Hey All,
This week there was not a trade put on. The fiscal cliff worries weighed heavily on the market. I just could not get my indicators to line up for a trade. There were some trades that I thought would have made money, and in hindsight many of them would have made money. BUT our system is not built on hunches and random thoughts. The system works because the indicators give us a rationale behind the trade. This past week I just could not get any to line up.
I did do some paper trading with some trades that are called pinning trades. We will talk about them in the paper trade system.
Now on to the analysis:
ANALYSIS
NO ACTUAL TRADES THIS WEEK
PAPER TRADE
AAPL 495 Put $0.53
AAPL 490 Put $(.22) This gave a $0.31 Credit for a 6.2% ROI
1. This trade is called a pinning trade. I am still researching the name as to why it is called pinning, but basically I made this trade with about 30 seconds left in the trading day Friday.
2. The shortened week with the holiday combined with all the fiscal cliff mess in the air gave us no real opportunity to place an actual trade, so I decided to try a new strategy in the paper trading section.
3. The volatility was extremely high Friday and prices were bouncing all over the place as each new rumor of progress or regress hit the wires. The end of the day saw a sharp decline as CNBC reported that there was no progress on a deal and all were done for the day on Friday.
4. This caused a last minute price spike downward. Earlier in the day I had looked at the AAPL 490/495 Put spread for an actual trade, but the premium wasn’t there. Finally at the end of the day it was and we put it on as a paper trade.
5. I did not have the time to do the analysis again on this trade since the end of the trading day was literally seconds away. That is why I did it as a paper trade. I knew from experience and a good hunch that the trade would be profitable. But before I do a real trade I want all the analytic work done and confirming the trade.
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 13.21 Jan17 .32 2,676.00 14.35%
CBI Chicago Bridge & Iron 46.35 Jan48 .50 4,480.00 13.39%
VVUS – We claimed our premium last week and have written (sold) the January 17 Call going forward.
CBI – This is the first time we put this trade on. CBI has grown tremendously this past year and I wish I would have added it to my portfolio months ago. But it is still a good stock for covered call writing. This stock has a good chance of breaking into a new 52 week high. If it does and hits 48 then we will make $165 + $50 = $215 for a 4.79% return in the month. If we only get the option premium then we will get 1.11% for 3 weeks. Not a bad return at all either way.
Starting in January I will expand this part of the blog to show our monthly and annualized return in a chart. This is in response to those who have issues with me adjusting the annualized return each month when I enter a new option. I will continue to do this as this is the industry standard. But I am adding the additional work to show the actual return and a running return for the year. This will refine the analysis so those who like the covered call aspect can see how the return would look throughout the course of the year.
DIVIDEND STOCKS
As I said last week I would be updating this part of the blog. I am keeping the initial dividend portfolio. This portfolio purchased 100 shares or each stock. This time we created a new portfolio with the same stocks, but allocating $Here is our Dividend Stock Portfolio:
Ticker Name Buy Current Date Div
Price Price Yield
KO Coke 38.17 36.25 08/27/2012 2.71%
AGD Alpine Global Dynamic 5.76 5.23 08/27/2012 12.18%
AOD Alpine Total Dynamic 4.37 4.03 08/27/2012 14.80%
MO Altria 34.26 31.44 08/27/2012 5.17%
INTC Intel 22.87 20.62 10/01/2012 3.94%
HIX Western Asset Hi Inc II 10.53 9.66 10/15/2012 9.44%
MCD McDonald’s 91.74 88.21 10/30/2012 3.55%
MSFT Microsoft 28.55 26.71 10/30/2012 3.12%
JNJ Johnson and Johnson 68.03 70.10 11/23/2012 3.53%
PG Proctor and Gamble 68.72 67.89 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 36.25 02/27/2013 135.917
AGD Alpine Global Dynamic 5.76 5.23 01/22/2013 970
AOD Alpine Total Dynamic 4.37 4.03 01/22/2013 1,240
MO Altria 34.26 31.44 12/21/2012 147
INTC Intel 22.87 20.62 02/05/2013 240
HIX Western Asset Hi Inc II 10.53 9.66 01/16/2013 519
MCD McDonald’s 91.74 88.21 02/28/2013 55
MSFT Microsoft 28.55 26.71 02/19/2013 182
JNJ Johnson and Johnson 68.03 70.10 02/25/2013 71
PG Proctor and Gamble 68.72 67.89 01/17/2013 72
MO - Dividend to be paid 01/10/2013
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.
Happy New Year to all!! Next week is another short week with the holiday. Trade safe and safe travels if you are going to be with family over the holiday.
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.
Reach me @:
Twitter: @awagel01
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TTFN
Ash
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