Hello fellow traders,
Ok, we headed back to an old favorite GLD and did a pretty fair job this week. GLD has been on a long term down trend basically since we got burned this spring. We have taken advantage of that to make some of our money back and continue to generate strings of profitable trades.
So last time we talked I was off to a Pickleball tournament. This was part of the Iowa Games. A state competition in all kinds of sports. For the past several years I have gone to the Tae Kwon do and Martial Arts competitions. I did very well in those, so this year I decided to try Pickleball. I am new to the Pickleball sport having only played since the first of the year. But I really enjoy it and have started to get the hang of it. I entered the singles, doubles and mixed doubles competitions. Since I entered needing a partner to play in the doubles portions I was paired with others who needed a partner. This turned out ok. My mixed doubles partner had played for years, and was a little older than myself. We took 3rd place losing to two other pairs that were significantly younger than us. My men’s doubles partner has played even less than me and it showed. Our more experienced competition knew how to play to our weaknesses and we ended up finishing 4th. I finished 3rd in the singles division. I lost to two of the best players in the state, including one that I play with regularly, so I was happy to do as well as I did. Overall I was happy with my showing – 2 bronze medals in my first competition was pretty good. Not like my martial arts showing – I was the 7 time forms champion in my age group, but still pretty respectable, I have continued my streak of medaling at every Iowa Games competition I have entered.
ANALYSIS
Here is the trade we had on last week:
Sold GLD 129.00 Call $ 0.12
Bought GLD 130.00 Call $(0.06) This gave a 6% ROI
There are several ideas in the chart that show this was a good trade to put on:
1. Both the 50 Day SMA and 200 Day SMA turned negative this week.
2. Wednesday the price broke below the 200 Day SMA
3. Thursday after a brief spike the price broke below both the 50 Day and the 200 Day SMA
4. The price trend for the week was negative
5. Toward the end of the week we got a breakout signal in the upper Bollinger Band and again on Friday
6. We were able to consistently keep a 1.5+ Standard Deviation gap between our lower strike price and the market price
7. We were able to keep our 3% minimum with ease.
8. Again, all of our other equities/ETFs really didn’t have any margin all that met our trading requirements. All the others were at $0 spread at less than 1 standard deviation away from the strike price.
The past two weeks we have been able to get returns well in excess of our 3% target. This is NOT the norm!!! It is just how the market was pricing these options.
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 14.98 Aug16 .33 2,676.00 14.79%
CBI Chicago Bridge
These are the completed covered call trades this year:
Symbol Month Premium Month ROI Ann Month ROI Cum Prem Cum An 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%
VVUS June $16 0.597% 7.17% $212 15.84%
VVUS July $20 0.747% 8.96% $232 14.86%
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%
CBI June $45 0.831% 9.98% $450 8.42%
VVUS – It looks like we are keeping the $13-16 range and staying right in the middle of that range. As long as this trend keeps up we will just keep plugging along and collect premium.
CBI – We are in a good zone for this one. We haven’t put on a covered call here for a while as the option premium just hasn’t been there. If it is not there this time around we might consider selling a put on the shares if it looks good on that side. The stock has performed very well this year. Now the drying up of the premium. Right now there is not enough premium to put on a covered call trade.
