Weekend Update – August 31, 2014

You really can’t blame the markets for wanting to remain ignorant of what is going on around it.

When you’re having a party that just doesn’t seem to want to end the last thing you want to do is answer that unexpected knock on the door, especially when you can see a flashing red and blue light projected onto your walls.

The recent pattern has been a rational one in that any bad news has been treated as bad news. The market has demonstrated a great deal of nervousness surrounding uncertainty, particularly of a geo-political nature and there has been no shortage of that kind of news lately.

On the other hand, the market has thrived during a summer time environment that has been devoid of any news. Over the past four weeks that market has had its climb higher interrupted briefly only by occasional rumors of geo-political conflict.

Given the market’s reaction to such news which seemingly is accelerating from different corners of the world, the solution is fairly simple. But it was only this week that the obvious solution was put into action. Like any young child who wants only to do what he wants to do, the strategy is to hear only what you want to hear and ignore the rest.

Had the events of this week occurred earlier in the summer we might have been looking at another of the mini-corrections we’ve seen over the past two years and perhaps more. The additive impact of learning of Russian soldiers crossing the Ukraine border, Great Britain’s decision to elevate their Terror Alert level to “Severe” and President Obama’s comment that the United States did not yet have a strategy to  deal with ISIS, would have put a pause to any buying spree.

Instead, this week we heard none of those warnings and simply marched higher to even more new record closes, even ignoring the traditional warning to not go into a weekend of uncertainty with net long positions.

To compound the flagrant flaunting the market closed at another new high as we entered into a long holiday weekend. As we return to trading after its celebration the incentive to continue ignoring the world and environment around us can only be reinforced when learning that this past month was the best performing month of August in more than 10 years.

Marking the fourth consecutive week moving higher, the July worries of spiking volatility and a declining market are ancient history, occurring back in the days when we actually cared and actually listened.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

Bank of America (BAC) may be a good example of ignoring news, although it could also be an example of  the relief that accompanies the baring of news. The finality of its recent $17 billion settlement stemming from its role in the financial crisis was a spur to the financial sector.

Shares go ex-dividend this week and represent the first distribution of its newly raised dividend. While still nothing worthy of chasing and despite the recent climb higher, the elimination of such significant uncertainty can see shares trading increasingly on fundamentals and increasingly becoming less of a speculative purchase as its beta has plunged in the past year.

With thoughts of conflict related risk continuing to be on my mind there’s reason to consider positions that may have some relative immunity to those risks. This week, however, the reward for selling options is unusually low. Not only is the extraordinarily depressed volatility so adversely impacting those premiums, but there are only four days of time value during this trade shortened week. Looking to use something other than a weekly option doesn’t offer much in the way of relief from the low volatility, so I’m not terribly enthusiastic about spending down cash reserves this coming week, particularly at market highs.

Still, there can always be an opportunity in the making. With the exceptions of the first and last selections for this week, like last week I’m drawn to positions that have under-performed the S&P 500 during the summer’s advance.

^SPX ChartThere was a time that Altria (MO) was one of my favorite stocks. Not one of my favorite companies, just one of my favorite stocks, thanks to drawing on the logic of the expression “hate the sin and not the sinner.”

Back in the old days, before it spun off Philip Morris (PM) it was one of those “triple threat” stocks. It offered a great dividend, great option premiums and the opportunity for share gains, as well. Even better, it did so with relatively little risk.

These days it’s not a very exciting stock, although it still offers a great dividend, but not a terribly compelling option premium, especially as the ex-dividend date approaches. However, during a time when geo-political events may take center stage, there may be some added safety in a company that is rarely associated with the word “safe,” other than in a negative context.

Colgate Palmolive (CL) isn’t a terribly exciting stock, but in the face of unwanted excitement, who needs to add to that fiery mix? Last week I added shares of Kellogg (K), another boring kind of position, but both represent some flight to safety. 

Trailing the S&P 500 by 8% during the summer, shares of Colgate Palmolive could reasonably be expected to have an additional degree of safety afforded from that recent decline and that adds to its appeal at a time when risk may be otherwise be an equal opportunity destroyer of assets.

