As I mentioned in a post near the end of July, times seemed too good to last and I expected the July rally to fizzle. And fizzle it did along with my balance. I didn’t fall as hard as the broader markets, but certainly lost. I ended August with a combined balance of $108,954.79 ($95,553.87.87 with Interactive Brokers and $13,400.92 with TD Ameritrade) and that’s after making a deposit to AMTD of $2,000 during the first week of the month. After ending July with a combined balance of $112,122.50, I lost $5,167.71 on paper for August, although I had a realized gain for the month of $1,782.95. My combined balance in Quicken was a little off as usual and said I have $108,883.36.
My account continues to have lower volatility than the markets in general due to my use of options and my (small) diversification into bonds. August pulled me ahead of the S&P 500 by a little bit more than previous months which is always a good feeling, but a big broad market rally could move me back to even quickly. With only four months remaining a lot can change, but I prefer being in the lead rather than working on a comeback in the …
The premiums on VXX are just hard to resist, so I didn’t. I like VXX as an indirect hedge for most of my other long positions and think even on a lull in volatility the premiums are still worth selling out of the money. While VXX was trading at $22.32 this morning (above its low) I sold three VXX October 20 naked puts at $0.70 each and received $207.86 after commissions. My move into more VXX naked puts today wasn’t completely based on a belief that VXX is at a bottom right now, but more that it won’t go much below my strike, if it even goes that far.
In April VXX went as low as $17.84 intraday before recovering. I don’t see any time it has closed below $18 yet, but I assume that eventually it will, but doubt it’ll stay down too long. Even if/when it gets down into the $17-18 range again, the shares that I might buy at $20 won’t be very deep in the money and I still think I’ll be able to sell $20 strike covered calls all day long for a good return.
For example, as I’m writing this post VXX is trading at $23.00. The October $28 strike calls are …
I’ll admit I got a little excited about the prospects of a little rally this morning while I was long so many positions still open long without covered calls. That misplaced euphoria vanished quickly as the markets retreated. By noon I had already sold three covered calls and I’m still debating some others.
While ITRI was trading at $56.84 I sold one October $60 covered call for $2.15 and received $213.99 after commissions. If these shares are called away I’ll take a big realized loss on the shares, even when accounting for the premiums I’ve taken in. I didn’t want to completely exit the position yet because I still believe in ITRI longer term and taking in $200+ on $5,684 backing it is a nice return on its own, assuming ITRI doesn’t keep falling.
While AVAV was trading at $23.00 I sold two October $22.50 covered calls for $1.70 each and received $338.57 after commissions. AVAV is below where I started and I have a paper profit on it already, but think the risk is somewhat low that I’ll take a loss by stretching this position out for another couple of months. Taking in $1.70 while $0.50 in the money is basically the same …
I charted the S&P 500 ($SPX) after the markets closed on Friday, 8/20/10, when it finished the week at 1,071.69.
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The first thing I noticed when I looked at the S&P 500 chart this week was that even after what felt like a painful slide lower, it’s still trading within the same trading channel that it’s been in for months. A lot of bears out there will scream for the reasoning that it’s going for a double dip now and although they could be correct, the chart doesn’t say give up yet. Until this trading channel breaks, there’s no reason to abandon ship completely yet. Lightening up when resistance hits on the upper limits (around 1,130) and reloading when support is found on the lower limits (around 1,040) is still the game that works. At some point that will stop being a winning strategy, …
Today’s option expiration finished somewhat differently than I thought it was going to as of a week ago. Here’s the breakdown of how it went down:
VXX, two August 24 Puts – I’ll be assigned 200 shares of VXX on Monday morning. Instead of trying to roll these puts I sold covered calls on the shares I’m about to be assigned. While VXX was trading at $23.07 I sold two September 24 covered calls at $1.25 and received $248.97 after commissions.
AVAV, two August 25 calls – AVAV stayed below my covered calls strike and I’ll be holding onto my shares. I plan to sell covered calls at the $22.50 strike on Monday or Tuesday. I’d like to see a little bounce first, but won’t wait too long.
