Readers will recall CCI had established the $23-$25, 1 by 2 ratio call spread in both Nov. and Dec as a way to repair a put sale gone bad in ANR. Both times the stock retreated and these spreads expired worthless.
Let's hope the third time is a charm, because today CCI re-established this spread in Feb. ANR was trading around $22.50 and trade was done for a very modest $.04 per contract credit. If you need a refresher on this
activity and the rationale for this recovery trade it is documented here. Book value (from Yahoo finance) is still over $36 and my calculations of tangible book value is still over $25. Hence, it seems the stock still has a reasonable chance to get back over $25. At that price the spread will have max gain, but it will start to make money over $23 ...all for no further out-of-pocket costs.
Thursday, January 12, 2012
Wednesday, January 11, 2012
"Putting" on some insurance
As discussed in this article with the market up and volatility down it seems like it might be time to establish some hedges by selling a put spread on the S&P500 (spy)
Monday, January 9, 2012
Adding to Google Holdings Today
Cisco covered calls
Cisco (csco) pushed over $19 today. In a previous post (here), CCI bought $10 Jan 13 Leaps with the intent of selling calls against that position if Cisco traded higher. Specifically CCI sold the Feb $20 calls for $.37 after commissions.
- If the stock continues to rise to over $20 by Feb expiration we will take both legs off for a nice profit.
- If the stock reverses, CCI will harvest some of the premium from the Feb covered calls which will lower the break even price for the Jan $10 leap leap.
Friday, January 6, 2012
Shorting LULU.....again
With the overall market starting the first few days of the year in a positive manner, it generally seems like time to get some short positions in place to provide some hedge to the portfolio. To do that CCI decided to go short Lululemon today at $53.54 after commissions.
CCI discussed some of the fundamental rationale for shorting this stock in this post in October. Trailing P/E remains at 47. Being short LULU is not a unique view. LULU is one of the most heavily shorted stocks in the market. Earlier this week Goldman Sachs made some positive statements about LULU and the stock has gone straight up about 12%. CCI is thinking some of that price rise might be a short squeeze caused by this news. Further, if I was cynical about wall street (me, cynical about wall street..really) I might think that the street will be nimble enough to take the other side of this situation. Hence I felt now was a good time to re-enter the short position. Of course, it is also possible that CCI will become the next victim of the market remaining irrationally optimistic about this stock for an extended period of time. However, the overall long bias of the portfolio will probably perform very well if the market continues to move straight up, so this trade can be rationalized as an overall hedge.
CCI discussed some of the fundamental rationale for shorting this stock in this post in October. Trailing P/E remains at 47. Being short LULU is not a unique view. LULU is one of the most heavily shorted stocks in the market. Earlier this week Goldman Sachs made some positive statements about LULU and the stock has gone straight up about 12%. CCI is thinking some of that price rise might be a short squeeze caused by this news. Further, if I was cynical about wall street (me, cynical about wall street..really) I might think that the street will be nimble enough to take the other side of this situation. Hence I felt now was a good time to re-enter the short position. Of course, it is also possible that CCI will become the next victim of the market remaining irrationally optimistic about this stock for an extended period of time. However, the overall long bias of the portfolio will probably perform very well if the market continues to move straight up, so this trade can be rationalized as an overall hedge.
Thursday, January 5, 2012
Using options to build a position in EEM
Frequent readers will recall that CCI had two international portfolio's in 2011 EEM2 and GSPY.
In 2012 CCI will be merging those two portfolios into one global portfolio. The portfolio plans
At the start of 2012, the portfolio is long one lot of EEM at an effective price of $38.33, and one lot of naked Jan 6 (weekly) $38 puts. Building on this position over the past two days:
In 2012 CCI will be merging those two portfolios into one global portfolio. The portfolio plans
- to continue to hold the 7 country etfs described in those funds
- to add in several other country funds
- to more actively trade/hedge this portfolio than done in 2011
At the start of 2012, the portfolio is long one lot of EEM at an effective price of $38.33, and one lot of naked Jan 6 (weekly) $38 puts. Building on this position over the past two days:
- Sold the Jan $40 calls against the one lot of shares owned for a credit $.57
- Rolled the Jan 6 (weekly) $38 puts to Jan $38 puts for a net credit of $.55
- There is about a 43% chance (according to option theory) that EEM will be trading below $38 at Jan expiration and CCI will be the proud new owner of a second lot of EEM. Since there is a good chance this may happen an investor really needs to be comfortable with this outcome. Additionally, CCI will have collected $1.84/share (4.8%) in option premium to lower the cost basis.
