Week in Review (January 6 – 10, 2013)

 

Option to Profit Week in Review
January 6 – 10, 2014
 
NEW POSITIONS/STO NEW STO ROLLOVERS CALLS ASSIGNED/PUTS EXPIRED CALLS EXPIRED/PUTS ASSIGNED CLOSED
4/ 4 1 5 9 / 0 1 / 0 2

    

Weekly Up to Date Performance

January 6-10, 2014

For the first full week of 2014, new purchases trailed the time adjusted S&P 500 by 0.3% and also trailed the unadjusted index by 0.2%.

The market showed an adjusted gain for the week of 0.7% and unadjusted gain of 0.6% for the week, while new positions advanced only 0.4%.

For the 12 positions positions closed in 2014, performance exceeded that of the S&P 500 by 1.1%. They were up 2.9% out-performing the market by 62.8% for the data-challenged year to date. I don’t expect that kind of out=-performance to continue, however, with the current low volatility.

I’m not really certain how I felt about this week.

While I suppose that the bottom line should be the bottom line and that was improved, it still felt very empty.

Prior to today’s assignments, I was at my lowest cash level for a while, yet don’t feel as if I have quite that much to show for it. Beside that, there were only four new position purchases for the week and they really didn’t fare too well, even with lots of cushion built into their strike prices.

On the other hand, there were all of those assignments and the ability to replenish cash reserves, as well as the ability to rollover all but one non-assigned position and to be more time diversified when it was all said and done.

But then there was that lost dividend in Verizon that spiked up for no reason at all on the day before ex-dividend.

Of course, the ambivalence is further reflected in the happiness that I wasn’t holding Verizon after it plunged the next day, also for no reason at all.

So, after all of that, there’s this emptiness that even with a week that had an FOMC release and an Employment Situation Report, not much happened.

Ordinarily, those are the best of all weeks and that might explain the emptiness.

On weeks that the market doesn’t do much other than tread water there’s every reason to expect out-performance. Not only out-performance, but also beating the 1% threshold for new purchases.

This week, as has occurred before, you do get to see how when only opening a small number of new positions it’s very easy to greatly out-perform or under-perform,on the basis of a single stand out.

Following this lackluster week, both in the markets and in personal performance, we’re faced with a monthly expiration, with positioned being well positioned for both assignments and rollovers, although anything goes.

Based on the market’s performance through the first week of yearly trading the idea that “anything goes” is well founded. There basically is very low predictive capability when the first week of an otherwise predicitive month is lower.

However, the market really wasn’t lower. It just felt that way and no one has done any statistical analysis based on the way things feel.

With cash coming and enough positions expiring next week, once again the focus will be on expanded options or February monthly options.

As earnings get underway in earnest next week the market tone may be set by the financials. such as JP Morgan, Citibank, Morgan Stanley and others that all report next week.

If the past two quarters are any guide, the financials will do well, but that won’t necessarily set the stage for the others in the S&P 500. As we’ve seen, retail has been incredibly weak of late and even Macys. which is widely regarded as the best performing right now, has announced large layoffs.

Still, with challenges and risk come opportunity.

I anticipate being a little more active next week, if only to be able to camouflage any under-performers for the week and will be mindful of when companies report earnings. Knowing those dates allows the option of either avoiding, embracing or dancing around those companies.

 

     

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:  CHK, DRI, EBAY, WLT

Puts Closed in order to take profits:  none

Calls Rolled over, taking profits, into the next weekly cycle: none

Calls Rolled over, taking profits, into extended weekly cycleCSCO, LULU, MRO, MSFT, WLT,

Calls Rolled over, taking profits, into the monthly cycle: none

Calls Rolled Over, taking profits, into a future monthly cycle: &nb
sp;none

Calls Rolled Up, taking net profits into same cyclenone

New STO:  ANF

Put contracts sold and still open: **

Put contracts expired: none

Put contract rolled over: none

Long term call contracts sold:  none

Calls Assigned:  ANF, BMY, EMC, HFC, JPM, NLY, SBUX, WAG

Calls Expired: CLF

Puts Assigned:  none

Stock positions Closed to take profits:  CCL, M 

Stock positions Closed to take losses: none

Calls Closed to Take Profits: none

Ex-dividend Positions:  EMC (1/6 $0.10), GPS (1/6 $0.20), DRI (1/8 $0.55)

 

 

** Some people had early assignment of ANF puts on November 8, 2013. Subsequently OTP Trading Alerts were sent to sell new calls on ANF, as well as to roll over puts. The strike prices on the two trades differ, but the premium differentials have this far been virtually identical through a third round of rollovers, with strike prices adjusted on calls and puts to $36 and $35, respectively, from the original $35.50 put sale.

 

 



For the coming week the existing positions have lots that still require the sale of contracts:   APC, CLFFCXJCP, LLY, MCP, MOS, NEM, PBRTGT, WLT (See “Weekly Performance” spreadsheet or PDF file)



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p style=”text-align: center;”>* If you don’t have a program to read or modify spreadsheets, you can download the OpenOffice Suite at no cost.



