US Downgrade Portfolio Closed with 3.35% Gain

Readers will recall that about the time S&P downgraded US debt in August, CCI put some dry-powder to work on the simple assumption of “buy when others were fearful”. The specifics of those trades and update status can be found at this google doc and are described below under the trade status heading. 

Overall, this basket of nine diverse stock and option positions gained 3.35 % since late August. Hence this portfolio was a successful example of “buying when others are fearful” or “strategic portfolio asset allocation re-balancing”. (Because we all know,”timing the market” is never a good thing...lol)

Yes, that's right cash came from the sideline, was put to work, and made about a gazillion more than it would have if it stayed in cash.  Before I pat myself on the back anymore, I must point out that this portfolio substantially underperformed the market over the same time period (S&P up over 7%). Further, with better stock picking and aggressive use of leverage an investor could have done far better. However, that ignores the very real human fear factor that exists at these times. In fact, most investors actually pull money out of the market when things are fearful, not put money to work. By using option based strategies an investor can put money to work with a greater margin of safety and/or hedge against continued downturns. Hopefully the comfort that buffer provides makes it more likely that an investor will step up to the plate when times are fearful and put some dry powder to work. CCI's capital from the downgrade portfolio is mostly back in cash, waiting for another time when things seem fearful to go back to work in a conservative, hedged manner.

A final summary of the transactions are contained below.

Final Trade Results

Four long positions and associated covered calls

Bank of New York (BK) lost 10.3%. The only loser in the portfolio. CCI was finally able to sell calls against this position in December. This call expired worthless reducing the loss per share by $.26 or over 1%. This week, with the stock trading back at $20, CCI closed the position. CCI felt this somewhat different banking stock might behave better than most other financial services stocks if the sector was once again hit by a wave of selling. Hopefully that will still be the case in the longer term, and we will keep this stock on the watch list for the future. (-12.2% Cap loss, .6% div gain, 1.3% option premium)

Ford (F) - Bought a lot of stock at $10.18. Sold and then subsequently covered a lot of $11 Sept calls against the position for a gain of $.35. Did the same thing again with November $11 calls for a gain of $.49, and the once again in December for a gain of $.22. Sold the stock in Dec. at $10.89. Overall that was a 17% gain. (7% cap gain, 10% option premium)

Ford remains attractively valued and a candidate for continuing this strategy in the future. .

Waste Management (WM) - Sold Aug $30 puts for $.70, and the stock was put to us at an effective purchase price of $29.30. Sold the stock at $31.44. Over the past months, sold calls against the position for a $.63 gain and collected a $.24 dividend twice. Overall this position made 12.8% (4.7%capital gain, 5.7% option premium, 2.2%dividend).

Utilities ETF (XLU) – Originally bought the etf at $31.72 and sold Jan $32 calls against it for $1.23.

The intent was for this conservative group of utility stock to stay stable through the end of the year and pocket both the option premium and two dividend cycles. This position was called away from me in mid December. Overall the position made 6% ( .8% cap gain, 4% option premium, 1.2 % dividend)

Having the position called away before the second dividend payment cost a small amount and was unfortunate. However, when this situation of early exercise occurs, I just try to rationalize it as the original decision was soooooo good that one of those big bad wall street types paid me the compliment of skimming away a little bit of my good idea.

Four short puts trades were made. All were closed with a profitable collection of option premium

• Japan ETF (EWJ) $9 put – closed for a profit of .9% in a little more than a week.
• Health Care Sector (XLV) Jan $29 puts – closed at $.39 for a gain of 4.6% in about 2 months
• Bank of America(BAC) – first the Sept $7 puts and then the $6 Oct. puts for a gain of 5.5% in about 2 months.
• Corning (GLW) – Initially sold Oct $13 puts for $.75 cents. Those expired worthless and put the same trade on for $13 puts in November for $41 cents. Covered that position after the earnings move at $.08 for a gain of $33. In total $1.08 (9.1%) gain in about 3 months.
  