YUM Brands (YUM) and Las Vegas Sands (LVS) both have much of their fortunes tied up in China and both have come down quite a bit during the summer.

YUM Brands has shown some stability of late and I would be happy to see it trading in the doldrums for a while, as that’s the best way to accumulate option premiums. WHile doing bu

siness is always a risk in China, there is, at least, little concern for exposure to other worldwide risks and YUM may have now weathered its latest food safety challenge.

Las Vegas Sands, on the other hand, may not yet have seen the bottom to the concerns related to the vibrancy of gaming in Macao. However, the concerns now seem to be overdo and expectations seem to have been sufficiently lowered, setting the stage for upside surprises, as has been the situation in the past. As with concerns regarding decreased business at YUM due to economic downturns, once you get the taste for fast food or gambling, it’s hard to cut down on their addictive hold.

T-Mobile (TMUS), despite the high profile it maintains, thanks to the efforts of its CEO, John Legere, has somehow still managed to trail the S&P500 during the summer. This past week’s comments by parent Deutsche Telecom (DTEGY) seemed to imply that they would be happy to sell their interests for a $35 price on shares. They may be willing to take even less if a potential suitor would also take possession of John Legere, no questions asked.

I think that in the longer term the T-Mobile story will not end well, as there is reason to question the sustainability of its strategy to attract customers and its limited spectrum. It needs a partner with both cash and spectrum. However, since I don;t particularly look at the longer term picture when looking for weekly selections, I’m interested in replacing the shares that were assigned this past week, as its premium is very attractive.

Whole Foods (WFM) is another position that I had assigned this past week, while I still sit on a much more expensive lot. On the slightest pullback in price, or even stability in share price, I would consider a re-purchase of shares, as it appears Whole FOods is finding considerable support at its current level and has digested a year’s worth of bad news.

In an environment that has witnessed significant erosion in option premiums, Whole Foods has recently started moving in the opposite direction. Its option premiums have seen an increase in price, probably reflecting broader belief that shares are under-valued and ready to move higher. Although I’ve been adding shares in an attempt to offset paper losses from that more expensive lot, I believe that any new positions are warranted on their own at this level and would even consider rolling over positions that are likely to be assigned in order to accumulate these enriched premiums.

I currently have no technology sector holdings and have been anxious to add some. With distrust of “new technology” and “old technology” having appreciated so much in the past few months, it has been difficult to find suitable candidates.

Both SanDisk (SNDK) and QualComm (QCOM) have failed to match the performance recently of the S&P 500 and may be worthy of some consideration, although they both may have some more downside risk potential during a period of market uncertainty.

Among challenges that QualComm may face is that it is not collecting payment for its products. That is just another of the myriad of problems that may confront those doing business in China, as QualComm, and others, such as Microsoft (MSFT), may not be receiving sufficient licensing fee payments due to under-reporting of device sales.

In addition, it may also be facing a challenge to its supremacy in providing the chips that connect devices to cellular networks worldwide as Intel (INTC) and others may be poised to add to their market share at QualComm’s expense.

For those believing that the bad news has now been factored into QualComm’s share price, having resulted in nearly a 7% loss as compared to the S&P 500 performance, there may be opportunity to establish a position at this point, although continued adverse news could test support some 6% lower.

SanDisk certainly didn’t inspire much confidence this week as a number of executives and directors sold a portion of their positions.

I don’t have any particular bias as to the meaning of such sales. SanDisk’s price trajectory over the past year certainly leaves significant downside risk, however, the management of this company has consistently steered it against a torrent of  pessimistic waves, as it has survived commoditization of its core products. The risk of share ownership is mitigated by its option premium, that has resisted some of the general declines seen elsewhere, perhaps reflective of the perceived risk.

Finally, Coach (COH) has recently been in my doghouse, despite the fact that it has been a very reliable friend over the course of the past two years. But human nature being what it is, it’s hard to escape the question “what have you done for me lately?”