- If the stock stays between $38 and $40 over the next few weeks, CCI will still collect the $1.84 option premium and own one lot of shares.
- If it rises over $40, CCI will collect the $1.84 in option premium, and make $1.67 on the first lot of shares being called away.
Wednesday, January 4, 2012
Trying to saving some money with a Costco iron condor
In CCI's continuing attempt to generate income via options, an iron condor in Costco (COST) was established.
Readers relatively new to option strategies might recall that an Iron Condor will make money if the stock trades in a range. In general an iron condor is the combination of a put and call spread. The specific transactions in this case are:
Sell Feb $ 80.00 Put Sell Feb $87.50 Call
Buy Feb $ 77.50 Put Buy Feb $90.00 Call
Costco is trading around $84.50. The options were sold for a credit of $79/contract after commissions.
The $80 level is about the 200dma support level, and the $87.5 is near the recent high resistance. This trade is basically a bet that the stock stays within that 10% range.
The trade is not anticipated to be held to expiration date, but If held to expiration:
Readers relatively new to option strategies might recall that an Iron Condor will make money if the stock trades in a range. In general an iron condor is the combination of a put and call spread. The specific transactions in this case are:
Sell Feb $ 80.00 Put Sell Feb $87.50 Call
Buy Feb $ 77.50 Put Buy Feb $90.00 Call
Costco is trading around $84.50. The options were sold for a credit of $79/contract after commissions.
The $80 level is about the 200dma support level, and the $87.5 is near the recent high resistance. This trade is basically a bet that the stock stays within that 10% range.
The trade is not anticipated to be held to expiration date, but If held to expiration:
- Worse case the stock hits new highs over $87.50% or pulls back below $80 and the portfolio will lose $171 per contract. ($2.50spread -.79 credit)
- Best case the stock stays anywhere between $80 and $87.5, and the portfolio keeps the $79 premium. gains $164. That range is a little tighter than CCI would normally like to see in an iron condor, but I think this stock has become a leading provider of "staples" that is more likely to stay stable than most of the market.
- Realistic Case - Around Feb. 1 CCI would anticipate looking to exit this trade. This is after the Jan options expire and are rolled towards Feb, and initial q4 earnings will have been released.
Tuesday, January 3, 2012
Teva - Covered Calls
CCI's position in TEVA has not moved very much over the past months. Today it jumped nearly 7%. It seems the market likes the idea of a new CEO! In the longer term, a new CEO could be a good change agent to help drive this stock towards my original target price near $50. However, in the shorter-term I suspect that today's positive reaction might be short-lived. It usually takes several quarters for a new CEO to have an impact on the company.
Hence, this morning CCI sold Jan $42.50 calls against one lot of the stock in the portfolio for a credit of $.80. The stock continued to move up during the day and an investor could have gotten a much better price or moved to the $45 strike. Two scenario's
Hence, this morning CCI sold Jan $42.50 calls against one lot of the stock in the portfolio for a credit of $.80. The stock continued to move up during the day and an investor could have gotten a much better price or moved to the $45 strike. Two scenario's
- Today's positive move was indeed an over reaction, and the stock will pull back in the short-term. In this case CCI will look to harvest some premium and potentially roll this same call out t a future month
- The stock stay here or rises. In this case one lot of share will be called away at an effective price of $43.30, and the other two lots in the portfolio will continue to enjoy the ride.
Monday, January 2, 2012
2011 Report and 2012 Plans
2011 was the inaugural year for CCI. I want to thank all of you have taken the time to read the blog this year. I hope it has provided some insight for you, and look forward to your continued support in 2012. This post provides an overview of 2011 results and insight into plans for 2012.
2011 Review
CCI had two initial goals in 2011.
- CCI's first goal was to see if I had the time and energy to keep this active/current for the full year, and if anyone would read it. I feel I was able to accomplish this objective.
