Results for Week Ending August 24, 2012

Ok, I am finally back.  For those of you who didn’t see the Twitter feed and the Facebook posts I had some family business to take care of.  Some good – like eldest daughter graduating Air Force Basic Training as an Honor Graduate.  Some not so good – I say in jest “It’s hell getting old”, but I found out the hard way that it a truism.  On another note the MAX10 class is in the final phase I have only lost about 4 pounds in the class, but the reshaping going on is amazing!  I have lost another 2 inches off my waist and am getting some definition that I haven’t had for years.

Youngest daughter is starting volleyball.  Two games in her team is 1-1 with a ton of improvement from game 1 to game 2.  She loves the game and has a coach that makes it fun for the girls.

Middle boy is back at school as well.  He isn’t much into playing sports but does like the bass guitar and will start piano lessons soon.

Ok now on to the trades:

ANALYSIS

3 Month Price Chart for AAPL

1 Month Price Chart for AAPL



Here is last week’s trade:

AAPL     645     Put    $0.78

AAPL     640     Put   $(0.48)    This gave an Net Credit of $0.30 for a 3.00% ROI

This week we put on this trade late since I was getting back from my daughter’s Basic Military Training Graduation.  I put this trade on Thursday afternoon.  AAPL is going on a great tear right now.  Earnings have been great this entire year, the new iphone 5 is coming soon, and they just won a large patent infringement suit against Samsung.  This stock could easily see 700 soon.  Expect a pullback when the new phone comes out as that has been the pattern with all the other iphone releases.

1.       A look at the 3 month chart shows that both the 20 day and the 50 day moving averages are well below the current market price and are uptrending.  This is a big clue to use put options.

2.      The 3 month chart shows a big uptrend in market price.  The 1 month chart shows the same thing.  This is another clue to use put options.

3.      AAPL is on our list of equities and indexes to use.

4.      There is a new product release, and before every new product release AAPL trends up until the release then there is a slight downtrend for 1-3 weeks before the uptrend continues.  WE are a couple of weeks out from the Iphone 5 release so the uptrend pattern is repeating itself

5.      Our ROI is a little light due primarily to the lateness of the timing of the trade.  If I had been available to do my work and get a trade on earlier in the week the ROI would have been a little higher.  BUT we still hit our 3% minimum.

PAPER TRADE

There was no paper trade last week due to my travel arrangements

COVERED CALLS

We have been doing covered calls on Vivus and McDonald’s.  We are continuing with these two stocks in our covered call adventure.

Symbol           Company       Stock     Option          Option            Initial              Annualized

VVUS             Vivus               22.90      Sept 25         .27                   2,676.00          12.1%

MCD               McDonalds     89.54      Sept 92.5      .16                   9,174.00          2.09%

VVUS still is throwing off good returns but MCD is lowering from our initial 7.8% when we started.  But a couple of things to keep in mind:

1.       We get a 3.15% dividend with MCD.  The next dividend will be paid on 9/18/2012. 

2.      The quarterly dividend will be $0.705/share or $70.50 for our 100 shares we hold.

3.      We have collected 2 months of options premium for $104.

4.      Going into the September options expirations we will collect $104 + $16 + $70.5 = $190.5 for a 2.07$ ROI so far.  Our MCD shares are close to a 10yr Treasury Note value of $10,000.  The current rate for a 10 year treasury is 1.68% at the end of the day Monday 08/27/2012.  So we are doing ok with this vehicle.

5.      AND we will keep getting returns on this as long as we want!

DIVIDEND STOCKS

This is a new feature.  I have gotten lots of requests for something like this and I do have some high yielding dividend stocks in my retirement account.  Here are the beginnings of a dividend generating portfolio:

Ticker Name                                                  Recent Price   Date                Div Yield

 KO     Coke                                                         38.17          08/27/2012         2.65%

AGD   Alpine Global Dynamic Fund                   5.76           08/27/2012        12.52%

AOD   Alpine Total Dynamic Fund                   4.37             08/27/2012        15.10%

MO      Altria                                                     34.26             08/27/2012          5.16%

KO and MO are great stocks that have great “moats” – they have huge market shares and will hold those market shares for a LONG time to come.  They have each increased their dividends for years and years.  I am looking for others like that and will put them to you soon.