Materials ETF (XLB) – As previously described. Initially the Dec $31 puts were sold and those proceeds were used to buy the Dec $34 calls. Zero out of pocket costs. When XLB was trading higher we were able to finance the covering of the short Dec $31 puts by selling the Dec $37 calls. Received a very small credit. In option language, that was starting with a risk reversal and converting it to a vertical call spread. In common sense language that was risking less ($31) to now have a can't lose shot at making $3 or about 10%.It is nice to be sitting in a place where we are now essentially playing with the houses money. XLB plunged in November and never recovered. The trade expired with a small profit from the option trades of .7%.

End of Year Put Selling - Update

NEWS FLASH:   Nothing happened this week in the market. The S&P 500 closed almost flat for the week (and the year).  Common sense would seem to dictate little market moving news would occur in a holiday week,   and CCI acted on that belief to make a little money to pay for those holiday gifts via put selling.

Trade status below:


Walgreens (Wag) earnings last week were basically a non event  (especially related to their battle with Express Scripts) .  Subsequently the stock rallied, the volatility rushing out of the Jan options, and time decay worked in our favor.   CCI closed the $32 Jan put position for a gain of .68/share (2.1% in two weeks)

Us Steel (X) - Nothing happened with X this week.  The slightly out of the money $25 Dec 30 (weekly options) expired worthless and CCI pocketed $.32/share (1.2% in a week)

Emerging markets (EEM) fell a bit and closed just below the $38 Dec 30 strike CCI had aggressively selected.  Earlier today CCI was able to roll this option out to next weeks $38 Jan 30 strike.  The Dec 30 option made only $.23/share (.6% in a week), but we also know received a $.49share credit ( 1.3%) for next weeks options.  Obviously there is about at a 50/50 chance that CCI will get assigned that stock next week. CCI is very comfortable building a position in EEM and this option premium collected will have lowered the effective entry price to $37.28.  If the stock rebounds CCi will have pocketed $.72/share (1.9%) in two weeks.

Corning (GLW) - Corning closed trading at $12.98.  CCI still holds the Jan $12.50 puts.  At this time the position is up about $.12/share or 1%.   CCI let this option ride into next week as there is still $.25 (2%) left in the premium.


Seems like realized volatility in the final week of the year might be naturally suppressed, and the mostly mathematically based weekly option market pricing could have a hard time factoring in that dynamic.  Hence, CCI will likely be looking to aggressively sell weekly puts again next holiday season.

End of Year Put Selling

With the creation of weekly options there are now many stocks that have options expiring this Friday Dec $30. The volatility in these options seems to be in-line with traditional market factors.  However, it seems like there is less of a probability of bad news coming out during this holiday week than in most weeks.  Hence, CCI is willing to risk some capital on selling out of the money puts to potentially generate some short-term cash.  As always when selling puts an investor needs to be prepared to take ownership of the stock if the market falls.


Here are two very short-term put sales CCI established

On Friday, Us Steel, (X) was trading just under $26.  The Dec 30 $25 puts were able to be sold at $.32.   I believe the volatility is so high, because of various M&A rumors and related arbitrage.  However it seems less likely that any breaking news in that area will occur in this slow, quiet, holiday week.  So CCI feel that there is a good probability that the stock stays over $25 this week and the portfolio can earn a 1.2% premium in a week.

On Tuesday, the emerging market ETF (EEM ) was trading around $38.2, it was possible to sell the Dec $38 puts for $.37.     This position essentially has a 50/50 likelihood of either yielding 1% or being put the ETF at a price of $37.67.    CCI is comfortable adding to our overall emerging market position so I am comfortable taking this risk.

Selling January Puts to Generate Income

With the market slumping into the holidays it seemed like another  potential opportunity to generate some income via selling some puts on stocks with higher implied volatility. This article at seeking alpha describes two potential trades in January options for Walgreens (WAG) and Corning (GLW).