- The second objective was the basic goal of any trading log, to clearly document why an investment is made, track performance, and become a better investor. Making the effort to documenting trade rationale seems helpful. Frankly, I really did not entire the year with any infrastructure in place to track performance. However, based on my cobbled together, unaudited, approximate review of 2011 posts the performance has been good. Specifically:
- All domestic stock and options activities had just over a 5% gain. The S&P500 had a 2% gain (all from dividends). Hence, it seems CCI performed 2.5 times better than the market.!!! Of course, past performance is no indication of future results. However, this type of performance is consistent with the objective of the type of investing discussed in the blog. My expectations would be to under perform in big up markets, lose less in down markets, and out perform in sideways markets. Over the long-term, I think that will provide a better, more stable return.
- The two international portfolio's both lost about 11.5%. It is a little more challenging to determine the right benchmark for these portfolios. My understanding is emerging market were down about 16% and developed markets down about 11% in 2012. Blending those two numbers based on the asset allocation that was used in these portfolios results in benchmark down 12.5%. I guess 11.5% is over-performance, but I would have hoped to lose less than that amount in a down market. CCI will be re-examining the approach in this area in 2012.
What's new for 2012
In the inaugural year, CC posted about a variety of stocks and options that I found of interest. The big change planned for CCI in 2012 is more focus. Specifically, in 2012 CCI plans to focus on six specific groups of stocks or portfolios. The stocks in each portfolio will be in a similar industry and/or share a similar set of characteristics. Within each portfolio CCI intends to use a wide variety of techniques beyond just being long equities. This includes the heavy use of options, some shorting, and a minor amount of leverage. Yes, these can be considered hedge fund type tactics. To many that may seem aggressive. However, it can also be viewed as the common sense way to invest in markets today.
This increased focus is intended to
- Make it easier for readers to understand how specific post “fit together”
- Differentiate CCI from many other “stock pick of the day” internet sites
- Make it easier to track and understand performance
The six stock groupings are
- Global Country Basket (GCB) - An alternate blend of non US ETFs
- Options for Income (O4I) - Generating income via selling options
- Behind the Clouds (BTC) - Technology Sector, hedge fund
- Utility Dividend Capture (UDC) - Utility Sector, Income oriented
- The Short Game (TSG) - Shorting market indexes
- Sweet Swing Trades (SST) - Traditional opportunistic swing trades
To support this focused effort, there will be some technology changes.
First, the groupings on the left side of the blog will be migrating to these six topic areas. It may take some time to evolve to this architecture, so the community's patience during the process is appreciated.
Second, CCI is also announcing the pilot release of a web site! It can be found at
This web site is intended to provide a platform to better contain common sense thoughts and theories about investing, better keep track of trades over a long period of time, and allow for future expansion of the concept of self directed investors managing and sharing portfolios in their areas of expertise.
Please note: this web site is a work in progress and will probably remain that way for much of 2012
For starters, CCI's IT staff (i.e. me) is still learning how to produce a web site and CCI is too cheap to outsource web-site development (for now). In 2012, the focus will be on adding content, and in future years potentially accessing better web development skills to improve the form of the site.
Secondly the web site is intended to grow over time, so for now several initial pages are listed as “under construction”. Throughout the year, CCI will be considering if/how this web site may need to grow, with the intent of formalizing it better in 2013.
Thanks again for your support in 2011 and best wishes for a happy, healthy and prosperous 2012.
CCI
Sunday, January 1, 2012
UDC Portfolio Q4 Results
The Utility Dividend Capture portfolio (description here) made 5.7% in the fourth quarter, and 12.2% for the year. The fund once again, as planned, generated significant dividend income (4.8%). The portfolio was also able to piggyback on the rising tide of utility stocks in the stock market to post a small capital gain (.9%).
Of course the S&P 500, and more specifically the utility sector ETF (XLU) had much better gains than the portfolio. That is not surprising as this portfolio's objective is more oriented towards an absolute return and better weathering downdrafts. This is illustrated by the continually falling volatility of this portfolio. Over the 10 quarters of existence its SD is now less than half the S&P 500 and 20% less volatile than even the much more docile utility ETF. Performance results for the past 10 quarters are shown below.
| 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% | 11.2% |
| Compound Return | | | 36.5% | 42.0% | 39.9% |
| Standard Dev | | | 4.2 | 5.0 | 9.1 |
Correlations between these three funds are shown below.
- udc/xlu .77
- udc/spy .71
- xlu/spy .46
| TRADE STATS | Trades | Wins | Loses | Win % |
| 2011 q4 | 15 | 14 | 1 | 93.00% |
| Total | 180 | 136 | 44 | 76.00% |
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