The July $47.50 Teva puts recently sold by CCI expired worthless this weekend.
This results in over a 2% gain for this lot of Teva stock on this transaction. This is the fourth time the sale of puts has earned money while the stock stagnated. As shown via the spreadsheet below, this strategy of naked put selling on Teva has now yielded nearly 10% this year.
Teva Performance
CCI remains long one lot of Teva at a cost of $48 which is about where it closed trading on Friday.
Earnings announcement is planned for 7/27.
CCI may look to get long a second lot of Teva, perhaps via calls, prior to that date.
Sunday, July 17, 2011
USO Options Expire ...OOPS
The "insurance" oriented USO (oil) options bought by CCI a few weeks ago moved immediately against CCI and expired worthless this weekend. The trade can be rationalized as the cost of insurance for the energy portion of the overall portfolio. ...or said another way......I was wrong, and oil remains near $100/barrel.
No new trades in the energy space planned at this time. Although, my bias is still to beleive that several countries have the intent of keeping the price of a barrel of oil under $100 for the summer.
No new trades in the energy space planned at this time. Although, my bias is still to beleive that several countries have the intent of keeping the price of a barrel of oil under $100 for the summer.
Thursday, July 14, 2011
Trading ANR Again
In the recent past, CCI successfully traded coal stock ANR. The core of the rational for putting some money in this stock has been that
Crammer calls ANR "top dog" in coal space.
Today CCI decided to re-initiate a trade in ANR. Wiht ANR trading around $44.35 sold one lot of Aug $41 puts for $1.11 net of commissions. Implied vol remains high at around 45 at the time of the trade. A catalyst in the form of a earnings call is schedule for Aug 3. A few scenarios
Worse case - the stock falls over $3 (about 8%) and CCI will be long a lot at an effective price of around $40. In this case, volatility will even likely be higher and we would likely sell calls against the position to try to recover any losses.
Best case - Stock stays above $41 and the portfolio makes 2.5+% in option premium over 5 weeks.
Most likely case - Any positive drift in the stock going into earnings provides the opportunity to scalp a smaller profits in a shorter period of time.
- coal seems like a resource that will continue to be a critical
- ANR might have been overly punished by noise and uncertainty from its acquisition of Massey
- with a forward P/E of single digits (now near 7) it is not overly expensive.
Crammer calls ANR "top dog" in coal space.
Today CCI decided to re-initiate a trade in ANR. Wiht ANR trading around $44.35 sold one lot of Aug $41 puts for $1.11 net of commissions. Implied vol remains high at around 45 at the time of the trade. A catalyst in the form of a earnings call is schedule for Aug 3. A few scenarios
Worse case - the stock falls over $3 (about 8%) and CCI will be long a lot at an effective price of around $40. In this case, volatility will even likely be higher and we would likely sell calls against the position to try to recover any losses.
Best case - Stock stays above $41 and the portfolio makes 2.5+% in option premium over 5 weeks.
Most likely case - Any positive drift in the stock going into earnings provides the opportunity to scalp a smaller profits in a shorter period of time.
Wednesday, July 6, 2011
Two Strategies for Trading HP Stock.
CCI has been in the process of legging into a trading position in HP for awhile.
Today an article appeared on Seeking Alpha with a good analysis of HP.
HP Value Play at SA by Tom Armistead
CCI has quoted Tom's articles in the past, and found solace that he and I had totally independently come to a similar view. Given that view, Tom suggested a trading strategy around a deep itm leap option, and covered calls. CCI has been legging into a more conservative, income oriented, shorter term trade around the stock. I documented it on a comment on the article above. So a reader who agrees with the analysis of the stock has two trading strategies to consider.
CCI will track the results of my trade here on this blog.
Today an article appeared on Seeking Alpha with a good analysis of HP.
HP Value Play at SA by Tom Armistead
CCI has quoted Tom's articles in the past, and found solace that he and I had totally independently come to a similar view. Given that view, Tom suggested a trading strategy around a deep itm leap option, and covered calls. CCI has been legging into a more conservative, income oriented, shorter term trade around the stock. I documented it on a comment on the article above. So a reader who agrees with the analysis of the stock has two trading strategies to consider.
CCI will track the results of my trade here on this blog.