Downgrade Portfolio - Thanksgiving Status

CCI has been busy with Thanksgiving holiday travels and hence only watched last week's market train wreck from afar. I thought that a good way to get back into the mood of the markets was to do an end of November review of the “downgrade portfolio” a few days early.

Readers will recall that about the time S&P downgraded US debt in early Aug, CCI put some dry-powder to work on the simple assumption of “buy when others were fearful”. The specifics of those trades and update status can be found at this google doc and are described below under the trade status heading. 

Overall, this basket of 9 diverse positions is essentially at break even.  Up .2% to be exact. With last weeks drop the S&P is also at basically break even over the same time frame. Certainly nothing too spectacular to report, but the mix of results may be illustrative for readers.

• 4 trades are closed at gains of 0.9%, 5.5%, 9.1%, and 4.6% respectively
• 4 trades are open with current gains of 3.9%, 7.7%, 4.5%, and 1.4% respectively
• 1 trade is open and currently down 22% percent. Down 8% last week while I was out..ouch
  
  

Frankly, this distribution of trades disappointingly represents classic problem with more active trading where big losers overwhelm modest size winners in a portfolio. Most observers would say that, CCI should have cut losses in the the loser earlier. Certainly true, and I do currently have “traders remorse” over not selling the position earlier. However, this also represents the only position of the nine that did not have an option oriented, hedge associated with it. So I really, really have a severe case of “hedgers

remorse”. There was plenty of opportunity to lower the cost basis in this stock via covered calls that were not taken. I will try not to let that happen again too often, and it is good lesson for readers to think about having hedges in places. (especially while taking time off and not watching positions)

Oh well, overall this portfolio is tracking the market so certainly not a terrible situation.

Trade Status

Bank of New York (BK) is down 22%. CCI felt this somewhat different banking stock might behave better than most other financial services stocks if the sector was once again hit by a wave of selling. Instead it is under-performing the poor performance of the financial sector. I will have to do a little digging to see what the rationale for that might be. While doing that fundamental research, hopefully $18 will hold as the chart support level. (Yes...hope can be a strategy...lol)

Three long positions and associated covered calls

Ford (F) - Bought a lot of stock at $10.18. Sold and then subsequently covered a lot of $11 Sept calls against the position for a gain of $.35. Did the same thing again with November $11 calls for a gain of $.49.

After last weeks sell off the stock is trading at 9.75. With option premiums collected to-date the break even on the position is $9.34. Still generally bullish on Ford at these prices. Willing to hold for awhile longer and re-establish yet another covered call position on any bounce.

Waste Management (WM) - Sold Aug $30 puts for $.70, and the stock was put to us at an effective purchase price of $29.30. Closed trading Friday at $30.31 for about a $1 capital gain. Over the past months, sold calls against the position for a $.63 gain and collected a $.34 dividend. Overall the position is up 7.7% and the stock goes x-dividend for another $.34 (1.1%) this week.

Will likely look to establish another round of covered calls on a bounce.

Utilities ETF (XLU) – Originally bought the etf at $31.72 and sold Jan $32 calls against it for $1.23.

The intent was for this conservative group of utility stock to stay stable through the end of the year and pocket both the option premium and two dividend cycles. The etf close trading today at $34.85. The original plan remains in place. We plan to hold through the dividend cycle and assuming it is still trading above $32 will likely exit the trade at near a 7% gain.

Four short puts trades were made. All were closed for a profit..

• Japan ETF (EWJ) $9 put – closed for a profit of .9% in a little more than a week.
• Health Care Sector (XLV) Jan $29 puts – closed at $.39 for a gain of 4.6% in about 2 months
• Bank of America(BAC) – first the Sept $7 puts and then the $6 Oct. puts for a gain of 5.5% in about 2 months.
• Corning (GLW) – Initially sold Oct $13 puts for $.75 cents. Those expired worthless and put the same trade on for $13 puts in November for $41 cents. Covered that position after the earnings move at $.08 for a gain of $33. In total $1.08 (9.1%) gain in about 3 months.
  

