Option to Profit Week in Review
September 22 – 26,  2014
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Weekly Up to Date Performance

September 22 – 26, 2014

New purchases for the week beat the unadjusted S&P 500 by 1.1% and the adjusted index by 0.7% during a week that the market made a return to 2011 by having competing triple digit moves each day of the week in continuing some of the same moves seen the previous week.

While new positions did beat the overall market, they were still 0.3% lower for the week, while the S&P 500 was 1.4% lower and the adjusted index was 0.9% lower.

Performance of closed positions continued to out-perform the S&P 500 performance by 1.7%. They were up 3.5% out-performing the market by 88.9%.

This was a week without any real news but lots of speculation over whether various indicators had predictive value and whether an outspoken and outgoing Federal Reserve Governor could have one last hawkish hurrah.

Regardless of the validity of any of those factors that really swung the markets, they did swing the markets and that’s all that really counts. The market has to be really unsure of itself to react in such exaggerated ways to some really meaningless inputs, but those exaggerated swings can be a good thing if the net results aren’t very big.

If they continue you’ll see why, although timing can be critical, as you certainly would prefer to be on the early side if buying, rather than being late to the party.

This week was partying like it was 2011.

That doesn’t seem to fit all that well as a song lyric, but 5 consecutive days of triple digit moves was exactly what 2011 was all about.

What was really fascinating about 2011 was that there were nearly 100 of those kind of moves, back in the days when 100 points really meant something as the DJIA traded at about 12000 back then.

More fascinating was that those triple digit moves were nearly equally distributed between gains and losses.

But that’s what volatility is really all about and I love that kind of volatility.

To give an idea of what that volatility was like this week saw a net 166 point loss, but the absolute sum of all of the moves for the week was 810 points or an average of 162 Dow points each day in one direction or another. The greater the total movement and the shorter the time, the more the volatility grows.

Even though the general belief is that volatility grows when a market is moving lower and that is the most common way, the best way is to have a string of weeks like this one. Lots of movement, but with little net change is ideal for selling options.

Very fortunately the week did end on an up note and it gave lots of opportunity to get more rollovers executed than looked likely even on Wednesday, much less on Thursday when it looked very bleak.

While I would have very much liked to have seen more than a single assignment, the week did acquit itself somewhat with the slew of rollovers to end the week, as well as a couple of new covers that were opened during the week.

For those that purchased Comcast early in the afternoon on Friday those shares may end up being assigned early, as well, as they are ex-dividend on Monday. My hope is that will be the case, as the transaction would represent then about 0.5% ROI for the few hours and open up another opportunity to generate another round of income or add to the cash reserve. But even if that is to be the case, there just weren’t enough assignments to be able to fuel too much new buying for next week.

Because of that the inability to recycle much cash this week I may be less likely to add very much in the way of new positions next week, although there may be some very attractive prices, despite today’s strong and broad advance. That S&P 500 advance, however, still trailed the narrower DJIA and just added to the growing spread for the week.

While I may not be adding too many new positions next week, I would especially like to add some technology positions, where I’m woefully under-invested, especially after their poor performance the past few days.

While it doesn’t really show up in the statistics, the other good thing for the week was something that makes me  feel a little less beholden to a single day or a couple of day’s moves in the market. After a week like this one it’s easy to see how a single day in the market can wreck some well developed plans.

This week continued to add to the very slow process of increasingly developing some diversification in expiration dates as volatility has climbed just a little bit and opened up some of those forward week opportunities.

What next week brings is really anyone’s guess, although the week does end with the Employment Situation Report and my guess is that there will be some improvement and perhaps even a revision to last month’s disappointing statistics.

Still, there’s nothing wrong with some additional downward momentum, as long as it’s in a controlled fashion. But, while I wouldn’t necessarily mind that I would like to see some higher movement first to begin the week so that there is some chance to generate cover n existing positions and perhaps even more completely fill out those forward week expirations.



This week’s details may be seen in the Weekly Performance spreadsheet * or in the PDF file, as well as as in the summary.below

(Note: Duplicate mention of positions reflects different priced lots):

New Positions Opened:   ANF, CMCSA, GDX, JOY, WFM

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycleANF, EBAY, GDX, JOY

Calls Rolled over, taking profits, into extended weekly cycle:  HAL (10/10), LVS (10/10)

Calls Rolled over, taking profits, into the monthly cycleTMUS

Calls Rolled Over, taking profits, into a future monthly cycle: none

Calls Rolled Up, taking net profits into same cyclenone

New STO:  EBAY (10/24), DRI (11/22)

Put contracts expired: none

Put contracts rolled over: none

Long term call contracts sold:  none

Calls Assigned:  EBAY

Calls Expired:  ANF, IP, WFM

Puts Assigned:  none

Stock positions Closed to take profits:  none

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions: CY (9/23 $0.11), WFM (9/24 $0.12)

Ex-dividend Positions Next Week:  CMCSA (9/29 $0.22), BMY (10/1 $0.36)



For the coming week the existing positions have lots that still require the sale of contracts:   AGQ, CHK, CLF, COH, FCX, GM, HFC, IP, .JCP, K,  LULU, LVS, MCP, MOS,  NEM, RIG, SBGI, TGT, 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.