Tuesday, July 5, 2011
Emerging Market Consumer Portfolio (EEM2) Q2 Results
Complete information about the objective and make up of the EEM2 portfolio can be found at
http://seekingalpha.com/article/258012-don-t-let-your-emerging-market-position-catch-a-cold
In summary the objective of this portfolio is to outperform an emerging market ETF such as VWO by holding several ETFs that focus on the emerging middle class while having less exposure to China (FXI) than most emerging market investments. Performance for the second quarter of 2011 was
CCI plans to continue to hold this portfolio for now, but may make adjustments to the composition over time.
http://seekingalpha.com/article/258012-don-t-let-your-emerging-market-position-catch-a-cold
In summary the objective of this portfolio is to outperform an emerging market ETF such as VWO by holding several ETFs that focus on the emerging middle class while having less exposure to China (FXI) than most emerging market investments. Performance for the second quarter of 2011 was
- eem2 - plus 3.6%
- vwo - minus 0.67%
- fxi - minus 5.6%
CCI plans to continue to hold this portfolio for now, but may make adjustments to the composition over time.
Q2 Resutls for GSPY - Global diversification with less risk than emrging markets
Version 2 of this post.
The detail rational and objectives of the Globalized SPY (GSPY) portfolio can be found at
http://seekingalpha.com/article/247845-globalizing-spy-how-to-diversify-without-adding-emerging-market-risk
The objective of this portfolio is to provide diversification from the S&P 500 (SPY) via a portfolio that provides better returns with less volatility and risk than using the very popular emerging market ETFs such as VWO (VWO) to provide portfolio diversification.
Basically, this portfolio is a mix of ETFs of the following countries:
For the first half of the year the portfolio's performance has not been great. Specifically;
The detail rational and objectives of the Globalized SPY (GSPY) portfolio can be found at
http://seekingalpha.com/article/247845-globalizing-spy-how-to-diversify-without-adding-emerging-market-risk
The objective of this portfolio is to provide diversification from the S&P 500 (SPY) via a portfolio that provides better returns with less volatility and risk than using the very popular emerging market ETFs such as VWO (VWO) to provide portfolio diversification.
Basically, this portfolio is a mix of ETFs of the following countries:
For the first half of the year the portfolio's performance has not been great. Specifically;
- GSPY has lost -.2% while VWO is up 1% for the year.
- GSPY has been less volatile than VWO with a monthly SD of 2.6% vs. VWO's monthly SD of 3.6% and it seems to make common sense that these larger more established countries and companies shold be less risky than other emerging markets.
- GSPY and VWO have shown a high correlation of 94%
- GSPY underperformed the S&P 500s return of 5.5% YTD. The positive spin on this negative comparative result is that GSPY is showing a -.20 correlation with the S&P500. In reality this type of negative correlation is the objective of diversification. Hopefully this negative correlation will continue if/when the S&P500 has a down period.
Monday, July 4, 2011
Utility Dividend Capture Portfolio Achieves 8th Straight Quarter of Growth
The Utility Dividend Capture Portfolio just completed it 8th quarter of operation.
Detailed information on the objective, approach, and returns of this portfolio can be found at
http://ccentsinvesting.blogspot.com/p/udc-prospectus.html
In summary, the objectives of this portfolio are
- absolute quarterly returns of 2+% in quarters when the stock market is up and 0% when the stock market is down.
- to be less volatile than the stock market.
This objective is to be accomplished via trading in and out of 15-20 utility stocks around their dividend x-date to capture about a 1% return from the dividend and relying on market inefficiency to be able to loose less than that amount via capital gains.
For the eigth quarter in a row this fund achieved its objective!!
This portfolio continues to meet and exceed expectations. This begs the question "how long can this last". IMO the most likely thing to adversely impact the performance of this fund would be higher interest rates. As an extreme example if one-year risk free interest rates went to 4+%, the additional risk of this portfolio would not seem justified. However, it seems like short-term interest rates will remain low for awhile, so CCI will continue pursuing this portfolio into its ninth quarter of operations.
Detailed information on the objective, approach, and returns of this portfolio can be found at
http://ccentsinvesting.blogspot.com/p/udc-prospectus.html
In summary, the objectives of this portfolio are
- absolute quarterly returns of 2+% in quarters when the stock market is up and 0% when the stock market is down.
- to be less volatile than the stock market.