This is the cumulative covered call results for 2013:
Symbol Invested $ Option Prem Call Away Div Total Return
VVUS $2,676.00 $ 232 $232 8.67%
CBI $4,480.00 $ 50 $320 $370 8.26%
CBI $5,409.00 $ 400 $ 91 $10.00 $501 9.35%
Totals $12.925.00 $682 $411 $10.00 $1,083 8.38%
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 10.95 08/29/2013 11.96%
AGD Alpine Global Dynamic 4.84 4.76 08/29/2013 7.43%
TCPC TCP Capital 15.28 16.02 08/29/2013 8.99%
MO Altria 34.26 35.68 10/10/2013 5.17%
T ATT 37.34 35.77 11/01/2013 4.82%
ARCP Am. Realty Capital 16.69 14.10 09/15/2013 5.37%
GLAD Gladstone Capital 8.98 8.54 08/31/2013 9.35%
STI Sun Trust Bank 29.37 35.44 09/14/2013 1.36%
WFC Wells Fargo 37.74 44.49 09/01/2013 3.18%
KKR KKR & Co Units 20.77 20.71 08/21/2013 6.39%
Buy Price Portfolio Value = $21,595.00
Current Price Portfolio Value = $22,904.24
Gain/(Loss) So Far = $1,309.24
Portfolio Return = 6.06%
Dividends Received So Far = $305.07
Portfolio Return w/ Dividends = 7.48%
Current Prices as of 08/02/2013 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 equities must 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 40.22 10/01/2013 137.800
AGD Alpine Global Dynamic 5.76 4.76 08/29/2013 1,001.005
AOD Alpine Total Dynamic 4.37 4.03 08/29/2013 1,283.110
MO Altria 34.26 35.68 08/10/2013 152.562
INTC Intel 22.87 23.00 09/01/2013 242.196
HIX Western Asset Hi Inc II 10.53 8.89 08/22/2013 531.753
MCD McDonald’s 91.74 99.20 09/15/2013 55.964
MSFT Microsoft 28.55 31.89 09/13/2013 184.025
JNJ Johnson and Johnson 68.03 94.39 09/12/2013 72.098
PG Proctor and Gamble 68.72 81.29 08/15/2013 73.080
Buy Price Portfolio Value = $51,996.01
Current Price Portfolio Value = $55,385.42
Gain/(Loss) So Far = $3,389.41
Dividends Received So Far = $1,036.35
Dividend ROI = 1.99%
Stock Return = 4.53%
Total Return = 6.52%
Earnings season is over for us, Coke (KO) and Microsoft (MSFT) disappointed a bit and went on sale. As I tweeted out this would have been a good time to pick up more shares. I did in my personal accounts, but did not here as I am letting the shares here do the buying for me each month. When good companies go on sale with little dips like after a disappointing earnings announcement – THAT is the time to buy. Both MSFT and KO are still great companies. They are very profitable and are dominant players in their markets. They just didn’t make as much money this past quarter as the consensus of Wall Street analysts thought they should. So the price dropped and we had a sale opportunity to buy more at a lower price. Both of these businesses fundamental reason for being in our portfolio has not changed. Both are generating tons of cash each quarter and hold dominant positions in their markets. So for now they are still in the portfolio. But this is why you need to keep up with your portfolio holdings. If there had been a major shift in company thinking or they were slipping in their dominance in the market, then it might be the time to change out the stock, like if MSFT decided that it was all of a sudden going into the frozen fish market and abandoning the computer industry. But since neither KO or MSFT are doing anything that drastic we are sticking with them.
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 67.93 4.53% 58.00
BAC Bank of America 14.84 0.35% 11.00
BRKB Berkshire Hath B 117.82 No Div Pd 100.00
FUN Cedar Fair 43.27 4.85% Up to $45
VOC VOC Energy Trust 14.72 10.94% Up to $14.75
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.
Cedar Fair- This stock has Cedar Point as well as several regional amusement parks. It has been doing really well this year. I wish I had gotten into this one at the beginning of the year when I first came across it.
VOC Energy Trust – This is an MLP that is called a statutory trust. This means that is will only be around for a finite time before it must terminate. If there is still income coming in when the termination date happens there most likely will be another statutory trust formed to take advantage of that or the company will turn itself into a conventional MLP. This company holds oil and gas interests in Texas, Kansas and Oklahoma. It hit a dry well earlier this year which is the reason of the income drop so far this year. Again this company is generating lots of cash and will still turn out dividends at a nice rate. With the WTI (West Texas Intermediate)oil price now approaching the Brent price (VOC largely gets paid the WTI price for its oil) and it looks like it will be doing that for some time to come the cash stream looks good for this company. Getting in at a ceiling of $14.75 would be a great thing for good income for years to come.
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 @:
Email: hashleycm@yahoo.com
Twitter: @awagel01
Stocktwits: awagel01
Or leave a comment on the blog
TTFN
Ash
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