That’s the case because my most recent lot of Coach was purchased after earnings when it fell sharply and then surprised me by continuing to do so in a significant manner afterward, as well. Unlike with some other earnings related drops over the past two years this most recent one has had an extended recovery period, but I think that it is finally getting started.

The timing may be helped a little bit with shares going ex-dividend this week. That dividend is presumably safe, as management has committed toward maintaining it, although some have questioned how long Coach can continue to do so.

I choose not to listen to those fears.

Traditional Stocks: Altria, Colgate Palmolive, QualComm, Whole Foods, YUM Brands

Momentum:  Las Vegas Sands, SanDisk, T-Mobile

Double Dip Dividend: Bank of America (9/3), Coach (9/5)

Premiums Enhanced by Earnings: none

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

Weekend Update – August 10, 2014

Back in 2007 there was a sign that most mere mortals failed to recognize or understand as they stood in the path of peril.

A messenger delivered such a sign some seven years earlier, as well, and did so again last month.

The messenger was old, perhaps as old as the universe itself and his words and actions did foretell of the dangers that awaited, yet they were not appreciated as such, not even by the messenger, who may also have served as the executioner.

The proposed acquisitions of Chris-Craft and Dow Jones, in 2000 and 2007, respectively, were among the signs of market tops preceding terrible plunges that each saw the sacrifice of a generation of investors, some of whom are still said to be hiding as they await some sign of safety to begin investing once again.

The re-appearance of the messenger should give them some pause before considering a return to the action.

However, in a strange kind of way the “all safe” sign may have been delivered this week, as Rupert Murdoch, whose timing with his large previous acquisitions has been exquisite in its accuracy for coinciding with market tops has now sent a counter sign.

Barely a month ago, for those believing in the power of Murdoch, it was ominous that he would have proposed a buy out of Time Warner (TWX), but this week that offer was revoked, perhaps offering a respite to investors fearing another plunge from what may be destined to be a market top.

While many are speculating as to the reason for Murdoch’s change of heart, could it be that he has come to the realization that his offering price was just too high and that history, which has a habit of repeating itself, was poised to do so again?

Probably not, as once you get the taste, it’s all about the hunt and it shouldn’t come as a surprise if Murdoch either regroups, as the world appreciates that Time Warner’s share value is far less without Murdoch’s pursuit or as he seeks a new target.

As far as the revocation of the offer being a counter sign, this past week didn’t seem to receive it as such, as market weakness from last week continued amidst a barrage of international events.

But Murdoch wasn’t alone this week in perhaps having some remorse. Sprint (S), which never really made an overt bid for T-Mobile (TMUS), did however, overtly withdraw itself from that fray, just as T-Mobile was thumbing its nose at the French telecommunications company, Illiad’s (ILD) bid.

Walgreen (WAG) may have had a double dose of remorse this week as it announced that it would buy the remainder of a British drug store chain but would not be considering doing a tax inversion. They may have first regretted the speculation that they would be doing so as they undoubtedly received considerable political pressure to not move its headquarters. Seeing its shares plunge on that news may have been additional cause for remorse.

While Murdoch may have significant personal wealth tied to the fortunes of his company and may have a very vested interest in those shares prospering, that may not always be the case, as for some, it may be very easy to spend “other people’s money” in pursuit of the target and be immune to feelings of remorse.

But it’s a different story when it’s your own money in question. “Investor’s Remorse” can have applicability in both the micro and macro sense. We have all made a stock purchase that we’ve come to regret. However, in the larger sense, the remorse that may have been felt in 2000 and 2007 as Murdoch flexed his muscles was related to the agony of having remained fully invested in the belief that the market could only go higher.

When we see the potential signs of an apocalypse, such as increasing buyout offers and increasing numbers of initial public offerings while the market is hitting new highs, one has to wonder whether remorse will be the inevitable outcome. An Italian recession and the German stock exchange in correction may add to concerns.

Philosophically, my preference has long been to miss an upward climb to some degree by virtue of not being fully invested, rather than to be fully engaged during a market decline.

