CCI has held a half position in Teva (TEVA) for awhile.
The primary reason for holding the stock was management's long-term goal of $7 eps driving a very attractive forward validation and generic drugs seeming to be a growth market. My original thoughts on Teva are shown here.
With a new management team coming into place it is less clear if their is still a commitment to this longer term goal, or at minimum it is likely that new management may want to take some time to adjust their view of the future plan. Further one of the risks related to Teva is that despite the fact that it is a global company, the stock price will likely be adversely impacted by any macro issues related to the mid-east. Tensions in that area of the regions seem to be growing and probably already having a drag on the stock price. Our position is near break even.
CCI sold one lot of the stock as documented here . With the stock trading around $43.50, CCI sold one lot of April $45 calls for about $.45 after commissions today. If this stock rebounds toward $45 it will be called away as part of continuing to reduce exposure to this holding. If the stock does not rise, the 1% premium will serve to provide a very small buffer to downside risks.
Monday, March 19, 2012
Friday, March 16, 2012
Keep "putting" on the insurance
Our hedges keep losing....and we are "happy" about it..because overall the market continues to rise.
Continuing with our practice of having a market hedge in place CCI rolled the March $135 - $129 put spread out and up to the April $137-$130 put spread late Wednesday. Net cost after commissions of $1.10/contract. That is the max loss. Break even at $135.90. Max gain of $5.90/contract.
"Hopefully" we will lose that again as the market continues higher. Seems like there "has" to be a pull back at some point and this relatively cheap, leveraged play provides some insurance against such an event.
Continuing with our practice of having a market hedge in place CCI rolled the March $135 - $129 put spread out and up to the April $137-$130 put spread late Wednesday. Net cost after commissions of $1.10/contract. That is the max loss. Break even at $135.90. Max gain of $5.90/contract.
"Hopefully" we will lose that again as the market continues higher. Seems like there "has" to be a pull back at some point and this relatively cheap, leveraged play provides some insurance against such an event.
Thursday, March 15, 2012
What is worse than a Muppet?
The link to the op ed below received a fair amount of recent commentary. It was penned by a Goldman Sachs director as part of his resignation process. First it is important to note that this is just the opinion of one, possibly disgruntled, person. Hence, it may not be entirely accurate. However, he seems to feel that at times...GS puts its own interests instead of its clients. CCI was so "shocked and dismayed" by this possible revelation, that I decided to use this post to add my own general commentary to this "news".
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1&pagewanted=2
One of the quotes from the op ed that attracted the most public attention was the author's claim that "Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,”". In full disclosure CCI is not a client of GS. I doubt many of those reading this blog are as well. Their clients are more likely hedge funds, asset managers, sovereign wealth funds, extremely wealthy individuals, etc. Not usually the type of investors I think of as being easily controlled by pulling their strings, of somewhat limited intelligence, or any other characteristic of a muppet.
It got me to thinking.... If GS might think these sophisticated investors are "muppets"...I wonder what they the financial services industry thinks of members of the investor class? Probably something even more easily manipulated, gullible, dimwitted, etc. Who knows, but this just re-enforces my belief that the individual investor might be better off thinking for themselves and/or banding together with others in the peer group to get a more independent and useful perspective on their investment strategy.
http://www.nytimes.com/2012/03/14/opinion/why-i-am-leaving-goldman-sachs.html?_r=1&pagewanted=2
One of the quotes from the op ed that attracted the most public attention was the author's claim that "Over the last 12 months I have seen five different managing directors refer to their own clients as “muppets,”". In full disclosure CCI is not a client of GS. I doubt many of those reading this blog are as well. Their clients are more likely hedge funds, asset managers, sovereign wealth funds, extremely wealthy individuals, etc. Not usually the type of investors I think of as being easily controlled by pulling their strings, of somewhat limited intelligence, or any other characteristic of a muppet.
It got me to thinking.... If GS might think these sophisticated investors are "muppets"...I wonder what they the financial services industry thinks of members of the investor class? Probably something even more easily manipulated, gullible, dimwitted, etc. Who knows, but this just re-enforces my belief that the individual investor might be better off thinking for themselves and/or banding together with others in the peer group to get a more independent and useful perspective on their investment strategy.
Wednesday, March 14, 2012
Selling Covered Calls on Cisco....Again
With Cisco (CSCO) trading back near its 52 week high, CCI continued with the plan of selling covered calls against a Jan 13 $10 call position.
Specifically, CCI sold the May $21 calls for a credit of $.48/contract after commissions. A few scenarios:
Specifically, CCI sold the May $21 calls for a credit of $.48/contract after commissions. A few scenarios:
- If the stock does break out over $21 in the next two months the combined leveraged from the gain in the LEAP and the covered calls sales to date will be up approx 40%.
- If the stock stalls out or falls in the next two months, the covered call will yield 2.3% (before leverage) to soften the blow of the any market pullback.
"Linsanity" could make shorting MSG a slam dunk
With the market hitting new highs, CCI continues to contrarily look for positions to provide a hedge to the overall rising portfolio.
Read this article for rational why Madison Square Garden ( MSG ) stock might be overvalued, largely based on Linsanity.
Read this article for rational why Madison Square Garden ( MSG ) stock might be overvalued, largely based on Linsanity.
Tuesday, March 13, 2012
Hoping the Heat Wave will continue the Decker melt down.
