As discussed here, CCI sold one lot of April $26 puts in Hewlett Packard for $.73. With HPQ trading at $24.51 on Friday, CCI is the proud new owner of another lot of HPQ shares at an effective price of $25.27.
I continue to believe in my thesis that HPQ will remain range bound for awhile and hopefully that means this lot of shares has been added to the portfolio at an attractive price. If/when HPQ moves back toward the top its trading range CCI intends to sell some calls against this position.
FYI, HPQ earnings are not until May 23.
Sunday, April 22, 2012
Wednesday, April 18, 2012
Google Stock Split: Buy, Sell or Hold
As part of Google's earnings announcement this week, they also announced a somewhat unusual stock split apparently aimed at allowing the founders to better retain voting control over the company. There are a variety of opinions about if this is good or bad. CCI weighs in with my opinion in the article below.
http://seekingalpha.com/article/504711-google-stock-split-into-more-classes-buy-sell-or-hold
http://seekingalpha.com/article/504711-google-stock-split-into-more-classes-buy-sell-or-hold
Tuesday, April 17, 2012
Intel Covered Calls Going into Earnings
Intel (INTC) reports earnings after the bell today. With the stock trading around $28.50, CCI sold one lot of June $30 calls against the portfolio's position for $.41 after commissions. Several reasons for this activity.
FYI, Intel earnings just came out and seem to be slightly above estimates and hence about in-line with expectations. As seems to be the usual story, the stock is down in the after markets. Hence, at the moment this covered call hedge seems like it will add a little profit to the position. I plan to look closer at the earnings results and conference call to determine next steps, but generally what look to be solid numbers continues to make me bullish on Intel and hope to see the stock get over $30 with time.
- As discussed here $30 has been my target price fro awhile. Hence, barring some major change in "the story", this is a level to lighten-up on the position.
- The stock has had a nice big run. Even if it continues higher after positive earnings it seems highly unlikely to run way past $30 in the short term.
- If Intel misses earnings or it meets earnings and there is a "sell the news" reaction this position will earn about 1.3% in 2 months. Just adding a small amount of juice to a nice winner, with little real risk.
FYI, Intel earnings just came out and seem to be slightly above estimates and hence about in-line with expectations. As seems to be the usual story, the stock is down in the after markets. Hence, at the moment this covered call hedge seems like it will add a little profit to the position. I plan to look closer at the earnings results and conference call to determine next steps, but generally what look to be solid numbers continues to make me bullish on Intel and hope to see the stock get over $30 with time.
Monday, April 16, 2012
More useless hedging via double shorts
Last week was the worst week of the year for the US equity markets. CCI thought there was a chance the market might continue this sell off more substantially going into or over the weekend.
So, ......Once again, we purchased the double short etf for the S&P500 (SDS) on Thursday to provide a small hedge to the portfolio.
And......Once again, the market......did nothing.
Closed the position for a negligible gain today, essentially another tie.
0-1-3 trying to use the double shorts as short-term hedges this year.
I'm not sure if /when market volatility will return to make holding these leveraged short etfs profitable again. However, we will keep these in our tool kit, and continue to look for opportunities to use them effectively.
So, ......Once again, we purchased the double short etf for the S&P500 (SDS) on Thursday to provide a small hedge to the portfolio.
And......Once again, the market......did nothing.
Closed the position for a negligible gain today, essentially another tie.
0-1-3 trying to use the double shorts as short-term hedges this year.
I'm not sure if /when market volatility will return to make holding these leveraged short etfs profitable again. However, we will keep these in our tool kit, and continue to look for opportunities to use them effectively.
Sunday, April 15, 2012
A belated option trade on Google earnings
CCI was a little late getting this posted, so unfortunately the opportunity for readers to follow along with this trade has passed. However, hopefully it can still be informative.
This week CCI established an option position to somewhat hedge the portfolio's position in Google (goog) prior to the earning announcement this past Thursday. The rationale and specifics of the iron condor option position is described at a seeking alpha article here.
CCI felt that the bulls and bears in Google would find enough good and bad news respectively in Google's earnings announcement that the stock would trade between $590 and $660 after earnings. That is indeed what happened and this trade achieved max profit as the stock did not move significantly on earnings.