A drop of 10% seems like a lot, but it will seem even more when you realize that you must gain 11% just to once again reach your baseline. Having been that route I believe it’s much easier to drop 10% than it is to gain 11%. Just ask anyone who now own stocks that may have suddenly found themselves officially in “correction territory.”

As I get older I have less and less time and less appetite for remorse. I would assume that Rupert Murdoch feels the same, but he may also have a sense of immunity coupled with the secret for immortality, neither of which I enjoy.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

This week’s selections include a number of recent targets and perhaps sources of remorse that may now find themselves better suited for those spending their own money, rather than that of other people.

Time Warner shareholders have been on a rollercoaster ride over the past three weeks as they saw a plunge on the same order as an initial surge in that time span. They may be experiencing some remorse for their leadership not being willing to consider Murdoch’s overture. The revocation of the offer, beautifully timed to dampen the good news of Time Warner’s earnings perhaps helped to limit any upside gains from earnings and adding to the feeling that Murdoch was the key to attaining “fair value,” even if that fair value may now no longer represent a premium to the initial bid.

However, with shares now back to their pre-offer level, which admittedly was at the then high for the year, the option premiums are quite high, reflecting the potential for more action. The challenge is knowing in which direction.

In the case of T-Mobile, it was a whirlwind week seeing an offer from abroad which wasn’t taken very seriously by anyone and then seeing the presumptive acquirer drop out of the game.

It’s hard to say who if anyone would have had any remorse, certainly not its out front CEO, John Legere, but no doubt shareholders experienced some, as shares plummeted in the belief that suitors were dropping like flies.

While Legere talks a boisterous game and did all he could to close the door to any future with Sprint, the reality is that T-Mobile needs both spectrum and cash and Legere needs a “sugar daddy” and one with lots of patience and tolerance.

For anyone willing to get in bed with T-Mobile, the good news is that they can have John Legere. The bad news is that they get John Legere.

But for a short term trade, suddenly T-Mobile is in correction territory and as long as there may still be prospects of capital appreciation, the option premiums are very enticing.

Walgreen shares fell nearly 15% on news that it wasn’t going to do a tax inversion, which seems far more than appropriate, as shares had their major ascent about 6 months ago long before most had ever heard of tax inversion.

I’ve been waiting for a while for Walgreen shares to return to the $60 level and the current reason hardly seems like one that would keep shares trading at that low level. Some recovery over the past two days doesn’t dampen the attraction to its shares.

Target (TGT) certainly should have experienced some remorse over the manner in which its data security practices were managed. In Target’s case, they put an additional price tag on that remorse that reversed the recent climb in shares, but was just really part of the obligatory dumping of all bad news into a single quarter to honor the ascension of a new CEO.

I’ve owned Target shares for a while waiting for it to recover from its security breach related price drop. Uncharacteristically, I haven’t added to my holdings as I usually do when prices drop because I haven’t had the level of confidence that I usually want before doing so. Now, however, I’m ready to take that plunge and don’t believe that there will be reason for further personal remorse. WIth an upcoming dividend, I don’t mind waiting for it to share in an anticipated pick up in the retail sector.

I’ve certainly had remorse over my ownership of shares in Whole Foods (WFM). While its co-CEOs are certainly visionaries, they have been facing increasing competition, are engaged in an aggressive national expansion and have one CEO that tends to make inopportune comments reflecting personal beliefs that frequently impact the stock price.

To his credit John Mackey has expressed some regrets over his choice of words in the past, but recently there has been little to inspire confidence. A recent, albeit small, price climb was attributed to a rumor of an activist position. While I have no idea of whether there’s any validity to that, Whole Foods does represent the kind of asset that may be appealing to an activist, in that it has a well regarded product, significantly depressed share price and leadership that may have lost touch with what is really important.

Mondelez (MDLZ) may or may not have any reason to feel remorse over adding activist investor Nelson Peltz onto its Board of Directors and to his decision to stop seeking a merger deal with Pepsi (PEP). Investors, however, may have some remorse as shares suddenly find themselves in correction over the past month.

