to using the initial investment.
VVUS – Well, we broke through resistance and it looks like we are heading for a long term resistance line of $10.00 This is a weird time, VVUS main product is showing increasing market penetration, but the stock slid almost 5%. I am still sticking with this stock for now, but am scouring the internet and the VVUS website for any sign of bad news. There is something going on here as the stock is sliding, but I cannot find what it is. I am looking to buy back the covered call we have out there and get into either a $18 or $19 strike call. This would give us an extra $13-$20 for each call sold. The basic fundamentals of the stock have not changed, but something in the market outlook has. This is why we are staying with it.
DIVIDEND STOCKS
Here is our Dividend Stock Portfolio:
Ticker Name Buy Current Date Div
Price Price Yield
KO Coke 38.17 37.08 08/27/2012 2.71%
AGD Alpine Global Dynamic 5.76 5.71 08/27/201 12.18%
AOD Alpine Total Dynamic 4.37 4.25 08/27/2012 14.80%
MO Altria 34.26 31.70 08/27/2012 5.17%
INTC Intel 22.87 22.06 10/01/2012 3.94%
HIX Western Asset Hi Income II 10.53 10.17 10/15/2012 9.44%
MCD McDonald’s 91.74 86.86 10/30/2012 3.55%
MSFT Microsoft 28.55 29.50 10/30/2012 3.12%
Current Prices as of 11/02/2012 Closing Price
Each of these stocks carries a 15% stop on them, and we are nowhere near that on any of these stocks. This portfolio is made up of 100 shares in each stock and will generate $1,020 in dividend revenue per year assuming no reinvestment. This gives a 4.48% return. This is a pretty good return in this market and it is very safe. Five Blue Chips and three 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 69.19 09/21/2012 3.27% 67.50
JNJ Johnson & Johnson 70.90 09/21/2012 3.56% 65.00
MSFT – I picked this up on All Hallows Eve and it is now part of the Dividend Portfolio
JNJ – Still waiting!!!
PG – I have raised the target price to $67.50. The fundamentals still look good there and it looks like we are in a relative crevasse pattern – there are two and it looks like we may developing a third. This is a neutral range bound pattern. If this holds I will buy at the low end of the pattern which is $67.50
QUESTIONS
Why have you limited yourself to the list of approved Stocks/ETFs/Indexes? There are tons of weekly options available.
Good question. I developed the list basically as a time saver. Yes there are tons of weekly options available. BUT most of them do not have the premium I need to make a worthy spread trade. Remember, weekly options were developed originally as a hedging tool. So you will see tons of ITM or just OTM options, but very few chances for getting premium like I do.
Periodically I will go through the list to see if there are any others that I might add, but so far none have passed muster. If there is I will let all you guys know.
If you want to see the complete list of weekly options available here is a link:
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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