Daily Market Update

 

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(see all trades this option cycle)

 

Daily Market Update – January 10, 2014 (9:00 AM)

The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday:

Today’s possible outcomes include:

AssignmentANF, BMY, EMC, HFC, JPM, NLY, SBUX, WAG

Rollover: MRO, MSFT, WLT

ExpirationCLF, CSCO

 

Trades, if any, will be attempted to be made prior to 3:30 PM (EST)

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

 

 

 

 

 

 

 

 

 

 

 

See all Trade Alerts for this monthly option cycle

  
 

   

Abercrombie and Fitch Sets Itself Up for More Disappointment

disappointment

 

(A version of this article appears on TheStreet.com)

With low expectations shareholders of Abercrombie and Fitch (ANF) were rewarded during Thursday’s after hours trading as it was announced that the company experienced higher than expected sales for the fourth quarter to date.

Embattled CEO and Chairman Michael Jeffries needed a boost after calls for his resignation and having been the recent recipient of Herb Greenberg’s “Worst CEO of 2013 Award.” The 15% surge, if maintained into trading to end the week will leave shares only about 30% below their 52 week high.

Perhaps lost in the translation are the nuances contained in the report that sent shares soaring that may set Abercrombie and Fitch share holders up for more disappointment in the future. Manufactured good news has a way of doing that once reality hits and it is difficult to interpret today’s press release as anything other than a very favorable spin on a company and a personality much in need of spin.

For the period in question, which ended on January 4, 2014, the company actually reported decreased total sales, but found some solace in the fact that its direct to consumer sales were at its highest level of total sales than ever before. Of course, as the total pie shrinks a component may look comparatively better by simply not shrinking as much. The details of the direct to consumer activities was lacking. Its growth, was by all accounts, relative.

While sales were reported to be better than expected they represented a 4% decrease in the United States and a 10% decrease in international sales. Improved guidance was based on the nine week period ending before much of the east coast freeze that is reported to have stalled mall traffic. It’s unclear how nature’s elements will project forward as the first quarter becomes the object of focus. Additionally, reliance on”ongoing cost reduction efforts” is rarely a strategy for growth. Jeffries’ one year contract extension may require something more substantive than smoke and mirrors to further extend the engagement. Marketing the company as “We’re Not Sears” is not likely to provide a prolonged bounce, much as today’s press release may be suspect.

But I don’t really care about any of that, because Abercrombie and Fitch, for all of its dysfunction and sometimes embaarrassing behavior of its CEO, has been one of my favorite stocks since May 2012. During that period of time I’ve owned shares on 18 occasions.

Abercrombie and Fitch hasn’t been a holding for the faint of heart during that period, nor for anyone abiding by a buy and hold strategy.

As a punctuated buy and hold investor, my sales have been dictated by the call contracts I routinely sold on holdings, almost always utilizing in the money or very near the money strike levels.

Abercrombie and Fitch

Perhaps coincidentally the average cost of those shares has been $38.64, which was just slightly higher than the after hours trading peak after its more than $5 climb. During the period in question shares were initiated at $35.15 and soared as high as $55.23 almost a year to the date of that opening position. A perfect market timer could have sold shares at the peak ans achieved a 59% return with dividends.

Not only am I not a perfect market timer, but I’m also not very patient and would have had a hard time holding onto shares for a full year. Instead my shares were held for reasonably short periods of time, other than one lot currently open for 4 months. During that time the cumulative return has been 56% while the shares themselves have appreciated less than 11% from the date of first purchase.

With some of my shares set to expire on Friday January 10, 2014 amd some others the very next week, there is a chance that I will be left with no shares, thanks to a well timed press release.

However, I have no doubts that Abercrombie and Fitch will find a way to undo investor goodwill and will see its price come down. When it does, I will be there, once again, eager to pick up the wounded shares of of a company that would be embarrassed to have me as a customer.

Daily Market Update – Close

 

  

(see all trades this option cycle)

 

Daily Market Update – January 9, 2014 (Close)

Much has been said of the ability for January to predict the entire year’s stock market.

In fact, taking it even further, there are those who believe that the first 5 trading days actually have great predictive capacity for determining the outlook for the entire year.

Today marks the 6th trading day of 2014, so it must be time to make some conclusions.

An interesting article takes a statisticians’s view of the topic and is somewhat better than the more superficial mentions of how January may impact the remainder of the year. Unfortunately, this short and undated article appears to be about 10 years old and hasn’t considered the past tumultuous trading period, but still offers some meaningful insights. I’ve tried contacting the author to see if he has an update and will share the information, if he does respond.

However, I can tell you that his conclusions, when looking at those past years in hindsight, have been well founded.

In a nutshell, he believes that January is an effective predictor for the rest of the year, especially if January is a month that moves higher. What may be more useful, however, is what occurs when January moves lower.