That price drop brings Mondelez shares back into consideration for rotation into my portfolio, especially if looking for classically “defensive” positions in advance of an anticipated market decline. With an almost competitive dividend, a decent option premium and the possibility of some price bounce back the shares look attractive once again.

DuPont (DD) and Eli Lilly (LLY) are both ex-dividend this week and there’s rarely reason to feel remorse when a dividend can make you feel so much better, especially when well in excess of the average for S&P 500 stocks. Lilly’s recent fall in the past two weeks and DuPont’s two month’s decline offer some incentive to consider adding shares at this time and adding option premiums to the income mix while waiting for the market to return to an upward bias.

Cree (CREE) reports earnings this week and is always an exciting ride for a lucky or unlucky investor. It is a stock that either creates glee or remorse.

My most recent lot of shares came from eventually taking assignment of shares following the sale of puts after the previous earnings report, thinking that they couldn’t possibly go down any further in a significant manner. I don’t have any remorse, as I’ve been able to generate option premium revenue on having rolled the puts over and then having sold calls subsequent to assignment. I may, however, have some remorse after this coming week’s earnings.

The option market is once again looking for a significant earnings related move next week. For the trader willing to risk remorse a 1% weekly ROI may be achieved at a strike level 12% below the current price. For those less tolerant of risk, if shares do drop significantly after earnings, some consideration can be given to selling out of the money puts and being prepared to manage the position, as may become necessary.

Finally, how can you talk about remorse and not mention Halliburton (HAL)? From drilling disasters to adventures in Iraq Halliburton really hasn’t needed to be remorseful, because somehow it always found a way to prosper and move beyond the “disaster du jour.”

In hindsight, it seems so perfectly appropriate that for a period in time its CEO was future Vice President Dick Cheney, who didn’t even express any remorse for having shot a good friend in the face.

That’s the kind of leadership that we need in a company being considered for its worthiness of our personal assets, because we are capable of remorse and are pained by the prospects of engaging in it.

With some recent price weakness, as being experienced in the energy sector, now appears to be a good time to take advantage of Halliburton’s price retreat and save the remorse for others.

Traditional Stocks: Halliburton, Mondelez, Target, Time Warner, Walgreen, Whole Foods

Momentum: T-Mobile

Double Dip Dividend: DuPont (8/13), Eli Lilly (8/13)

Premiums Enhanced by Earnings: Cree (8/12 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of covered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.

Weekend Update – August 3, 2014

This past week was one that I initially thought would have its outcome determined by our rational reaction to earnings reports. It was to be another busy week on the earnings front and the previous two weeks had been fairly orderly, despite some occasional intrusion by world events in far away places.

Regardless of the outcome of earnings reports, there is something fundamentally calming when the market actually reacts in a rational way to fundamental bits of data.

But by the time we found ourselves awaiting the release of this month’s Employment Situation Report a certain kind of speculation returned after an absence of a few months and the calm was disrupted.

Is good news now bad again and bad news now good? If you already have trouble distinguishing between good and evil, the contortions necessary to interpret economic events is especially difficult when the rules aren’t clear.

After a few months of more traditional beliefs that good was good and bad was bad, in light of the nuances that may have been contained in the FOMC statement from earlier in the week, many were beginning to question how reality should be perceived.

Perhaps it was the realization that the Federal Reserve wasn’t sounding quite as dovish with its most recent FOMC statement release and that interest rates might rise sooner than stock traders had anticipated. That set off concerns regarding Friday’s Employment Situation Report and the worries that too much growth on the employment front would accelerate the Federal Reserve’s decision to foster higher interest rates.

Which as we all know is bad for stocks, as long as the market has read the same play book and decides to act in a predictable fashion.

The return of paradoxical thinking was made possible by a sudden 317 point loss on Thursday, which of course, initiated a new round of speculation regarding whether this was the beginning of the long awaited correction.

