Hello fellow traders,
Well, we got back on the GLD wagon last week. Usually when volatility is high so are options premiums…and they were except for the weekly options that expired last week. Going out to the following week (expiry 06/14/2013) wasn’t much there either. The premium price was out in the monthlies. This was good and bad. Good in the sense that there was premium. Bad in the sense that with the market swinging wildly from day to day it was very hard to get into a trade. So I stuck with the weekly that I am somewhat familiar with and took a low premium, but very safe trade.
This past week, youngest daughter won a coloring contest in the local paper and got two FREE tickets for the Cirque de Soleil show Quidam. She loved it, mom on the other hand was largely unimpressed. Monday youngest daughter is off to camp for the week. I bet she will have a great time as many of her school friends are going this week as well.
Son has been working for a friend of ours. She is a handyman and does terrific work. IF you want her contact info contact me if you are in Eastern Iowa, I can say with high certainty she does great work. This has been a very good thing for Son so far. Our friend is demanding, but not overbearing so he is getting a good sense of what a boss will be like when he gets out in the world. Also he is very interested in learning carpentry and handyman skills so he is learning a ton while working for her.
Eldest daughter is doing well in the Air Force. She is enjoying what she is doing and stretching herself personally and professionally. The military was a good move for her. Only problem is that dad and daughter don’t get to spend the summer together like we used to. It is hard to let them go!!!
ANALYSIS
Here is the trade we had on last week:
GLD 139.50 Call .09
GLD 149.50 Call (.05) This gave a net ROI of 4.00%
This was an easy trade this week as PCLN just shot up all week. This trade was put on Wednesday morning and was a nice trade to watch run. Now PCLN is coming close to the 52-week high so we might need to switch to the call side for this week if we stick with this stock for our spreads.
We were really never in danger with this trade. As can be seen by the White lines that are the markers of our trade. I scaled back the profit percentage of the trade and that helped us go out further on the option chain. A look at the trends show that price never reached above the 200 day SMA for the past month. Also when the price got above the 50 day SMA it quickly retreated. So by putting our trade parameters above the 200 day SMA it was with 94% certainty that the trade would be successful.
After our GLD debacle I have put some more stringent controls on the model. Now realize that nothing would have stopped the last loss as the European gitters that made the market drop all happened during the closed hours, and on Thursday at the close before all the thoughts of Sovereigns selling their gold came out we still had a 91% probability of success and the market was trending our way. But by taking a longer look at the moving averages and moving further out the option chain I am trying to mediate as much as possible those happenings from going on again. When the debacle happened if I would have noticed the trend of staying below the 50 day SMA and put a trade in above the 200 day SMA all would have been good. So I have incorporated that into my analysis for the trades made from now on.
PAPER TRADE
There are no paper trades on at this time.
COVERED CALLS
We still have our covered calls on Vivus and CBI again.
Symbol Company Stock Option Premium Initial Annualized
VVUS Vivus 14.26 June14 .16 2,676.00 4.18%
CBI Chicago Bridge 60.19 June70 .45 5,409.00 5.82%
These are the completed covered call trades this year:
Symbol Month Premium Month Ann Month Cum Prem Cum An
ROI ROI Prem ROI
VVUS January $32 1.19% 14.35% $32 14.35%
VVUS February $63 2.35% 25.25% $95 21.30%
VVUS March $28 1.05% 12.56% $123 13.79%
VVUS April $29 1.08% 13.00% $152 17.04%
VVUS May $44 1.64% 11.51% $196 14.64%
CBI January $50 1.12% 13.39%
CBI March $ 125 2.31% 27.73% $175 12.94%
CBI April $230 4.05% 48.67% $405 7.14%
VVUS – This stock has broken out of the $10-$12 range for now. It has moved up to the $13-$14 range and pushing $15. If the current price holds I will be called away for this stock. This would be a two edged sword for me. I am carrying a loss on this stock after buying it really high – the bad side. The good side is that I could get back into this at a much lower basis and offset some of my gains this year with the loss. We still have a couple of weeks to go before expiry and the trend is moving lower again in the stock so we will have to wait and see if we are called away. The buzz is starting wear off from the promising trials news from a couple of weeks ago I think.
CBI – We are in a good zone for this one. The price swooned up last week, but still was far away from our strike. I am pretty certain that we will not be called away on this one. The company itself is still rolling. Business is good although guidance was a little weak for the year and that chilled the stock. Then last week with the rally Friday the stock moved well, and now I am thinking that there will be profit taking as the stock has shot up for the past year so I am looking for some down trends this week. If a big move comes on and we do get called away then we will still make out like a bandit. We bought at $54 and would get $70 on a call away this month that is a great gain in and of itself. Plus we have already pocketed the option premium. Also the ex-div date is Wednesday so we will hold through that and that means we will be getting dividend income for the stock as well. The cup overfloweth on this stock!