In that case the correlation falls apart. The market could move lower or higher, as opposed to a greater likelihood of only moving higher. The belief expressed in that article was that during such a period moving in and out of stocks was an appropriate strategy.

For me, that’s like music to my ears, especially if the first 5 days.of 2014, which have been similar to the first 5 days of 2011, would result in a repeat of 2011.

That was an odd year, only in that the market ended the year unchanged.

It was a year punctuated by ups and downs in an alternating rhythm. As a result, it was also a year that saw a significant spike in volatility and, therefore, option premiums.

To be fair, the opinion expressed by the author specifically avoided the idea that the first 5 days of the month have any real meaning. He looked at the entire month of January, but taken together with the comments being tossed around about those first 5 days, it at least warrants some attention.

Thus far, the first 5 days haven’t set the world on fire, although the 6th day’s pre-market is pointing mildly higher and although not likely, tomorrow’s Employment Situation Report could create a large move in either direction.

Still, the very thought that a stock picker’s market may be on the horizon, one in which stocks are actually distinguished from one another on the basis of price performance, is a great and overdue situation.

If that is truly on the horizon that would mean less opening of new positions and more rollovers of existing positions, as the increased volatility would offer premiums more worthwhile, even when strike prices are more of a distance from current prices.

That’s not really the situation right now and hasn’t been so for much of 2013.

What’s also very appealing is that when markets do have such alternating currents it tends to be easier to find new positions worthy of purchase. Instead of a market where everything just moves higher imagine a world where there are tides and you can coincide moving in and out of positions with the flow of those tides.

That’s not really a dream, it’s more of a hope for the return of what used to be what we thought were regular markets.

For now my hope is that this negative tone takes a break.

While the market did recover on this 6th day, the retailers, other than Macys, are having a really hard time and that can never be very good. Even Macys owed its good fortune to the way the market reacted to news of widespread layoffs.

That’s certainly not nice or good.

 

 

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

 

 

 

 

 

 

 

 

 

 

 

See all Trade Alerts for this monthly option cycle

  
 

   

Daily Market Update

 

  

(see all trades this option cycle)

 

Daily Market Update – January 9, 2014 (9:30 AM)

Much has been said of the ability for January to predict the entire year’s stock market.

In fact, taking it even further, there are those who believe that the first 5 trading days actually have great predictive capacity for determining the outlook for the entire year.

Today marks the 6th trading day of 2014, so it must be time to make some conclusions.

An interesting article takes a statisticians’s view of the topic and is somewhat better than the more superficial mentions of how January may impact the remainder of the year. Unfortunately, this short and undated article appears to be about 10 years old and hasn’t considered the past tumultuous trading period, but still offers some meaningful insights. I’ve tried contacting the author to see if he has an update and will share the information, if he does respond.

However, I can tell you that his conclusions, when looking at those past years in hindsight, have been well founded.

In a nutshell, he believes that January is an effective predictor for the rest of the year, especially if January is a month that moves higher. What may be more useful, however, is what occurs when January moves lower.

In that case the correlation falls apart. The market could move lower or higher, as opposed to a greater likelihood of only moving higher. The belief expressed in that article was that during such a period moving in and out of stocks was an appropriate strategy.

For me, that’s like music to my ears, especially if the first 5 days.of 2014, which have been similar to the first 5 days of 2011, would result in a repeat of 2011.

That was an odd year, only in that the market ended the year unchanged.

It was a year punctuated by ups and downs in an alternating rhythm. As a result, it was also a year that saw a significant spike in volatility and, therefore, option premiums.

To be fair, the opinion expressed by the author specifically avoided the idea that the first 5 days of the month have any real meaning. He looked at the entire month of January, but taken together with the comments being tossed around about those first 5 days, it at least warrants some attention.

Thus far, the first 5 days haven’t set the world on fire, although the 6th day’s pre-market is pointing mildly higher and although not likely, tomorrow’s Employment Situation Report could create a large move in either direction.

Still, the very thought that a stock picker’s market may be on the horizon, one in which stocks are actually distinguished from one another on the basis of price performance, is a great and overdue situation.

If that is truly on the horizon that would mean less opening of new positions and more rollovers of existing positions, as the increased volatility would offer premiums more worthwhile, even when strike prices are more of a distance from current prices.

That’s not really the situation right now and hasn’t been so for much of 2013.

What’s also very appealing is that when markets do have such alternating currents it tends to be easier to find new positions worthy of purchase. Instead of a market where everything just moves higher imagine a world where there are tides and you can coincide moving in and out of positions with the flow of those tides.

That’s not really a dream, it’s more of a hope for the return of what used to be what we thought were regular markets.

 

 

   

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 8, 2014

 * Assumes equal number of shares in positions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Posting of trades is not a recommendation to execute trades

 

Monday through Thursday? See “Daily Market Update” with first edition published by 12 Noon and Closing Update published by 4:30 PM

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

 

 

 

 

 

 

 

 

 

 

 

See all Trade Alerts for this monthly option cycle