However we start interpreting news going forward this was definitely a week with lots of it, in very sharp contrast to those past few months of predominantly boredom filled weeks punctuated by some isolated, but contained crises here and there.

While the last few months have had their own unique issues, this week was unusual due to the coincidental convergence of so many events. So confusing, in fact, that the usually assured “talking heads” weren’t really able to decide what the root cause was for Thursday’s sudden drop. Lack of agreement isn’t unusual, but lack of assuredness is and there was clear uncertainty within and between pundits. Was it Argentina? Was it more Russian sanctions? Both?

What they could all agree upon and incessantly discussed, was the rise in volatility, always marveling at the rise in percentage terms, without regard to its still very low level. While most investors don’t spend too much time thinking about volatility, it is what drives option premiums, so it is very important to those buying or selling option contracts and for sellers increasing volatility offers greater cushions for market declines accompanying the volatility increase.

The new week begins with the feeling that bargains may be had, but there has to be some concern that the week ending selling was done on fairly heavy trading volume. Additionally, the attempt to rally on Friday afternoon ended up fizzling, as for once traders may have decided to live by age old words of wisdom and not go long into a weekend of uncertainty.

As with most weeks set to begin with uncertainty, I split the difference. Always trying to maintain a cash reserve for new weekly purchases, usually supplemented by weekly assignments, I expect to wait for some cues as trading begins the week, but am not adverse to reducing those cash reserves in response to what may have been good news for those on the hunt for bargains.

As usual, the week’s potential stock selections are classified as being in Traditional, Double Dip Dividend, Momentum or “PEE” categories.

The coming week may be a battle of deciding upon stocks that may be exposed to the various perils that face the world and those that may be somewhat protected. While staying away from danger may have its appeal, there may be some opportunities even in the danger zone now that we all know where it resides.

At the moment Best Buy (BBY) faces some perils, but it’s not too likely that Argentina nor Russia will have much impact on its immediate  fortunes. The same is likely true for Gaza and Ukraine.

What Best Buy may be concerned about, and the market took note, was what its CEO observed regarding tablet sales. Such a decrease, if accurate, and which appears to be consistent with Apple’s (AAPL) recent earnings release and sales reports, at least doesn’t place concern on an incapable, but willing consumer, which would have ramifications far beyond Best Buy and far beyond its sale of tablets.

However, with shares driven below $30, I’m ready to take ownership again after having recently had shares assigned at that strike level.

With its own earnings still about 4 weeks away there may be some opportunity to wring some benefit from ownership again in advance of that date.

Cypress Semiconductor (CY) and Texas Instruments (TXN) have taken two different paths, with perhaps Best Buy’s observation having greater impact on sales at Cypress Semiconductor, which among its product lines, the sale of touch screens is quite important. Fortunately, while tablet sales may be falling, smartphone sales continue to grow and Cypress Semiconductor stands to benefit from that continued phenomenon. Trading near its near term low of $10 makes it an attractive purchase using either an August or September 2014 option contract. If utilizing the September contract and not assigned, I would likely consider waiting until the October 2014 contracts appeared, in order to have a better opportunity to collect both premiums and a healthy dividend.

I recently purchased shares of Texas Instruments (TXN) immediately before its ex-dividend date, but a sudden reversal and surge in its share price made
it too tempting to resist early exercise and the holding lasted only a single day.

By the time the week ended, Texas Instruments shares followed the same path as many others and ended at a price that made me glad that the shares had been assigned. However, now I’m enticed by shares simply for the option premium and chance to recover some of the recent drop from its near term highs, as “old technology” which was the market’s darling earlier in the month has settled back somewhat.

Although Sinclair Broadcasting (SBGI) relies on people watching their broadcasts on television sets, it probably doesn’t care very much about the fortunes over at Best Buy, as long as sales of Aereo have been halted, as they have following the Supreme Court’s decision. That decision sent shares sharply higher as for days before the announcement shares alternated between sharp gains and losses in anticipation of a decision.

It isn’t a very glamorous stock but after having given up some of those gains I would consider a position or selling put options after it announces its earnings prior to the open of trading on Wednesday. With an upcoming dividend later in the month, if opening a new position I might consider concomitant sale of the September 2014 monthly call contract.

