Friday, October 03, 2014

Long Term Outlook by David Solin FXS

Two nice charts in David Solin's Oct 2 2014 article, S&P 500, just the beginning:

  • Sept 23, the market broke the base of the rising wedge since July (then at 1992).
  • Oct 1, market took out the base of the even larger rising wedge from Nov 2012 (currently at 1952/55).
  • Resistance at base of large wedge since Nov 2012 (currently 1550/55)
    and bearish trendline from Sept 20th (currently at 1980/85).
  • Support is seen at 1902/07 (Aug 7th low).

As discussed above, looks like the view of sharply lower prices into at least the late Oct timeframe is indeed playing out. Note too that a number of more major, long term negatives remain, and continues to argue potential for a more significant top (9-12 months or more). No doubt the market is very overbought after the huge surge from the March 2009 low at 667, appear to be within the final upleg in the rally from at least the Oct 2011 low at 1075 (wave V), and the market has indeed broken down from the "rising wedge in a larger rising wedge" pattern. Initial downside target/support is seen at 1655/65 (both the base of the huge bullish channel since the March 2009 low at 667 and a 38% retracement from the Nov 2012 low at 1343, see in red on weekly chart/2nd chart below). Bottom line : break of the base of the large rising wedge since 2012 adding to the view of sharp declines toward an initial 1655/65 ahead (may be sharp).

Tuesday, May 13, 2014

Cisco Systems (CSCO) Earnings Play

Cisco Systems (CSCO) announces earnings / quarterly report Wednesday May 14 after the markets close.

Today CSCO traded as low as $22.76.

With CSCO at $22.87 I sold -1 CSCO May $22.5 Put (3 days to expiration) for a net credit of $31.05. If CSCO closes above $$22.50 on Friday I get to keep the credit. If below, I can either roll the put out to Jun for more credit, or take CSCO stock (currently yielding 3%).

Preview of CSCO Quarterly Report
Sales $11.36 B $11.24-11.48 B
EPS $0.48

Position Adjustments for week of 5/12/2014

ABX : Barrick Gold : $17.23 Friday close

-1 May $18 put
-1 May $19 put; "roll" to GDX $23 puts?

F : Ford Motor Co : $15.77 Friday close

-1 May $17 put;

SIL : Global X Silver Miners ETF : $12.03 Friday close

-5 May $13 puts;

SLV : iShares Silver Trust : $18.42 Friday close

-1 May $18.5 put;

Monday, May 12, 2014

Watchlist Week of 5/12/2014

Maybe the markets have worked off some of the froth? Time for more Put Selling?

The charts for these ETFs look interesting:




Tuesday, May 06, 2014

Long the Housing Sector (put-selling on XHB)

Today I sold puts against the SPDR S&P Homebuilders ETF (XHB)

I checked out XHB after reading a CNBC / Yahoo Finance Talking Numbers article, Buffett is worried about housing. Should you be too?

Some reasons for going long home builders:

I believe that over the next 5 to 10 years the housing market will be in a long term cautious recovery.

2013 Q4 Household Mortgage Debt Service Ratio near 30 year low

Household Mortgage Debt Service Payments and Financial Obligations as a Percentage Of Disposable Personal Income; Seasonally Adjusted

Technically, XHB may be Oversold

6-month chart for XHB showing Bollinger Bands and MACD, source

Tuesday, April 29, 2014

Earnings Play on Aflac (AFL)

Aflac (AFL) quarterly report drops today (Tuesday 4/29/2014) after the markets close.

IV (Implied Volatility or Uncertainty Premium) is high in the front month (May, with 17 days to go).

With AFL trading at $62.36 I sold (paper trading) a May $62.5 straddle (-1 $62.5 call, -1 $62.5 put) and simultaneously bought the June $62.5 straddle (+1 $62.5 call, +1 $62.5 put).

(I actually ordered these as a long Call Calendar Spread order and a long  Put Calendar Spread order, but maybe ordering as straddles would get a slightly better price from the market, since it may be simpler to hedge against straddles.)

The idea is that because of the earnings announcement the prices are a bit skewed so that I am selling an overpriced straddle and buying a fairly priced straddle. Theoretically, tomorrow I should be able to close all these positions at a profit, because the IV in the May options will decrease a lot (no more uncertainty about earnings numbers) while the IV in the June options will decrease a little but not as much.

Monday, April 21, 2014

US Mint Loses 80% on every Penny and Nickel

US Mint Annual Report 2013 [pdf]

Unit Cost of Producing and Distributing Coins By Denomination
Cost of Goods Sold$ 0.0156$ 0.0805$ 0.0391$ 0.0903
Selling, General &
$ 0.0025$ 0.0131$ 0.0061$ 0.0135
Distribution to FRB$ 0.0002$ 0.0005$ 0.0004$ 0.0012
Total Unit Cost$ 0.0183$ 0.0941$ 0.0456$ 0.1050
% Loss/Profit-83.00%-88.20%54.40%58.00%

Wednesday, March 19, 2014

March Expiration

March expiration week has been fun and interesting: many of my short puts are at the money (ATM). This means "rolling for dollars" brings the highest possible profits.

Here are my notes on the remaining short options:

ABX (around $20, short the $20 put)
Roll it. I like ABX, my thesis is that Gold will rise, I'm not worried about the strike price.

EWA (around $25, short the $25 call)
Hard one. EWA yields 4.5%, so I want to hold on to my 100 shares. EWA is in an uptrend (bad for my short call) after being beaten down by global growth fears. Maybe it will pin at 25 by Friday.
Put in a GTC order to close for .05 (bid/ask $5/$25, size 13x825 on 3/19).

EWW (around $60.50, short the $60 put)
I want exposure to Mexico, so do I roll this or let it expire and get long on the next correction? I think EWW has found a bottom, so maybe I roll out and up to the $61 put?
Roll out to 60 or 61 strike. Wait and see where it pins Friday.

EWZ (around $40, short the $39 put)
OTM with EWZ around 40.60 today.
Let it expire.

GDX (around $26, short the $24 put)
GDX is in a secular uptrend (my thesis) but it's down 7% so far this week, from 27.70 Friday to 25.70 today. If it should be near 24 Friday I will roll. Otherwise,
Let it expire.

GM (around $34.50, short the $34 put)
I don't like GM. This was a special situation "story stock" (panic selling on legal threats).
Let it expire.

UNG (aound $25, short the $24 put)
Let it expire. (Get long stock when at 100-day line.)