Friday, November 21, 2014

Outlook for Stock Markets November 2014: Time to Get Flat

What's happening in the Stock Markets?

Markets are trending strongly up, but there may be signs of peakiness.

Here are some market breadth charts ( of the Advance/Decline Ratios for the NYSE and NASDAQ exchanges:

Daily points are forming a peak, and the 10-day moving average may be topping as well.

Monday, November 03, 2014

Stocks in IRAs are not marginable

Stocks in IRAs are not marginable.

My main strategy is selling premium, and holding stock ties up capital that could be securing short puts.

Today I am wondering whether it is better to do "stock substitution": sell the stock, buy a call, sell a put.

I have paper traded long synthetic LEAPS in the past, and found that holding stock was better. But perhaps a little finagling would help:
  • Place a covered order to sell the stock and buy a call (saves $3 in fees)
  • Buy a long-dated call (ex. LEAPS) (minimize time decay)
  • Sell a front-month put (3-12 weeks) (maximize time decay)

Friday, October 31, 2014

Weeklies Expiration 31 10 2014

These are the option positions I am monitoring for the Oct 31 2014 (weeklies) expiration:
Symbol 10/29 closing price Position NotesPlan
CL65.85-1 CL Oct5 $65 CallCL in uptrend, OI small in weekliesroll
EEM41.58-1 EEM Oct5 $40 PutEEM in uptrendlet expire
EWZ41.11-1 EWZ Oct5 $41.5 PutEWZ IV down post electionlet expire
GDX19.64-1 GDX Oct5 $23 PutGDX crateringroll ratio
GDXJ19.64-1 GDXJ Oct5 $23 PutGDX crateringroll ratio
KO40.96-1 KO Oct5 $41 PutKO in uptrendlet expire, sto next series

Friday, October 24, 2014

Weeklies Expiration 24 10 2014

-1 CL (Weeklys) OCT4 $65 CALL
-1 GDXJ (Weeklys) OCT4 $33 PUT
-1 KO (Weeklys) OCT4 $41 PUT
-1 T (Weeklys) OCT4 $35 PUT
-1 WMT (Weeklys) OCT4 $75 PUT

Most of these are near the money, and I hope to roll for credit.

Thursday, October 23, 2014

Review: Selling Volatility Before Earnings (T stock)

In the last few days I have sold puts on CAT and T (sound stocks I would own) trying to exploit increased Implied Volatility in the day or days before Quarterly Earnings announcements.

Both these stocks have weekly options, and I have sold puts with less than a week to expiration.

CAT beat expectations, the stock is up, and I bought in the put for pennies.

T is down 2.5% to $33.67, my short puts are In the Money (bad), and what is most interesting, rolling out is not profitable.

With only one trading day left, the Implied Volatility in the Oct4 $35 put is 21%, while in the following weeks IV ranges from 15% for the Oct5 put down to 12.6% in Dec.

Rolling out 1 or 2 weeks (middle of market -$2, $2) would cost me money after commissions of $6. I could roll out to the Nov monthly for a net of $3, which is paltry for 4 additional weeks of risk. Rolling to December nets me $5!

Theoretically, the IV curve at expiration becomes very narrowly centered at the money (high IV at the $34 strike and low IV at $35 and $36) but for T puts expiring tomorrow IV is 20% all the way up to the $40 strike (T +15% above today's close).

The bid/ask spread is around 20¢ at all strikes and expirations.

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;