Hey All,
Ok - I tried to put up my images that I saved to my computer, but apparently during the past week the fine folks at Google have decided to make it that I have to upload my images to Picassa. I can no longer grab saved images on my own computer. Soooo....I am posting the text version now and will add a Picassa account so I can continue to put the graphs in the blog. NOT HAPPY GOOGLE!!!!
Well, now I am back at it after taking a couple of weeks off to enjoy the holidays and also not finding any trades with all the volatility surrounding the fiscal cliff. We go back to an old fave – GLD. Also we hot up a new trade partner – NFLX (Netflix).
Now on to the analysis:
ANALYSIS
GLD
GLD 162 Call $ 0.15
GLD 163 Call $(0.09) This gave a $0.06 Credit for a 6.00% ROI
NFLX 92.50 Put $ 0.22
NFLX 87.50 Put $(0.10) This gave a $0.12 Credit for a 2.40% ROI
Ok, let us hit the GLD trade first. On Friday the 4th we got our new indicator as a signal to trade this ETF. The price broke the lower Bollinger band then came back. This gave us the clue to go through the rest of the analysis and see if this would be a viable trade.
1. The Bollinger Band test was met
2. Price action was trending down so we look to the call side. (There was a possibility of a condor trade here, but I just didn’t do it)
3. We found a call spread with a minimum 85% probability of success. This trade had a 90.01% probability of success.
4. We were more than 1 Standard Deviation away from the underlying price at the time of the trade.
5. We were able to get more than the 3.00% ROI
Now looking at the chart you can see that the price moved into our spread on Thursday. This did cause some consternation, but this was due to a spike in response to some momentary rumor news. As you can also see the price started to retreat back into our profitable zone Thursday afternoon and kept well below our spread all Friday. The spike lasted less than a trading day after some nimrods in our Congress spouted off again on letting the country go into default over the debt ceiling. When the hysteria ebbed so did the price.
Now on to NFLX. This is a stock I have been watching for several weeks. NFLX has been on a long term up trend. Using some Fibonacci retracements and statistical means analysis I have calculated that this up trend will peak at around $110 for this stock. I put this trade on to take advantage of this info.
1. The long term trend is up so we look to go to the put side.
2. The Bollinger Band test was not met last Friday.
3. This spread had a 94% probability of success.
4. We were right at 1.5 Standard Deviations away from the underlying at the time of the trade.
5. We did not get the minimum 3.00% ROI, but I waived that mainly because this was the first time I was trying this stock and I just wanted to be profitable. In future trades with the stock I will enforce the 3.00% minimum.
PAPER TRADE
No paper trades this week
COVERED CALLS
We still have our covered calls on Vivus. And I have added another to the mix this week. Chicago Bridge and Iron (NYSE: CBI). This stock is seeing an up trend toward its 52 week high of $47.77. The stock closed $44.70 on Friday and has been rising for most of the month. So we go with the January 48 Call.
Symbol Company Stock Option Premium Initial Annualized
VVUS Vivus 13.89 Jan17 .32 2,676.00 14.35%
CBI Chicago Bridge & Iron 47.30 Jan48 .50 4,480.00 13.39%
VVUS – This looks good with a week to go. We should be safe. VVUS is now on an uptrend after the massive drop in response to VVUs not being first to market with a Hepatitis C drug. Remember this is a speculative play and has always generated good revenue for us. I will continue to generate cash with this and ride out the temporary dip.
CBI – This stock has a distinct possibility that we will be called away. The stock is flirting with the 52 week high. So far it has not breached the high, but is inching closer every day. Like we said last time, if we are called away we will make money since we bought CBI below the strike price. And if the flirtation comes close but does not go over our strike, then we also make good money. This is a true win-win situation. This is the type of situation that covered call sellers live for.
When these options expire and I get into new ones I will start giving monthly and year to date returns on the covered calls. This is in response to many of you asking for this data. I do not have this data readily available for the current covered calls, but will have it going forward.
DIVIDEND STOCKS
Here are the two portfolios updated:
Ticker Name Buy Current Date Div
Price Price Yield
KO Coke 38.17 36.95 08/27/2012 2.71%
AGD Alpine Global Dynamic 5.76 5.46 08/27/2012 12.18%
AOD Alpine Total Dynamic 4.37 4.20 08/27/2012 14.80%
MO Altria 34.26 32.98 08/27/2012 5.17%
INTC Intel 22.87 21.98 10/01/2012 3.94%
HIX Western Asset Hi Inc II 10.53 10.08 10/15/2012 9.44%
MCD McDonald’s 91.74 91.76 10/30/2012 3.55%
MSFT Microsoft 28.55 26.90 10/30/2012 3.12%
JNJ Johnson and Johnson 68.03 72.60 11/23/2012 3.53%
PG Proctor and Gamble 68.72 69.31 12/21/2012 3.27%
Current Prices as of 12/31/2012 Closing Price
The GOP not being able to bring to a vote their “Plan B” for the fiscal cliff resolution brought the market down to end the week, and basically kept us from getting back to even price wise in many of our portfolio holdings. In the initial portfolio we do not reinvest dividends, treat it as an income generator. The new portfolio will start with the same dollar amount invested in each stock and will reinvest the dividends. The return of the second portfolio will differ since we will not have equal weighting and will reinvest the dividends so the monthly payers will grow a little faster than the quarterly payers. AGD, AOD and HIX are Closed End Funds that pay monthly dividends.
Both portfolios will carry a 15% stop on them. Portfolio #1 has 100 shares of each stock and will generate $1,254 in dividend revenue assuming no reinvestment. This gives a 4.12% return. Portfolio #2 will have $5,000 invested into each stock and there will be dividend reinvestment. I will carry shares out 3 decimal places. So here is how Portfolio #2 shakes out:
Ticker Name Buy Current Ex-Div.
Price Price Date Shares
KO Coke 36.89 36.95 02/27/2013 135.917
AGD Alpine Global Dynamic 5.76 5.46 01/22/2013 970
AOD Alpine Total Dynamic 4.37 4.20 01/22/2013 1,240
MO Altria 34.26 32.98 12/21/2012 148.894
INTC Intel 22.87 21.98 02/05/2013 240
HIX Western Asset Hi Inc II 10.53 10.08 01/16/2013 519
MCD McDonald’s 91.74 91.76 02/28/2013 55
MSFT Microsoft 28.55 26.90 02/19/2013 182
JNJ Johnson and Johnson 68.03 72.60 02/25/2013 71
PG Proctor and Gamble 68.72 69.31 01/17/2013 72
Buy Price Portfolio Value = $51,996.01
Current Price Portfolio Value = $51,031.10
Dividends Received So Far = $114.11
Usually there is a watch list portion for the Dividend portfolio. But I have put all the watch list stocks into the portfolio. Now I am looking for replacement stocks for underperformers in the portfolio. But this will not be an easy task. Our three keys make getting on the list and then getting into the portfolio rather difficult. Here are the three keys: (1) a moat business model, (2) dividend of at least 3%, (3) solid fundamental analysis numbers.
Ticker Recent Date Div Target
Name Price Yield Price
QUESTIONS
No questions this week.
I did receive some questions over the holiday and I am working on the responses. Keep the questions and comments coming. I really enjoy reading them. If you have any ideas for what you want to see in future issues or topics you would like for me to discuss please send that as well.
As we start 2013 I want to try and make this a better blog and as informative as possible. Also you lurkers – sign up !!!! It doesn’t cost you anything; I don’t sell any info to anybody so sign up!
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 and options carry inherent risks and should be well researched before any buy/sell 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.
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Twitter: @awagel01
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TTFN
Ash
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