Like Best Buy, Las Vegas Sands (LVS) is another stock that I would like to re-buy as it trades near the $72.50 range. After some negative news from Macao, a major revenue center for Las Vegas Sands, the price has come down following some recent gains, as the price has seemed to establish a near term floor at about $72.50, while it trades well below its highs from earlier in the year. I’ve owned shares three times in the past two months and while the shares have moved, they’ve gone virtually nowhere. That is an ideal characteristic for a stock considered as a vehicle for a covered call strategy.

British Petroleum (BP) which is ex-dividend this week is one of those companies that could face additional risk as Russia may take steps in response to European Union sanctions which could then disproportionately have impact in the energy sector.

Over the past month shares have shown uneasiness in British Petroleum’s position in Russia. While those shares are still well above where I last owned them, I think that the current sell-off offers the opportunity to establish a position that may begin to benefit from increased volatility as its option premiums begin to reflect some of the politically induced uncertainty. The position may require some nursing as the situation develops, but in the past few years few stocks have shown an ability to climb back from the depths better than British Petroleum.

While Argentina has had seven previous debt defaults somehow this most recent one comes as a surprise, despite the protracted and high profile legal proceedings in the United States that pitted an aggressive hedge fund against the government of Argentina.

Money center banks, such as JP Morgan Chase (JPM) didn’t fare terribly well toward the latter part of the week after news came through regarding the likelihood of Argentina being in technical default of its debt obligations. Again, the surprise was lacking, so perhaps the only surprise should have been that shares would reflect surprise.

Otherwise, for me it is an opportunity to repurchase shares that were just assigned a week earlier at $58. Ultimately, that is the real essence of a covered call strategy, looking for opportunities to re-purchase the very same stocks, ideally at lower prices, while still being able to milk premiums and occasionally dividends from the shares. JP Morgan has consistently played along and I don’t envision the current decline as being deeply rooted.

With speculation that interest rates may be rising sooner than initially believed the thesis had helped to lift MetLife (MET) earlier in the year should once again come into the equation. Higher interest rates tend to be better for insurance companies and MetLife is certainly poised to benefit from an increase, with earlier better than later, even though such time frame concerns have tempered market optimism.

The timing may be just right for an investment as shares are down about 5% from its recent high following earnings. Even better is that shares are ex-dividend this week.

Finally, like most others sitting on appreciated real estate assets, I look at Zillow (Z) as a form of pornography, often salivating as I see the value it believes my home is worth and sometimes checking the site twenty times an hour, especially on those days that the stock market isn’t doing it for me.

Let’s just leave it at that, but you do have to admire the business model and its primacy, as it announced its buyout of competitor Trulia (TRLA) using its shares as currency and without any cash component.

Having dropped about 11% in the past week after about a 20% rise the previous week, the options market is implying a nearly 9% move upon earnings, down to a lower boundary of about $130. However, a 1% weekly ROI can possibly be achieved at a $126 strike level, representing an 11.2% decline if a weekly put contract is sold.

While I like those odds, this may be one of those potential trades that I would more likely consider executing after earnings, through the sale of put contracts, if shares plunge following earnings.

Hopefully the coming week will return to the normal boredom of summer and leave us only considering things like earnings, same store sales and merger/buyout news.

My brain hurts after this past week and needs a break from too much news and too much acrobatic thinking.


Traditional Stocks: Cypress Semiconductor, JP Morgan, Sinclair Broadcasting, Texas Instruments

Momentum: Best Buy, Las Vegas Sands

Double Dip Dividend: British Petroleum (8/6), MetLife (8/6)

Premiums Enhanced by Earnings: Zillow (8/5 PM)

Remember, these are just guidelines for the coming week. The above selections may become actionable, most often coupling a share purchase with call option sales or the sale of co

vered put contracts, in adjustment to and consideration of market movements. The overriding objective is to create a healthy income stream for the week with reduction of trading risk.