AOD and AGD are closed end funds that push out monthly dividends.  I like these because the compounding effect is greater because I am getting dividends each month.

With this strategy you need to tell your broker that you want to reinvest the dividend in the stock.

I have 100 shares of the AOD and AGD.  This gives me more than a share in dividends each month.  I also have 100 shares of KO and Altria.  This will push off approximately 5 shares of each stock each year.

Now with each of these stocks I plan on holding them for a long time in my retirement account.  All are good dividend payers with long histories of stable price patterns.  However; I always put on stop losses on any stock pick I choose.  I can always get out of a stock and reset.  I use a 15% trailing stop for my stock picks.  For example MO (Altria) closed @ 34.26, so the trailing stop would come in at:  34.26 – (34.26*.15) = 34.26 – 5.14 = 29.12.

Remember the idea with these dividend stocks is to let the dividends reinvest and grow over time.  This compounding will increase the earnings and build the position.  Our time horizon here is 10, 20 or 30 years.  This type of strategy is like a safety net to cache away the big gains we get from the weekly options and covered calls.

I have lots of questions piled up in the queue and will be getting to them in the coming weeks, so if you sent one in please be patient.  I will get to them soon.

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 options is risky and can result in loss of capital.  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

Results for the week of July 20, 2012

Hi guys!

We are through the earnings season for the most part and doing well.  The trade we put on was a success and the paper trade and the covered calls we put out all were successful.  All in all a good week.

Eldest daughter is halfway through basic training and appears to be doing ok.  Is anybody headed to San Antone? – It looks like me to paraphrase the old Charlie Rich song.  This is an interesting time for me.  This is the longest I have gone without talking to her or seeing her or texting or emailing or something.

Boy is almost done with driver training.  One week to go, then the BIG test!  He is doing much better on the road, but turning through intersections is still a little hairy!

Youngest daughter is gearing up for swimming lessons and another go round of camp.  One of her friends is on a swim team and YD wants that as well.  So I bet she will work really hard in lessons this week.

I am through 3 weeks of the MAX10 program and things are going very well.  I haven’t lost much weight, but there is a definite reshaping of my body.  I had some XXL shirts that are now looking big on me.  The physical part is doing ok, I need to work more in the nutrition part.

Now we move to the options part of the blog:

ANALYSIS

Google Chart for last week

Here is the trade we put on last week:

GOOG     530   Put     $1.82

GOOG     520   Put    ($1.15)   This gave a $0.67 Credit for a 6.70% ROI

Now let us delve into why this trade was made:

1.    The overall market trend was up until Friday when there was a big sell off.  This led to the inclination to do a Put Spread.

2.   This was an earnings reporting week.  All of the equities or indexes that I use to trade in were going to be impacted by the announcements each day.  So the kicker was to find something on our trading list that would not be affected as much nor had the distance from the strike to be successful.

3.   Of all the choices – RUT, SPX, NDX on the indexes and GOOG, PCLN, AMZN, APPL on the equities only GOOG gave a good return and looked safe.  The GOOG chart shows a brown vertical line indicating when I made the trade and the two white lines showing the boundaries of our spread.

4.   As you can see we had a large measure of safety built in with the Std Deviation.  Std Dev = 2.1 at time of trade and got metter as the week went along.

5.   We achieved a ROI of 6.7%, much better than the 3.5% floor with this trade.

6.   GOOG kept getting better as the week went along largely helped by other tech stocks that were reporting this week.  When Intel (INTC) reported better EPS despite lower revenue (In the business this in known as a bad top line but good bottomline).  The interesting thing for INTC is that after reporting there was a bump, but then the stock took back that gain to only end up fractionally for the week starting @ $25.23 and ending at $25.57 but reaching a high of $26.42 just after earnings were announced.