CVS, two August 33 puts and 100 shares assigned as of this morning from my third option – I might just dump these shares for a loss. I was expecting $28.40 to hold and it didn’t. It looks oversold and due for a bounce, but I’m not sure I have the patience. If the premiums were better I might extend my stay with it. That might be what I do once the October contracts are posted next …
MyTradersJournal.com has the honor of hosting this week’s Carnival of Financial Planning.
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Best Personal Financial Planning and Personal Investment Articles this Week from Personal Finance Blogs
Welcome to the August 20, 2010 Edition #154 of the Carnival of Financial Planning.
The Carnival of Financial Planning takes a long-term view of personal financial planning for individuals and families. We focus on efficient and sustainable personal financial planning practices that can lead to lifetime financial security.
This edition is arranged by subject heading, so that you can browse efficiently.
Enjoy!
The Skilled Investor, Editor
Budgeting and Economics
Jeff Rose, CFP presents 3 Unusual Ways to Save Money posted at Jeff Rose, saying, “Here goes, three unusual strategies that not only save you money but also improve the quality of your life.”
Roshawn Watson presents Economists Blame ME for the Slow Recovery posted at Watson Inc, saying, “We are responsible with our money, yet instead of admiration (or even understanding), these efforts garner contempt as the frugal once again get the blame for dismal economic activity.”
Craig Ford presents 20 Reasons to Start a Budget posted at Money Help For Christians, saying, “This post gives reasons why non-budgeters should consider budgeting.”
I have AVAV covered calls expiring tomorrow and it looks like I’ll be holding onto my shares, i.e. the options are out of the money by more than 6% with one day to go. I’ve been debating what I should do; exit my position now or hold on for one more round of covered calls. If I do write covered calls again, should I sell at the $22.50 or $25.00 strike? I looked at AVAV’s daily prices for the past six months and see some declining trend lines and a couple of horizontal lines that should act as resistance. The one trend line of higher lows isn’t too far away from AVAV’s current price and could be the line of support AVAV needs to get it moving higher again.
After checking the chart I also looked at Ford Equity Research’s Valuation Bands to see how AVAV was looking from a value perspective. The Ford information is from August 13th and already since then AVAV has gained almost a dollar. The big take away from the second chart is that AVAV is at the bottom of its valuation band. Couple that with the fact that AVAV has a forward P/E lower than its …
I haven’t made a trade yet in August. That’ll change this week with options expiration upon us as I adjust my option holdings. It’s not necessarily because I’ve been too busy to get to it, but more so that I couldn’t find anything I liked that I wasn’t already invested in with this latest dip back towards the lower side of the broad market’s trading channel.
I have a mixed bag of how August options expiration could end up for me. AVAV looks like it’ll stay below my covered call strike, so I’ll re-write covered calls on my long shares. CSX could go either way. It’s under my strike now, but that can change any day. CVS is well below my strike and I’ll end up buying the shares unless I close it for a loss before the close on Friday. ITRI is well below my strike, so if I keep it I’ll write a new covered call. JPM is close to my naked put strike which means my higher strike covered call will expire OTM and I’ll keep my shares and might even buy more if my naked puts come into play. VXX is close to my August strike. If it stays …
I charted the Dow Jones Industrial Average (DJIA, $INDU, $DJI) after the index closed on Friday, August 13, 2010, at 10,303.15.
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Two weeks ago I questioned if the DJIA chart had just swung its third strike and was heading lower. We’re only about 160 points below that mark now, but we are below it with a scared group of investors looking for exits. Now the DJIA has fallen below its 200 day moving average (dma) even deeper too. The 50 dma held support on Friday, but only after breaking intraday on Thursday before recovering. Failing at the 200 dma was a pretty big technical event for the index, but we did have multiple warnings it was coming.
Along with the break of the 200 dma came the break of the trend line of higher lows that started with …