Decker Outdoors (DECK) engages in the design, manufacture, and
marketing of footwear and accessories for outdoor activities and casual
lifestyle use for men, women, and children. Mostly known for the UGG
brand name. This previously high-flying stock has plummeted this year. The most common rationale for the melt down in the stock has been a warm winter meaning lower demand for their well know boots. Several analysts have downgraded the stock recently.
CCI considered shorting the stock. However, decided to make a short-term more speculative play. Specifically with the stock trading around $69.20 today, sold the Mar. $70 call and bought the Mar $72.50 call. Received a credit of $.57/contract after commissions. That is the most the trade can make if the stock continues to trade below $70 for four more days. Pure theory says there is about a 60% chance of that happening, but I'm hoping this week's warm weather is not going to trigger a lot of demand for someone to buy this stock this week. The trade starts to lose money if the stock trades over $70.57. This is a little more speculative play than CCI normally makes. I did not commit a lot of capital to the trade, but it does provide a little more short exposure to the portfolio for the short term.
CCI considered shorting the stock. However, decided to make a short-term more speculative play. Specifically with the stock trading around $69.20 today, sold the Mar. $70 call and bought the Mar $72.50 call. Received a credit of $.57/contract after commissions. That is the most the trade can make if the stock continues to trade below $70 for four more days. Pure theory says there is about a 60% chance of that happening, but I'm hoping this week's warm weather is not going to trigger a lot of demand for someone to buy this stock this week. The trade starts to lose money if the stock trades over $70.57. This is a little more speculative play than CCI normally makes. I did not commit a lot of capital to the trade, but it does provide a little more short exposure to the portfolio for the short term.
Friday, March 9, 2012
Double Yawn
In breaking news today.....Greece defaulted.
Yawn.
CCI thought either this event triggering credit default swaps and/or momentum money going to the sideline for the weekend might make today a good day to hedge the portfolio by adding a little of a double short etf to the portfolio.
Hence, this morning CCI bought the double short for the NASDAQ 100 (QID)
And......... yawn.
I just went back and checked. From the point of purchase this morning until the end of the day the etf traded between down $.12 and up $.06. That "huge" move is in a double leveraged etf.
That is certainly a....double yawn
Near the end of the day, CCI got stopped out at break even.
0-1-2 this year trading the double shorts.
Yawn
Not sure why all the market moves this year seem to be pre or post market, but this does provide a feeling of complacency. Who knows, but that is sometimes a per-courser to a market pullback.
Yawn.
CCI thought either this event triggering credit default swaps and/or momentum money going to the sideline for the weekend might make today a good day to hedge the portfolio by adding a little of a double short etf to the portfolio.
Hence, this morning CCI bought the double short for the NASDAQ 100 (QID)
And......... yawn.
I just went back and checked. From the point of purchase this morning until the end of the day the etf traded between down $.12 and up $.06. That "huge" move is in a double leveraged etf.
That is certainly a....double yawn
Near the end of the day, CCI got stopped out at break even.
0-1-2 this year trading the double shorts.
Yawn
Not sure why all the market moves this year seem to be pre or post market, but this does provide a feeling of complacency. Who knows, but that is sometimes a per-courser to a market pullback.
Wednesday, March 7, 2012
3 April Option Plays to Generate Income
Monday, March 5, 2012
Harvesting option premium in CSCO
Frequent readers will recall CCI has a small, one-lot position in Cisco (CSCO) via the Jan 13 $10 Calls (LEAPS). The intent has been to try to generate income against this leveraged position via selling calls against it. This position was described in more detail at a post done on Feb 9 that can be found here.
Cisco has pulled back more than 3% in the last week or two. Seems like that is just the normal churn of the marketplace. However this pullback and the normal time decay in the option market meant that the April $21 covered calls had fallen to just $.10. That is not a whole lot of premium left to harvest over the 6 weeks until expiration so CCI covered the April $21 calls today.
Overall, this cycle of covered calls generated a $.21/share. That is a very modest 1% gain of the stock price and a slightly less modest 2.5% gain when calculated against the reduced capital requirement of the LEAPS. Of course, that is 5% or 12.5% return on an annualized basis and consistent with the goal for this position of generating income via option premium.
As a big bonus the LEAP itself is up a very, very nice 14%. However, with over $8/share of cash stashed around the globe and what seems like a stable business CCI continues to believe this stock is a good candidate for this type of strategy. Hence CCI plans to hold the Jan $10 call for awhile. If CSCO rallies back towards $20 look for CCI to reestablish a covered call against this LEAP and if it falls towards $19 CCI may add a second lot to the portfolio.
Cisco has pulled back more than 3% in the last week or two. Seems like that is just the normal churn of the marketplace. However this pullback and the normal time decay in the option market meant that the April $21 covered calls had fallen to just $.10. That is not a whole lot of premium left to harvest over the 6 weeks until expiration so CCI covered the April $21 calls today.
Overall, this cycle of covered calls generated a $.21/share. That is a very modest 1% gain of the stock price and a slightly less modest 2.5% gain when calculated against the reduced capital requirement of the LEAPS. Of course, that is 5% or 12.5% return on an annualized basis and consistent with the goal for this position of generating income via option premium.
As a big bonus the LEAP itself is up a very, very nice 14%. However, with over $8/share of cash stashed around the globe and what seems like a stable business CCI continues to believe this stock is a good candidate for this type of strategy. Hence CCI plans to hold the Jan $10 call for awhile. If CSCO rallies back towards $20 look for CCI to reestablish a covered call against this LEAP and if it falls towards $19 CCI may add a second lot to the portfolio.
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