Materials ETF (XLB) – As previously described. Initially the Dec $31 puts were sold and those proceeds were used to buy the Dec $34 calls. Zero out of pocket costs. When XLB was trading higher we were able to finance the covering of the short Dec $31 puts by selling the Dec $37 calls. Received a very small credit. In option language, that was starting with a risk reversal and converting it to a vertical call spread. In common sense language that was risking less ($31) to now have a can't lose shot at making $3 or about 10%.It is nice to be sitting in a place where we are now essentially playing with the houses money.

XLB has fallen off the cliff this week. Down to $31.40. At this time, it certainly looks like this shot at a larger gain is going to expire worthless, but who knows. With these option strikes now 10% out of the money, will be looking for ways to re-position the strikes or exit the trade.

Downgrade Portfolio - End of October Status

Overview

Readers will recall that about the time S&P downgraded US debt, CCI put some dry-powder to work on the simple assumption of “buy when others were fearful”. As October comes to an end, it seems like a logical time to report on the status of those trades.The specifics of those trades and update status can be found at this google doc and are described below. 

Overall this basket of nine diverse positions is up just over 5%. Of course the S&P500 is up about 11% in that same time frame. So the reader can judge for themselves if the glass is

• half-empty – it would have been much better to just “buy the market” or buy with some leverage
• half-full – the timing of the call to put more capital to work was very good. While the positions taken did not match the market performance,  they did go up.  Further,  almost all were hedged in such a way that they would not have lost as much if the market had not cooperated.

CCI “unbiased” opinion is that the glass is half full. It is not all that easy to overcome the fear of the moment that existed at the downgrade time to put money to work. The easy course of action would have been to do nothing and make nothing, or worse panic sell and miss the opportunity. While the option based hedged positions put in place damped the gains, they not only reduced risk, but helped make it psychologically easier to invest at a time of fear.

Trade Status

Let's start with the worst position. Bank of New York (BK) is down 7% along with the overall financial sector. The stock and sector had bounced some based on last weeks alleged positive European news, but that faded away likely in sympathy with the noise related to MF Financial bankruptcy today. CCI continues to believe this is somewhat a unique play in the financial services industry and read the charts to say it can get back over $23.  So we continue to hold and may sell some calls against this position on a bounce.

Three long positions and associated covered calls

Ford (F) - Bought a lot of stock at $10.18. Sold and then subsequently covered a lot of $11 Sept calls against the position for a gain of $.35. Established another $11 covered call position in November for a credit of $.79. The stock closed today at $11.68. If the stock stays above $11 through November options expiration the position will close with a gain of 19%. Conversely, with all the premiums taken in the stock would have to fall to $9.04 before loosing money. Still generally bullish on Ford so it if does pull back we would likely skim the profits from the option position and hold for better days to re-establish yet another covered call position.

Waste Management (WM) - Sold Aug $30 puts for $.70, and the stock was put to us at an effective price of $29.30. Closed today at $32.90. Over the past months we sold calls against the position for a $.63 gain and collected a $.23 dividend. Overall the position is up 16.5%. I would plan to exit the stock if it nears $35 but in the interim, I am Ok owning this for the dividend and possibly another round of covered calls on a bounce.

Utilities ETF (XLU) – Originally bought the etf at $31.72 and sold Jan $32 calls against it for $1.23.

The intent was for this conservative group of utility stock to stay stable through the end of the year and pocket both the option premium and two dividend cycles. The etf close trading today at $34.85. The original plan remains in place. We plan to hold through the dividend cycle and assuming it is still trading above $32 will likely exit the trade at near a 7% gain.

Four short puts trades were made. Three are closed for a profit, and one is still open and showing a gain.