This objective is to be accomplished via trading in and out of 15-20 utility stocks around their dividend x-date to capture about a 1% return from the dividend and relying on market inefficiency to be able to loose less than that amount via capital gains.
For the eigth quarter in a row this fund achieved its objective!!
- The fund returned 5.5% in total this quarter
- The return was comprised of 5.9% in dividends and a loss of .4% in capital gains
- 18 trades were made. 15 of them were winning trades. An 83% win percentage.
- daily standard deviation of the fund was .49, which was about 25% less than volatility of the XLU etf.
- Never had a loosing quarter! This type of absolute return is the key goal of this portfolio.
- Averaged 3.9% in returns each quarter
- Had 109 of 145 winning trades for over a 75% win rate.
- Low daily volatility. A SD of .60% which is nearly 1/3 less volatile than the XLU etf.
- Low quarterly volatility. A SD of 3.97% which is nearly 1/2 less volatile than the S&P.
This portfolio continues to meet and exceed expectations. This begs the question "how long can this last". IMO the most likely thing to adversely impact the performance of this fund would be higher interest rates. As an extreme example if one-year risk free interest rates went to 4+%, the additional risk of this portfolio would not seem justified. However, it seems like short-term interest rates will remain low for awhile, so CCI will continue pursuing this portfolio into its ninth quarter of operations.
Tuesday, June 28, 2011
Short CRM - Deja Vu All Over Again
Yes, that is right, CCI is short CRM again.
CRM has risen back up a few points the past few day and the charts (which seems like the basis for trading in this stock) suggested it might be near the top of its short term range.
So CCI decided to risk some the profits from prior shorting of this stock to hopefully add to the gain. Shorted the stock at $146.50. Rational the same as before.
Investigated implementing a short position via options. However, it would seem most advantageous to go out until the August expiration to capture their next earnings announcement, and it seemed a little early to get a good price and IV at this point in time. So put on the more basic short position with the hope of scalping a small gain now.
CRM has risen back up a few points the past few day and the charts (which seems like the basis for trading in this stock) suggested it might be near the top of its short term range.
So CCI decided to risk some the profits from prior shorting of this stock to hopefully add to the gain. Shorted the stock at $146.50. Rational the same as before.
Investigated implementing a short position via options. However, it would seem most advantageous to go out until the August expiration to capture their next earnings announcement, and it seemed a little early to get a good price and IV at this point in time. So put on the more basic short position with the hope of scalping a small gain now.
Sunday, June 26, 2011
GDX and GLD - A bet on reversion to the mean
CCI has previously described an options strategy around the gold ETF (GLD) and the gold miners (GDX).
A key to that strategy was the assumption that since these two entities have traded with high correlation in the past they would continue to do that in the future. Take a look at the recent chart below.
Two year chart of GLD vs GDX
Surprise, surprise....over about the past 2-3 months gold has been relatively flat and the gold miners have lost nearly 20%. Hmmm. That could mean
a). something is causing this correlation to no longer be true (like general stock market concerns)
b). gold is due to fall
c). the miners are oversold and due for a bounce back.
Common sense would seem to dictate the miners would follow the price of gold so CCI chooses "c". On Friday bought a lot of GDX just over $52.50.
Hopefully earning season will bolster the confidence in these stocks. We will be watching the relationship on this chart hoping to see the pattern "revert to the mean" and GDX get a nice bounce over the coming months.
A key to that strategy was the assumption that since these two entities have traded with high correlation in the past they would continue to do that in the future. Take a look at the recent chart below.
Two year chart of GLD vs GDX
Surprise, surprise....over about the past 2-3 months gold has been relatively flat and the gold miners have lost nearly 20%. Hmmm. That could mean
a). something is causing this correlation to no longer be true (like general stock market concerns)
b). gold is due to fall
c). the miners are oversold and due for a bounce back.
Common sense would seem to dictate the miners would follow the price of gold so CCI chooses "c". On Friday bought a lot of GDX just over $52.50.
Hopefully earning season will bolster the confidence in these stocks. We will be watching the relationship on this chart hoping to see the pattern "revert to the mean" and GDX get a nice bounce over the coming months.