This is the cumulative covered call results for 2013:
Symbol Invested $ Option Prem Call Away Div Total Return
VVUS $2,676.00 $ 196 $196 7.32%
CBI $4,480.00 $ 50 $320 $370 8.26%
CBI $5,409.00 $355 $ 91 $5.00 $451 8.34%
Totals $12.925.00 $601 $411 $5.00 $1,017 7.87%
DIVIDEND STOCKS
Here are the two portfolios updated.
This portfolio is an income portfolio made up of 100 shares of each stock. These stocks are some blue chips, some Business Development Companies (BDCs), Closed End Funds (CEFs) and some small caps that look like they will grow. Some of these I have talked about before, some not. I will give a brief note on each of them in the coming weeks:
Ticker Name Buy Current Div Pay Div
Price Price Date Yield
PSEC Prospect Capital 10.68 10.26 06/29/2013 11.96%
AGD Alpine Global Dynamic 4.84 4.82 06/29/2013 7.43%
TCPC TCP Capital 15.28 16.02 06/29/2013 8.99%
MO Altria 34.26 36.15 07/10/2013 5.17%
T ATT 37.34 35.45 08/01/2013 4.82%
ARCP Am. Realty Capital 16.69 15.01 06/15/2013 5.37%
GLAD Gladstone Capital 8.98 8.48 06/31/2013 9.35%
STI Sun Trust Bank 29.37 32.25 06/14/2013 1.36%
WFC Wells Fargo 37.74 41.25 09/01/2013 3.18%
KKR KKR & Co Units 20.77 19.56 08/21/2013 6.39%
Buy Price Portfolio Value = $21,595.00
Current Price Portfolio Value = $21,967.53
Gain/(Loss) So Far = $372.53
Portfolio Return = 1.73%
Dividends Received So Far = $85.50
Portfolio Return w/ Dividends = 2.12%
Current Prices as of 06/07/2013 Closing Price
We keep our dividend moat portfolio. I have made the new portfolio as a way to show that a good return can come from another type of dividend model besides the moat philosophy. All the new equities are well rated in their business area and are quite strong companies. The financials look great so the dividend payout is relatively safe. Also many of the new equitiesmust pay out most of their earnings to keep their tax status. slow and steady climb with this portfolio. This past week many of the stocks in the portfolio paid the quarterly dividend. Total return is now over 8% with the portfolio portion at almost 7%. This is great! This portfolio is showing my primary philosophy with stocks – buy great companies on sale and then let them ride.
Here is how Portfolio #2 shakes out:
Ticker Name Buy Current Div. Pay
Price Price Date Shares
KO Coke 36.89 41.41 07/01/2013 136.854
AGD Alpine Global Dynamic 5.76 4.82 06/29/2013 982.153
AOD Alpine Total Dynamic 4.37 4.10 06/29/2013 1,257.549
MO Altria 34.26 36.15 07/10/2013 150.766
INTC Intel 22.87 24.59 09/01/2013 240.000
HIX Western Asset Hi Inc II 10.53 9.63 06/22/2013 527.137
MCD McDonald’s 91.74 98.28 06/15/2013 55.425
MSFT Microsoft 28.55 35.67 06/13/2013 183.492
JNJ Johnson and Johnson 68.03 84.91 06/12/2013 71.547
PG Proctor and Gamble 68.72 77.75 08/15/2013 73.080
Buy Price Portfolio Value = $51,996.01
Current Price Portfolio Value = $55,851.93
Gain/(Loss) So Far = $3,855.92
Dividends Received So Far = $790.73
Dividend ROI = 1.52%
Stock Return = 5.90%
Total Return = 7.42%
Here is the watch list. 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
COP ConocoPhillips 62.32 4.53% 58.00
BAC Bank of America 13.38 0.35% 11.00
BRKB Berkshire Hath B 115.31 No Div Pd 100.00
ConocoPhillips – This stock has great potential as the move significantly higher as the recent earnings was good and it has beat the street consistently.
Bank of America –This stock is keeping up a pattern of growing revenues and earnings after nearly collapsing in the banking crisis. This is a stock that I wish I had gotten into at this time last year at around $4.00
Berkshire Hathaway B Class – This is the way more affordable way to get into Berkshire Hathaway and Warren Buffett than the $150K+ regular Class A shares. Over any period of time 2years or greater an investment in Berkshire has made money. This past year (2012) the S&P beat Berkshire, only the 5th time that has happened in the history of Berkshire – over 40 years. So this is one that is purely price appreciation. DISCLOSURE – I own this in my personal stock portfolio –one of the few stocks I do own.
So far we are using the week’s downtrend to get closer to our target prices. Overall we are doing well with the two portfolios and I am very pleased.
QUESTIONS
All charts from freestockcharts.com. This is not a paid endorsement. They are a good free app that only asks for credit on their charts when you use them.
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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