• Japan ETF (EWJ) $9 put – closed for a profit of .9% in a little more than a week.
• Health Care Sector (XLV) Jan $29 puts – closed at $.39 for a gain of 4.6% in about 2 months
• Bank of America(BAC) – first the Sept $7 puts and then the $6 puts for a gain of 5.5% in about 2 months.
• Corning (GLW) – Initially sold Oct $13 puts for $.75 cents. Those expired worthless and put the same trade on for $13 puts in November for $41 cents. The stock is currently trading at $14.20 and the options at $.18. Looking to harvest a little more of the premium before closing the trade.

The final trade was on the materials ETF (XLB) – Initially we sold the Dec $31 puts and used those proceeds to buy the Dec $34 calls. Zero out of pocket costs. When XLB was trading higher we were able to finance the covering of the short Dec $31 puts by selling the Dec $37 calls. Received a very small credit. In option language, that was starting with a risk reversal and converting it to a vertical call spread. In common sense language that was risking less ($31) to now have a can't lose shot at making $3 or about 10%.It is nice to be sitting in a place where we are now essentially playing with the houses money. XLB ended the day at $34.45 so the spread is barely in the money. However, as stated we just need for this volatile etf to bounce back toward $37 anytime between now and December expiration and the position will turn nicely positive with nothing at risk now.

Downgrade Portfolio Status

Readers will recall that CCI established nine, relatively similar sized positions as the market was falling in conjunction with the S&P downgrade of the US. These trades were an attempt to “buy when others were fearful”. However, to be conservative, these positions were mostly done with options to provide some level of hedging and a different risk/reward than just buying stocks at that time.

The specifics of those trades and update status can be found at this Google doc

Highlights include:

• Let's start with the worst position which is dragging overall performance down. Bank of New York (BK) is down 12% as financial stocks have continued to perform poorly. This week the current CEO stepped down “due to differences in approach in managing the company”. Barron's this weekend re-iterated their buy on the stock, with target prices over $30. Of course they are more underwater on the trade than CCI. Never the less, this change can be a catalyst for the longer term.   CCI is sticking this one for awhile longer, but may have to cut losses at some point in time.

• Four of the positions have options with expiration dates in September (9 trading days away). At the present time, Ford and Waste Management stocks are trading up slightly from purchase, but not high enough to trigger the covered calls on them. So if the options decay further this week, CCI will likely harvest those premium profits and perhaps re-establish other calls. (As a side note, CCI also collected the dividend on WM this week for a 1+% gain on the lot) Similar to the covered calls, the naked put in Corning is well in the money and may be harvested this week. Lastly, Bank of America is trading back to $7.25 after the Buffet bounce. Anything could happen to this stock in the next two weeks and even more so with the $7 put CCI sold. Stay tuned.

• Three end of year option plays around ETFs (xlb, xlu, xlv) are all in the money by a few percent at this point. Current thinking is
• XLB (materials)– look to harvest gains if/when volatility creates a market bounce
• XLU (utilities) - this very conservative covered call position will pay its 1+% dividend in late September. Sighting tight at least until then.
• XLV (health care) – The position is up by 3% of its maximum 6% gain, or “only” 3% possible gain left in this trade this year. If an opportunity to harvest a little more gain presents itself, it maybe time to redeploy elsewhere.

• Aug EWJ (Japan) $9 put – closed for a profit of .9% in a little more than a week.

Trying to generate income by selling puts in Corning and BAC

With cash paying near zero, and fixed income yields low and facing the risks of rising interest rates eventually, it is a challenging time to generate income from a portfolio.  (or is that fixed, non-income...lol).  Dividend paying stocks are certainly one alternative to generating income.  However, along with this approach comes all the risks associated with equity investing.  A way to reduce the risk of holding equities while actually generating more income than can be received from dividends is to sell naked puts for stocks that seem to have hit some floor level.