Friday, June 24, 2011
Insurance for Falling Oil Prices
Preamble
Big news this week was the release of oil from the US, Europe and Asia strategic reserves. There are plenty of opinions on the merits of this decision. From a supply/demand perspective the amounts of oil released does not seem that significant, and there are "not too many bullets in this gun" so it hard to see how this changes the long term picture. Many talking heads on US TV seem to want to make this simply about US politics, but of course they make everything about US politics.
Full disclosure: I'm not an oil expert.....but of course that does not stop me from having an opinion...lol
IMO I think the oil consuming countries see a few opportunities to change the oil game a little. A few points
Further, many governments perceive that some larger financial players have figured out how to "game" the oil markets (shocking I know). I suspect many governments would not be too upset if some of these players got burned by a change in the world oil game. Lastly, the world economy would benefit from a drop in the price of oil and that would help the popularity of politicians across the globe.
Trading Strategies
There are a lot of opinions, assumptions and theories in that long preamble with which a reader can agree/ disagree and like/dislike. However, CCI feels that major governments may have set out to drive the price of oil down in the short term. The release of oil reserves might just be one step in that process. Generally, CCI's full portfolio is overweight energy and wants to remain that way in the longer term. However, in the shorter term, CCI does not want to fight this potential trend and is looking for ways to short the energy markets.
Over the past two days, CCI day traded the double short energy etf (DUG)
There was plenty of volatility which meant there were chances to make money in this trade, but disappointingly CCI only managed to break even on these trades. So for the year, CCI is 5-0-2 trading the double shorts.
I wanted to close out the position in DUG before the weekend (mostly because of the weird way these double short etfs are structured), but wanted to have some hedge against falling oil prices for the weekend. Hence CCI just bought a lots worth of July $35 puts in the oil etf (USO) at the end of the day as a straight insurance policy against falling oil prices.
Stay tuned to see if this was a good insurance policy to write, and if other vehicles to short the energy space might be deployed next week.
Big news this week was the release of oil from the US, Europe and Asia strategic reserves. There are plenty of opinions on the merits of this decision. From a supply/demand perspective the amounts of oil released does not seem that significant, and there are "not too many bullets in this gun" so it hard to see how this changes the long term picture. Many talking heads on US TV seem to want to make this simply about US politics, but of course they make everything about US politics.
Full disclosure: I'm not an oil expert.....but of course that does not stop me from having an opinion...lol
IMO I think the oil consuming countries see a few opportunities to change the oil game a little. A few points
- Apparently, the last OPEC meeting did not end well with the Saudi's and countries like Iran and Venezuela not seeing eye to eye.
- The Saudi regime feels as threatened as ever, and much of this threat comes from other Opec countries (mostly Iran) subtly undermining their authority in the Arabian Peninsula
- The "west" now controls Iraqi/Kuwaiti oil and is likely to control Libian oil soon.
- Brazil is having success in offshore drilling, and Canada the US are getting some oil from shale.
- China is buying up, and and taking control of African oil reserves.
- Natural Gas is being pushed as an alternative to oil (even in transportation) by many parties in the US.
Further, many governments perceive that some larger financial players have figured out how to "game" the oil markets (shocking I know). I suspect many governments would not be too upset if some of these players got burned by a change in the world oil game. Lastly, the world economy would benefit from a drop in the price of oil and that would help the popularity of politicians across the globe.
Trading Strategies
There are a lot of opinions, assumptions and theories in that long preamble with which a reader can agree/ disagree and like/dislike. However, CCI feels that major governments may have set out to drive the price of oil down in the short term. The release of oil reserves might just be one step in that process. Generally, CCI's full portfolio is overweight energy and wants to remain that way in the longer term. However, in the shorter term, CCI does not want to fight this potential trend and is looking for ways to short the energy markets.
Over the past two days, CCI day traded the double short energy etf (DUG)
There was plenty of volatility which meant there were chances to make money in this trade, but disappointingly CCI only managed to break even on these trades. So for the year, CCI is 5-0-2 trading the double shorts.
I wanted to close out the position in DUG before the weekend (mostly because of the weird way these double short etfs are structured), but wanted to have some hedge against falling oil prices for the weekend. Hence CCI just bought a lots worth of July $35 puts in the oil etf (USO) at the end of the day as a straight insurance policy against falling oil prices.
Stay tuned to see if this was a good insurance policy to write, and if other vehicles to short the energy space might be deployed next week.
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