7.   There were hints for a week before the earnings announcement that GOOG would be coming in very well.  Leaks came out about future acquisitions and joint venture opportunities.  So when GOOG cam out and beat the street estimates the stick just kept going higher.

PAPER TRADE

Sold:      VVUS  34  Call  $0.63

Bought:  VVUS  36  Call ($.32) 15.5% ROI is successful

This was the paper trade for the week.  We were trying to see if we could profit on the upcoming FDA approval notice for the Qnexa weight loss drug by Vivus.

Our paper trade last week was a very speculative one.  Vivus Inc. (VVUS) is a pharmaceutical company that was waiting to hear on FDA approval for a weight loss drug it has been working on for years.  In fact in 2010 this same drug was not approved, which sent a shock through the pharma community as just about everybody thought the approval was a foregone conclusion.  The stock tanked in 2010 and only rebounded when institutional investors that missed Arena (ARNA) and its big jump took to buying VVUS.  Well, the drug was approved this time, but this news was already pretty much baked into the price so the price dropped a little on the news.  This made our paper trade a big success.

COVERED CALLS

Here are the covered call trades put on last week:

Symbol           Company       Stock     Option          Option            Initial              Annualized

                                                Ask                             Bid                  Outlay             Return

VVUS             Vivus               27.11      July 34          .35                   2,676.00          14.2%

MCD               McDonalds     92.40      July 92.5       .66                   9,174.00          7.85%

We were successful on both of these trades as:

Ending price Friday for VVUS = $24.15

Ending price Friday for MCD = $91.58

So now we need to put on more covered calls for these stocks.  VVUS is the easy one.  VVUS does not have weekly options.  Sunday afternoon as I am writing this there are two August options that look good. The Aug 28 and the Aug 29 call both look good.  I have a preference for the Aug 29 call, but wither one will fit the bill. 

The Aug 28 call will give a one month ROI of 2.76% or an annualized yield of 33.15%.  If successful the Aug 28 call will give a 2 month return in our VVUs position of 4.06%.  The premium for the Aug 28 call is $75 per contract.

The Aug 29 call will give a one month ROI of 2.10% or an annualized yield of 25.23%  If successful the Aug 29 call will give us a 2 month return in our VVUS position of 3.39%.  The premium for the Aug 29 call is $57 per contract.

MCD is a little more complicated since MCD does have weekly options.  My preference is to go for the weekly option.  That way I can have 4 expirys and I can control the option strike price 4-5 times a month.  Either way is ok, it is just a matter of personal preference.

The MCD Weekly July 27 95 Call is giving $23 dollars in premium.  This would give a .2% weekly premium.  This would go to .8% for a month and 9.6% annualized.

The MCD Aug 95 Call is giving $49 in premium.  This would give a monthly ROI of .5% annualized this gives 6.42%

As you can see with both VVUS and MCD we set the strike price just above what we paid for the stock.  So if we get called, we will make money on the option premium as well as price appreciation of the stock.  Ya gotta like multiple streams of income from one trade.

Other Stuff

I am working on more questions that have come in during the last few weeks.  I will put these up toward the middle of the week.

Keep those questions coming.  I love to see them and get the info out to you guys. 

The next couple of weeks will be very turbulent IMHO.  The signs are here for a big short term pull back in the markets so be very cautious and tread lightly.  Europe has several countries with debt auctions and if they don’t go well that could ripple over to us.  Also McDonald’s, Caterpillar, Apple and UPS are the biggies that report this week.  If any of these companies give bad reports that could send a short term shock to the markets.

See you in the middle of the week!

Happy Trading!

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 options is risky and can result in loss of capital.  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

Results for week ending July 13, 2012

Good Day Traders!