This week CCI established an option position to somewhat hedge the portfolio's position in Google (goog) prior to the earning announcement this past Thursday. The rationale and specifics of the iron condor option position is described at a seeking alpha article here.
CCI felt that the bulls and bears in Google would find enough good and bad news respectively in Google's earnings announcement that the stock would trade between $590 and $660 after earnings. That is indeed what happened and this trade achieved max profit as the stock did not move significantly on earnings.
Thursday, April 5, 2012
Double Shorts Continue to Go No Where
CCI thought that the market might erode into the three day weekend. Hence we purchased the double short etf for the S&P500 (SDS) at the market close on Wednesday to provide a small hedge to the portfolio.
Today this double short.....went no where....again.
Closed the position for a negligible gain, essentially another tie.
0-1-3 trying to use the double shorts as short-term hedges this year.
Today this double short.....went no where....again.
Closed the position for a negligible gain, essentially another tie.
0-1-3 trying to use the double shorts as short-term hedges this year.
Wednesday, April 4, 2012
UDC Q1 Performance Meets Objectives....Again
The Utility Dividend Capture (UDC) portfolio (description here) strives to generate an absolute return in excess of 2% per quarter in quarters when the market is up and not lose money in down markets. The fund accomplishes this objective by swing trading between utility stocks capturing multiple dividends per quarter.
The UDC portfolio returned 3.56% in the first quarter of 2012. These
results represent the 10th of 11 quarters where the fund has achieved
its objective. As planned, the fund once again
generated significant dividend income (4.6%) while losing a small
amount in capital gains (-.9%). 11 of the 14 trades made this
quarter were winners (79%). This is consistent with the longer
term win percentage of 76%. Volatility remains low.
Performance results for the last 11 quarters are shown in the tables below.
Of course the S&P 500, had
much better gains than the UDC portfolio in q1. However, as stated
above the objective of this fund is not to track the undulations of
the S&P500, but instead yield more consistent absolute returns.
A more representative benchmark for this fund is the utility industry as best
represented by the SPDR Utilities Select Sector (XLU). This etf lost 1.7% in q1. Hence UDC significantly over performed this
fund.
| RETURNS | UDC DIV. |
UDC CG | UDC TOTAL |
XLU | S&P500 (DSPIX) | |
| 2009 q3 | 7.73% | -2.86% | 4.87% | 6.26% | 11.43% | |
| 2009 q4 | 8.22% | -4.29% | 3.93% | 7.02% | 6.02% | |
| 2010 q1 | 8.10% | -5.93% | 2.17% | -4.38% | 5.36% | |
| 2010 q2 | 7.98% | -7.89% | 0.09% | -3.68% | -11.39% | |
| 2010 q3 | 5.53% | 1.08% | 6.61% | 12.16% | 11.24% | |
| 2010 q4 | 5.62% | -3.25% | 2.37% | 1.05% | 14.80% | |
| 2011 q1 | 5.95% | -3.34% | 2.61% | 2.69% | 5.90% | |
| 2011 q2 | 5.96% | -0.39% | 5.57% | 6.10% | -2.10% | |
| 2011 q3 | 6.85% | -8.89% | -2.04% | 1.44% | -13.89% | |
| 2011 q4 | 4.78% | 0.96% | 5.74% | 8.17% | 11.20% | |
| 2012 q1 | 4.46% | -0.91% | 3.56% | -1.70% | 12.00% | |
| Compound Return | 41.40% | 39.60% | 56.60% | |||
| Standard Dev | 4.0 | 4.9 | 9.0 | |||
| TRADE STATS | Trades | Wins | Loses | Win % | ||
| 2012 q1 | 14 | 11 | 3 | 78.6% | ||
| Total | 194 | 147 | 47 | 76.0% | ||
| Correlations between these three funds are shown below. | ||||||
| udc/xlu | 0.72 | |||||
| udc/spy | 0.70 | |||||
| xlu/spy | 0.35 | |||||
Monday, March 19, 2012
Sold Covered Calls in Teva
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.
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.
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.
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