Option to Profit
Week in Review
May 18 – 22, 2015
|NEW POSITIONS/STO||NEW STO||ROLLOVERS||CALLS ASSIGNED/PUTS EXPIRED||CALLS EXPIRED/PUTS ASSIGNED||CLOSED|
|1 / 0||0||7||0 / 0||0 / 0||1|
Weekly Up to Date Performance
May 18 – 22, 2015
This was a very forgettable week.
The single new position for the week beat the adjusted and unadjusted S&P 500 by 1.9%.
That position gained 2.1% for the week. The unadjusted and adjusted S&P 500 ended the week having gone just 0.2% higher.
That high ROI was made possible by being able to pocket a full month’s worth of premium and a portion of the dividend while then closing out the position after just 4 days.
Existing positions broke their streak of out-performance this week as energy and materials, which had been primarily responsible for the previous out-performance faltered and were `1% lower for the week.
Lots closed in 2015 continue to out-perform the market. They are an average of 5.2% higher, while the comparable time adjusted S&P 500 average performance has been 1.5% higher. That 3.7% difference represents a 256.6% performance differential. That’s too large to be sustained, but I’ve been saying that for a while, including much of 2014.
This was as about a quiet of a week in the market as you could expect. Virtually nothing happened to get anyone’s attention and there were virtually no intra-day moves, either.
The pre-opening futures all pointed toward quiet days and that’s exactly how it all worked out.
Neither the release of FOMC minutes nor Janet Yellen’s Friday afternoon speech did anything to move or excite markets. Next week doesn’t look much different, except that next Friday’s GDP release will be more critically looked at and maybe not act as much to shake markets if it holds a surprise.
Somehow, though, with a little bit of luck, there was an opportunity to get some rollovers done and to be able to close out the single new position opened for the week.
Doing that restored the cash pile to where it had begun the week and the rollovers at least helped to generate some cash for the week.
Equally lucky is that it was another week not adding to that list of uncovered positions, but by the same token, there were no opportunities to sell calls on uncovered positions this week.
That would have made it an especially nice and complete week, particularly as dividends were back in the mix thois week
Otherwise, there was absolutely nothing memorable about the week or really setting the tone for the coming week, which is a holiday shortened one.
While it was a very boring and staid week we are left in an unusual position, having only a single option set to expire next week. It’s not totally unexpected, as I mentioned that it might be a possibility sometime last week, but it almost became a reality, except for one position..
That’s almost like starting with a fresh slate.
The only position currently set to expire next week is the Market Vectors Gold Miners ETF, which I think has the distinction of being the single most rolled over position of the past 3 years. One of the 3 currently open lots It has now been rolled over 19 times in 6 months. During that time its price is up just 1%, but the premiums make it a 20% advance.
It’s too bad that they can’t all be like that.
With a little bit of cash reserves in hand, although I’d like to have more ammunition, I’m not adverse to spending any next week. The question may be whether to look at expirations for that week or for the following weeks, as the combination of low volatility and only 4 days worth of time will make for some paltry premiums if looking only at a weekly option.
With earnings now pretty much out of the way, the focus will intensify on interest rates, especially as some doubt has been raised about the validity of some of the data that may have played into the FOMC’s decisions to leave interest rates unchanged.
But for now, I just look forward to a nice relaxing Memorial Day weekend and hope that everyone is able to have one of those.
Note: For those who purchased Cablevision this week, the hope, by selling a deep in the money call in advance of the ex-dividend date was that the shares would be assigned early. That would have sacrificed the dividend in exchange for an entire month’s option premium.
I was very surprised that shares were not assigned early, but in hindsight the option volume seen on the day prior to the ex-dividend date suggests that some may have had an intuition about the very significant price rise that was to occur the following day.
That rise was fueled by two things.
The first wa the entrance onto the US scene of a European cable company that bought a small US provider and made it clear that it wanted to enter US markets in a bigger way. That lent price support across the spectrum. But beyond that, the Dolan Family, principal owners of Cablevision and who have used it very much as a personal play thing, expressed an interest in selling. That was the real surprise and that really sent the stock much higher than others in the sector.
At that point, with shares so deeply in the money and with volatility still so low, there was actually very little time value in the premium and very little to be gained by holding onto the position.
By closing the position at a NC of $19.89, effectively $0.04 of the dividend was retained and the overall ROI was 2.1% for the 4 days of holding.
I had considered closing the position on the third day of holding, however that may have subjected some to a free-riding violation if they had used unsettled funds to make the original share purchase.
While the ROI was reduced from 2.7% for the monthly contract to 2.1% for the 4 day holding period, presumably the recycled cash over the next 4 weekly periods can more than make up that 0.6% giveback.
This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as in the summary below
(Note: Duplicate mention of positions reflects different priced lots):
New Positions Opened: CVC
Puts Closed in order to take profits: none
Calls Rolled over, taking profits, into the next weekly cycle: GDX
Calls Rolled over, taking profits, into extended weekly cycle: ANF (6/5), DOW (7/2), KMI (6/26), MRO (6/5), TWTR puts (6/5)
Calls Rolled over, taking profits, into the monthly cycle: none
Calls Rolled Over, taking profits, into a future monthly cycle: UAL (Sep 18, 2015)
Calls Rolled Up, taking net profits into same cycle: none
New STO: none
Put contracts expired: none
Put contracts rolled over: none
Long term call contracts sold: none
Calls Assigned: none
Calls Expired: none
Puts Assigned: none
Stock positions Closed to take profits: CVC
Stock positions Closed to take losses: none
Calls Closed to Take Profits: none
Ex-dividend Positions: MRO (5/17 $0.21), CVC (5/20 $0.15), MAT (5/20 $0.38)
Ex-dividend Positions Next Week: LXK (5/27 $0.36), RIG (5/27 $0.15)
For the coming week the existing positions have lots that still require the sale of contracts: AGQ, ANF, CHK, CLF, FAST, FCX, HAL, .INTC, JCP, JOY, LVS, MCP, MOS, RIG, WFM, WLT (See “Weekly Performance” spreadsheet or PDF file)
* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.