CCI made two trades at the end of last week and documented the rational and benefits of this type of trade in this article at seeking alpha.com.  It describes how selling puts in Corning and Bank of America at strikes well below both their current price and their book value can yield 4-5% in 1-2 months.  These position also offer a significant buffer of safety if the stocks were to resume falling in price.

After making the trades last week, it took some time to write and publish the article.  Both stocks moved up aggressively over that period of time.  The good news: that puts these trades solidly in the money and already ripe for potential harvesting.  The bad news: CCI readers may no longer have the opportunity to take similar position unless their is a pull back in price or they are willing to accept substantially less reward (and risk).

I'll add these two trades to the downgrade portfolio thread because they were initiated somewhat in conjunction with the market levels after the S&P downgrade of the US.

Downgrade Portfolio Update

As discussed in previous posts, CCI established 7 trading positions in the past week around the S&P downgrade of the US.  The plan/hope is that it will prove profitable over the mid-term to have bought at such a fearful time (or at least that is the theory!).   The google document at the link below will track these 7 trades.
 Downgrade portfolio


A few highlights/lowlights from this week.

• The naked put sale of the Japanese ETF expired worthless, thereby generating the small amount of income as planned. 
• With Waste Management closing Friday's trading at $29.40, the naked put sale was assigned and we are the proud owner of a lot of  Waste Management shares at an effective cost of $29.30.  Not in a rush to get rid of this stock as it is now paying a 4.6% dividend, but if option volatility remains high we will likely look to write a covered call against this position to try to add to the income stream.
• Most of the other positions are not too changed despite all the noise of the week except for the Bank of New York which is down.  Still believe that this somewhat unique bank stock is caught in the down draft of more traditional banks that have with a more risky position in the industry, but as of now this is a loser.

 Updates on these 7 positions will come out periodically. There are several other established trades that took a beating this week.  CCI will be sorting through the damage and determining next steps on these trades over the next several days.

Risk Reversal on Materials ETF - xlb

Stocks plunged again today.  That provided the "opportunity" to establish the risk reversal options based position in the materials ETF (xlb) that was originally described in  Friday's Shopping List article

At the time of the trade XLB was trading at around $32.9.  Sold 2 lots of the  Dec. $31 puts and bought the $34 calls for zero out of pocket costs after commission.  CCI will be long the xlb if it falls below $31(5.8% more down)  or if the etf trades over $34 (up about 3.3%) on the December expiration.

Scenarios
Below $31 - We miss out on the first 5.8% loss but after that lose dollar for dollar on any further drop.  (i.e. this position looses less than buying the etf today).
Above $34 - We miss out on the first 3.3% of gain but after that gain dollar for dollar on any further rise (i.e. this position makes less than buying the etf today.)
The idea of sacrificing 3+ % of the gain to avoid nearly 6% of the loss seems like a good risk reward.  Also option implied volatility is high if it comes down there might be trading opportunities around this position

Friday's shopping trip

Friday's market did not have near the volatility of the earlier in the week and was positive on the day.   That was not exactly the conditions I had in mind when I created the shopping list document in the following article.

fridays shopping list

However, some specific conditions still presented themselves to enter two of the  three potential Etf plays. described in more detail in the article.  Here are the trades made on Friday

• Materials ETF XLB - risk reversal .  XLB never really pulled back on Friday and conditions never seemed right to enter. So nothing was done, but we will continue to monitor for possible entry next week.
• Japanese ETF EXJ - put selling.  Somehow got an order processed to sell the Aug $9 puts for $.08.  The etf closed around $9.80. So if the Japanese stocks fall 8+% next week.  I own it.  If it does not fall 8% we make about .9% in a little more than a week.  (or about the income from a 5 year treasury for a year).  By the end of the day, the option was barely trading, so this opportunity is no longer available.  
• Utility ETF XLU - coverd calls.  The xlu did pull back a little and this trade was entered.  Stock was purchased at $31.73 and Jan $32 calls sold for $1.24. (about 4%). That is a net cost of $30.49.  If this etf trades flat for the rest of the year we can make the 4% option premium, plus about 2% in dividends.  The portfolio does not start loosing money on this trade until under $30.

