Rolling Gold and Gold Miner Option Position

As discussed here , CCI had established the following option position in the gold miners and gold etfs last February. 
 "Sold 2 June $52 GDX puts and bought 1 June $175 call.  That trade was done for a net credit of $86. As before we will hope to manage our way out of the risk of being short the GDX puts while using the GLD calls to profit from any wacky spike in the price of gold. "

Since the time of that trade the price of gold has fallen and the value of gold miners stocks has fallen further.   Hence this trade has been a loser and was closed on Wednesday for a loss of $1,551/contract.  That is not surprising as results of this position are anticipated to be highly correlated with the price of gold.

Of course no one likes to see a losing trade, but this is the fifth time this same type of trade has been completed and only the first time it has been a loser.  Cumulatively these 5 option trades are up  41% as compared to buying and holding of gold (gld) over the same time period would have returned 29%.

CCI remains somewhat unexcited about the prospects for gold, but feels from a diversification perspective it still makes sense to have some exposure to gold in a portfolio.  I continue to feel this type of paired option trade provides a better leveraged, lower cost way of gaining that exposure for the portfolio than simply buying the etfs. Hence this trade was re-established in September options.  Specifically, on Wednesday CCI

• bought 1 (GLD) Sept $155 call, (with GLD trading at about $151)
• sold 3 (GDX) Sept $39 puts (with GDX trading around $44)
• these trades were done for a collective net $31 credit
• this trade conceptually puts at risk $11,669 for the  potential purchase GDX. (actually less capital is actually tied up due to option margin rules). This trade starts to lose money if GDX falls by more than 10% this summer. The trade starts to gain from anything over about a 3% gain in gold this summer and is position to have unlimited, leveraged gains if for some macro level reason the price of gold spikes this summer.
  

Yet Another Tie

Going into the holiday weekend CCI felt there was some risk of the market  melting down as investors might take some risk off the table before the long weekend.  Hence Friday morning CCI bought one lot of the double short SP500 etf (SDS) and........got stopped out that afternoon for a gain of.......$1.87!!!!

Yes, yet another tie.
  A totally unexciting 1-1-4 when short-term hedging via  double short index etfs this year.

Selling Puts in Intel and Others

With the market down and option implied volatility up, now might be a good time to consider selling naked puts in stocks you might want to own.   If stocks keep going down you might get the stock put to you, hopefully at a discounted price, or if the market levels off in the next month a few percent return can be made.

My seeking alpha article  describes  potential put sales in GLW, MET, and INTC.
I've discussed the idea of adding to Intel before at recent posts at this blog.

Taking Off Some Insurance - Part 2

As discussed in  yesterday's post CCI is taking profits on portfolio insurance positions.

Today CCI rolled the option position in the S&P 500 (SPY) from May to June. Specifically;

•  closed the May $136-$130 put spread.  Paid $1.1/contract. Sold for $2.65/contract!
•  used the gains of this trade to re-purchase insurance via the June $133- $128 put spread for $1.61/contract. 

Insurance is starting to get more expensive to buy as implied volatility increases (i.e vix over 22 ).
If the market continues its current downward path, this might be the last time CCI buys insurance in the option market for awhile.

Taking Off Some of the Insusrance, for a profit!

As discussed here,   in late April,  CCI established two, May, index,  short put spreads to provide a little insurance for a portfolio for the chance/probability that a correction in them market was likely to come at some point this year.

Yesterday, CCI  closed the May $67 -$65 QQQ (Nadaq-100) put spread.  This spread was purchased for $.82/contract and sold for $1.80/contract.  That's a nice, "little",  20% gain to provide a small buffer against the recent market slide.

CCI still owns the SPY May $136-$130 put spread,  but anticipates rolling that out to June in the very near future.

Seems Natural to Speculate in WPRT

Generally CCI's investment style is conservatively biased towards grinding out modest, higher probability gains.
However, every portfolio can probably benefit from having a few speculative positions.  I've taken a small, speculative   position in Westport Innovations. (WPRT).

WPRT is a leader in the field of Natural Gas based engines.  In general, I'm thinking the upcoming political season will generate some press about this space, and could be a catalyst to drive a significant increase in the stock price.  On the other hand, there are many issues with this (and any) smaller company which makes this a very speculative investment.

My overall rational and timing about taking this position is described in a Seeking Alpha article here. 

FYI, since the article was drafted a few days ago, the stock has fallen a few dollars. So now it is obviously  even a better buy....lol!    More seriously, as discussed in the article, this weeks pull back makes it seem like a good thing that options were used to enter the position, thereby lowering my cost basis.

Intel covered call premium harvested.

With the market pull back, CCI closed the Intel (INTC) June $30 covered call position discussed here.
This trade yielded a boring 1% return in less than a month. This added into the sizable pot of unrealized capital gains, dividends, and option premium earned on this stock.

It doesn't seem like there is any real change to the Intel story.  (They did just increase their dividend!).  A modest multiple, on a key industry provider, with perhaps the largest competitive  "moat" anywhere, with a strong balance sheet still seems like a solid investment.  Further, if they ever get a mobile strategy in place, there could be more upside.   Here is a link to an article from Morningstar that seems to share a positive view of Intel's competitive position in the market.

Holding for now, but if the pull back continues towards $26,  we will likely sell a lot of puts in Intel to potentially add to the position.

You can put in on the board.....yes!

Yesterday CCI felt the market had showed a lot of apathy on the news of European election results, and risk of a pullback remains. Monday afternoon CCI bought the double sort S&P500 etf (SDS). Sold it on today's market pull back for a 1.35% gain. 

The first win of the year trying to put some modest, short-term hedges in place against the portfolio via double short etfs. That brings this years record to a boring 1-1-3.  Considering the market is up this year, it could be expected that this type of strategy would be down for the year. Hence, it is nice to report that these 5 trades actually show a small, cumulative positive gain for the year. 

Obviously not much opportunity to use this strategy so far this year. That is  mostly due to low volatility in the markets, but perhaps that will change as the year progresses.

Harvesting Cisco Option Premium....Again

Frequent readers will recall CCI has a small, one-lot position in Cisco (CSCO)  via the Jan 13 $10 Calls (LEAPS).   The intent is 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.

Earlier this year, one cycle of covered calls successfully yielded a modest $.21/contract gain as described here in March

With today's market pull back, CCI covered the second cycle of covered calls for a cost of $.13 after commissions.  This cycle of covered calls generated $.35 / contract gain.

In total that is a $.56/contract gain.  With the leverage provided by the LEAPS being bought at $8.37, that is a realized gain 6.7%. over two option cycles this year.

The $10 Jan Leap has an unrealized gain of 8.6% at this time.  Cisco reports earnings on Wednesday so this position will likely fluctuate next week, but CCI plans to hold this for awhile longer.

If Cisco's price or option volatility were to spike early next week going into earnings, we might sell the July $21 calls again this position again.  However, more likely we will wait to see the status or earnings before determining next steps for this position.     

Static in Skullcandy headphones, might be a buy

Skullcandy (SKUL) is a manufacturer headphones and other audio related products who might benefit from the ever growing use of a diverse set of mobile devices.  Skullcandy's  IPO was last summer.
It reported earnings yesterday, and unlike many recent IPOs actually has earnings.  However, the stock pulled back as earnings apparently did not meet elevated expectations. This article

adding-to-skullcandy-on-post-earnings-pull-back-noise

describes why now might be a good time for a small,  speculative play in this stock.