Well we have started off the second half of the year with a two week winning streak.  The market as a whole was down for the week and it showed in the premiums that were out there.

Later in the blog I am going to premiere a new item that was spawned from you the readers.  I received a literal ton of requests for this so I am obliging.

The paper trade this week is a very speculative trade that has a possibility or going either way meaning that it could be worth lots or there could be a bloodbath. 

Eldest daughter is through three weeks in basic training.  She is almost halfway through.  I am starting to make plans to get to San Antonio for her graduation.  What I thought was going to be a pretty easy trip is getting more complicated be the day.  Getting all the info for the background check from different relatives and finding points where we can join up to travel together are interesting challenges.  Boy is doing well in his driving for Driver’s Ed, gaining confidence behind the wheel and getting much needed experience.  And youngest daughter is enjoying her summer with friends and chasing butterflies – literally!!

I have started a 10 week fitness program called MAX10.  If you have done P90X is it similar, but in a group setting.  I have done P90X and I really liked it, but I was alone in the basement sweating my tail off.  The gym I go to had a Living Social coupon for ½ off the MAX10 class so I took the coupon and signed up.  So now I am sweating my tail off with 30 other people in the gym.  I can tell in the 2 weeks just completed my fitness level has improved.  I do have to do some modifications due to some arthritis, but I do as much as possible and have really seen some results.  For those of you like my in the mid-40s and wanting to get back into shape programs like MAX10 or P90X or any of these new cardio/weight training mix classes with limited breaks really work, but it does take a commitment.

OK let us get on with the analysis:

ANALYSIS

Here is the trade put on this past week:

Sold:      PCLN   660    Call     $0.89

Bought:  PCLN   670    Call    ($0.40)        This gave a Net Credit of $0.49 or 4.90% ROI

Let us look at this trade through the lens of the system:

1.       Find the direction of the market.  The market overall was flat to just slightly negative depending upon which measure you used.  The SPX was down until Friday when a BIG push up sent the index to just barely into positive territory.  The RUT was negative for the week, but again just barely.  The DJX (the Dow Jones 30 divided by 100 index) was just barely up at the end of the week after a BIG push on Friday.  For our purposes I treated the market as negative since that was the way it was until the huge push Friday.

2.      If the market direction is upward, use a put credit spread, if the market direction is downward use a call credit spread.  Since we the market as downward we used a call credit spread.

3.      Make sure there is no standard news event that will be coming out during the week that could affect your trade.  There was nothing on this horizon, but the beginning of earning season for the second quarter started this week, which can lead to some volatility.

4.      Choose among the following indexes - RUT, NDX, and SPX; use these equities – GOOG, PCLN, AMZN, and APPL.  This week after going through the list the PCLN options were the way to go.

5.      Find a spread of at least 1.5 Standard Deviations away from the strike price with at least a 3.5% weekly ROI.  The trade we found after looking at all the indexes and equities we regularly use the PCLN was the one that fit the best.  PCLN was 1.75 Std Dev away and had an ROI of 4.9%

6.      Use your online broker’s probability calculator to get at least an 85% probability of success on your trade.  This trade had an 88.3% probability Thursday morning when we put on the trade.  This higher level of probable success is one of those places where we put some safety margin in for the jobs report impact.

7.      If possible use the indexes of RUT or NDX where the settlement is Friday morning instead of the others that settle at Friday Close.  In this case we could not use the RUT or NDX as the ROI was not there on these this week.

8.      If your trade drops so that you are losing ½ of the money you expected to gain on the trade, then it is time to sell.  This was not an issue this week.

9.      If the market drops to within 1 strike price of your spread and stays there for more than 5 minutes it is time to sell.  This was not in play either. 

10.  Monitor your trades, but don’t obsess on them.  This was much easier this week as we had a large cushion Friday going into trading.

PAPER TRADE

This paper trade as I said is a more speculative trade, but the option premium was just so outrageous that I thought it would be interesting to see how it would play out. 