We will track these trades and hte ones from S&P downgrade Monday as a group

Down, Up, Down, Up - A Shopping List of ETFS and their options for Friday?

Let's see
Monday down, Tuesday up, Wednesday down, Thursday up....hmmm...what's next?

Let me use my binary, asset allocation, forecasting tool to try to predict tomorrow's direction...heads its up, tails its down.

Wait! Better yet I'll use my proprietary,  oscillation, simulation, modeling tool to perform an in-depth pattern analysis ....hang on....calculating.....oh no....it seems to indicate ..... down again.

OK...enough with the attempt at sarcasm/humor.

But...........while no one can be sure what Friday will bring, there is obviously some real probability of a down or weak day on Friday.  Especially since there seems like some chance that fast money may take their money off the table and head to the Hamptons for the weekend (or may this week it is more like the fast European money coming off the table so they can go to the Riviera).  In any event, it seem prudent for an individual investor to have a game plan in the event of Friday market weakness.   Do nothing, move to the sidelines, accumulate?

In the event of a weak day CCI will likely try to accumulate some positions and has created a list of a few potential, conservative, trades using etfs and their options.  A more in depth article describing the rationale for these trades should be posted at Seeking Alpha Articles by CCI in the morning, but in summary they are

• January at-the money covered calls on the Utility Sector etf (xlu)
• December $32/$35 risk reversal in the Materials Sector etf (xlb)
• Aug or Sept $9 naked put selling in the Japanese ETF (ewj) to try to generate some income.

Hopefully the market will rally again on Friday. In that event this list can be put on hold, and an early happy hour can begin.  If the market weakens into the weekend, CCI will try to enter these positions and track them as part of the downgrade portfolio started earlier this week.

Downgrade Portfolio

After S&P announced its US downgrade Friday it seemed highly probably that the markets would be volatile early this week.  I guess down 6.6 % on Monday up 4.7% on Tues can be described as "volatile" (rational would not be a word I would use).  During the relative calm of Sunday night CCI took the time to identify a few positions that might be worthwhile to trade in the upcoming volatility.  The rationale for four potential trades were documented at an article posted here at "options for downgrade monday" at seeking alpha.

Positions in these four relatively diverse selections were established in the last two days and are will be followed here on this blog under the tag of downgrade portfolio.

Ford (F) - Bought a lot of stock at $10.18 on Monday. As the stock rebounded this morning and volatility stayed high sold the $11 Oct calls against the position for $.68.   The stock closed Tuesday at $10.96.  Being fortunate enough to buy at $10.18 means there was already lots of opportunity to make money,  However, as it sits now, CCI is long the position at a break even point of about $9.50 (down 13+% from here) and the stock has a reasonable chance of being called away at an effective price of $11.68 (gain of 14+%).  CCI will look for good risk/reward points to exit the trade if/when option volatility falls.

Bank of New York (BK) - Bought at $22.77.  Closed Tuesday still down at $21.11.  Will be looking to write a covered call against the position if it moves up.

Waste Management (WM) - Sold Aug $30 puts for $.70.  Closed Tuesday at $29.40.   Would not be upset if this stock is put to us at a break even point of $29.30.  Would collect the 4.5% dividend and wait for awhile.

Health Care ETF (XLV) - Sold Jan 12 $29 puts for $1.73 based on the high volatility on Monday. Worse case we are long blue chip heath companies at about $27.27.  That is about 13% less than Tuesday's close of $31.28. The specific options were down to $1.24.  If/when volatility comes down,  we will be looking for an opportunity to add more legs to the trade possibly by using the proceeds of this put sale to buy an upside call.