Sold:       VVUS     34     Call     $0.63

 Bought:  VVUS    36     Call    ($0.32)   This gives a $0.31 Net Credit for a 15.5% ROI

Background:

VVUS = Vivus Inc., a pharmaceutical company that is currently banking on a weight loss drug – Qnexa – which will get final FDA approval (or not) on July 17^th.  The general consensus is that the drug will be approved, but it is far from a sure thing.  VVUS got a HUGE bump back in late February after its rival Arena Pharmaceuticals had a weight loss drug approved by FDA and Arena was largely ignored by the market.  Arena soared and put egg on the face of most of the Pharma analysts.  Probably as a CYA move a lot of money moved into VVUS more than doubling the share price.  VVUS has slowly climbed higher with the approach of the FDA ruling this week.

Why I made this trade:

1.       The premium is just outrageous

2.      Although the FDA is expected to approve Qnexa, there will likely be some restrictions on it.  Depending on whom you read these restrictions could be minor – such as a label warning, to major – Qnexa not allowed to be marketed to certain groups of people, like pregnant women and people with young children in the house.  The general point is Qnexa will most likely not be available to all obese people.  Arena’s drug is available to much more of the populace.  This doesn’t bode well for VVUS.

3.      The stock will have to move 26% in three days for me to get hurt on this trade.

4.      I went the call side because the consensus of analysts on VVUS is that if the drug is approved there won’t be a large price move, but if the drug is not approved there will be a huge downside move.

Why I am leery of this trade:

1.       This trade uses traditional monthly options.  VVUS doesn’t have a weekly market in options

2.      The option premium is keeping up with time decay, and sometimes premium is being added.  In technical talk negative Theta on a call option is not the norm.  The overall consensus is that Qnexa will be approved as I said above, but it is far from a foregone conclusion.

3.      There is a BIG news event coming out before the option expiration.  The FDA decision will make or break this trade 

Currently I am negative in this trade.  The option premium has been keeping par with time decay, and this makes it hard to make money the way I am used to making it.  The success of this trade depends on me believing the analysts in that if the drug is approved there will not be a large upward move in the share price.  I am not at one of my loss sell triggers, but I am monitoring the trade. 

BIG NEWS!!!!!

Ok – due to OVERWHELMING DEMAND I am going to add a new segment here.  I am going to add some stocks where you can use a covered call and/or cash secured put strategy.  I will primarily focus on covered calls, but from time to time give up some cash secured put ideas.

Now some important things to keep in mind with this:

1.       A covered call strategy is NOT a short term income producing strategy. 

2.      Covered call selling is a long term strategy.  That is my opinion.  There are websites out there that will tell you that you can make big bucks using a covered call strategy.  They use stocks that are more speculative than I like to get.

3.      I will put stocks out here that you can hold for a long time – several months to years.  Part of the strategy is to also capture dividend returns to compliment the option premium.

4.      Some will have weekly options, some won’t.

5.      The capital requirements will be higher for this strategy than my normal credit spread strategy.  To use a covered call strategy, you must own 100 shares of stock for every call option contract you want to sell

6.      The return will be lower using this strategy than the normal strategy I use.

OK – here are the current covered call picks:

Symbol           Company       Stock     Option          Option            Initial              Annualized

                                                Ask                             Bid                  Outlay             Return

VVUS             Vivus               27.11      July 34          .35                   2,676.00          14.2%

MCD               McDonalds     92.40      July 92.5       .66                   9,174.00          7.85%

Notice that to do these two ideas you would need $11,850 for two options contracts.  For this outlay a total of $101 is yours.  This would give a .85% ROI over the next week, and this comes to a 9.37% annualized blended ROI.   VVUS is more speculative while MCD is a stock that I have owned for years in my child’s UGMA account.  Neither of these have weekly options at this time.

VVUS Chart

MCD Chart



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 options is risky and can result in loss of capital.  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