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humn, maybe wait until it settles somewhere? around 10? Lets see tomorrow. if you think vol will go down, write longer term, if up, shorter term.
Looking at writing some calls on AA, and maybe after the pres-elect is in,some puts, but not sure what calls are good at this point?
Got out of CY calls today at $.25, for a 54% gain.
Interesting.
The other one I am looking at as a potential Buy write is cgw, a global water etf, and TAN, a solar etf. Both are great long term holds, and decent premiums.
just ran the numbers on it.
38% return if unchanged, 540% return if called.
Break Even $.40 Could be not bad, esp if you dont believe Borders will stay around. =)
Very interesting. Nice.
As a longer term... BGP... risky, but fairly low cost with lots of upside.
Stock $.55, write Jan 10 $2.50 for $.20 or so.
What are you liking for a new entry today?
Just an update.. cy, BGP,
CY closed at $5.05, HOD of $5.12. Calls are in the money. Lets see if they go through higher. Bought calls at $.33 originally, and then at $.05, Will take profits off the table if it hits $.45 or $.50 on the calls this week. These are Jan $5 strike.
BGP - HOD was $.72, closed at $.61, still up but not as much, perhaps profit taking, still looks good. I was going to take profits at $.75, hit HOD at $.72. eh.
Overall, a pretty good day, for all AUY, GE, CY, BGP, F.
Just an update, purchased the latest version of McMillan's "Options as Strategic Investment" at Borders yesterday with the 40% off coupon...
oh yeah, Purchased 1k shares of Borders, BGP at $.49 yesterday. Mentioned it on 2 other boards. Up to $.66/67 this morning. May look to take some profits if it hits $.75 to $1.
From Bill Fleckenstein's Daily Rap: (Here is Fleck's Site for the Daily Rap):
Note: reprinted with permission.
"After considerable thought and deliberation I have decided to make a major change in my life: I am going to close my hedge fund. I have several reasons for no longer wishing to run a short-only fund as I have for the past 12 years. First, my original reason for starting the fund was because of developments I saw occurring in the late 1990s that I wanted no part of. I felt that Greenspan was fomenting an environment that would lead to disaster, as consultants, financial advisors, and the public at large were losing all respect for risk. Of course, the reckless behavior carried far higher and lasted much, much longer than I ever imagined it could. However, the recent carnage in the stock market, real estate market and the financial system (as well as the job losses) has washed away those excesses to a large degree and it has violently demonstrated the risks associated with investing.
A future goal of mine, when I set up the fund in 1996 -- as I attempted to step aside from the madness -- was to return to the long side of the business at some point in time when I felt that investors had become more rational regarding risk and stocks offered a more favorable risk/reward proposition. I considered this option very briefly in 2002 after the stock bubble imploded, but the cleansing process was postponed due to the burgeoning real-estate bubble.
Second, though I think that the stock market still has unfinished business on the downside, I believe that 2009 is the year to prepare for a return to managing money in a more balanced fashion, with longs (and some shorts), as there are currently plenty of interesting ideas that appear to offer a margin of safety. On the flipside, compelling opportunities on the short side are not as abundant as they were just a few months ago (though there still are plenty.) The "value restoration project," to quote Jim Grant, has been brought about by the consequences of disastrous Fed policies and the madness of the crowd, both of which have concerned me for the last 15 or so years.
Lastly, on a personal note, I no longer want to run a short-only hedge fund, as it is very stressful, nerve-wracking and generally not very much fun, entailing an intense focus on the short term to effect risk control. In addition, one views the world differently when operating solely from the short side and I would like to widen my focus as I did when I managed money from 1982-1995. My wife is especially happy about this potential change.
My efforts in 2009 will be directed towards setting up an investment vehicle managed by Fred Hickey and me that won't be a hedge fund, which hopefully will be available to everyone. I feel that many (but certainly not everyone) in the "hedge" fund community have behaved in a disgraceful manner in the last couple years by taking huge fees along the way and then either running at the first sign of trouble (by giving money back to avoid having to recoup draw-downs from high watermarks), or locking people up and not giving them their money back at all. Consequently I'd rather not be part of that "industry" going forward. The Rap will continue as it has."
From today's Gartman Letter
SHARE PRICES, LIKE NON-US
DOLLARS, BEGAN THE YEAR ON A
VERY FIRMLY, led higher by the “infrastructure”
plays such as steel, heavy equipment, railroads, et al.
As noted in our “recommendation section below, we
have returned to trading as the New Year has begun,
and we have done so by accepting… aggressively…
exposure to precisely these stocks. Further, beyond
the “infrastructure” component, the stocks we’ve
discussed at length here in our commentaries are also
solid “dividend paying” companies, with dividends that
are quite well covered and whose earnings are
materially cyclical in nature. We like “prosaic.” We like
boring; We admire consistency of purpose and we like
longevity. So we own Deere; and we own
ConocoPhillips; and we own US Steel and Norfolk
Southern Railroad, and GE and the like. We shall let
others wiser than we buy high-tech pharma, or dabble
in nano-technology, or have exposure to DNA
investigation, or invest in the next generations of
computer technology. These are all far beyond our
ken. We’ll make our bets and take our changes with
“top down” economic forecasting, betting that railroads,
and banks and oil will all do well as the economy
begins to rise later this year.
Further, we note that our old friend, and long standing
client, Bill Fleckenstein, who has run one of the most
successful “short only” hedge funds for many years,
has chosen to close his fund! We take it very seriously
that Bill has chosen to close down his fund and has
returned all of the money to his investors, stating rather
publically that there are simply too few stocks to be
short of, and a vast number that are compelling on the
long side. When Bill “speaks” this loudly, only the
foolish among us refuse to listen:
i rolled outta the train station with a pocket full of bills, hows that? :)
gonna sit around for a few days and decide what station to roll to. holding the GNW underlying for the jan 5's i wrote last month and a few extra just in case.
Yes. It could be very good. If you would be happy letting the shares go for $40, or even look at the $41 strike... could be a good payday. Otherwise, think about it as booking profits in 6 months.
Thanks for your thoughts. My basis is $40.70. What would you think about selling an ITM call such as the June 40 currently going for $6.90? If my shares were immediately called it looks like a $6.00 profit, no?
-Fritz
thanks again!
badabing1us
Still holding my calls, I am not picking up more simply because it would put me too concentrated in it.
At this point, to add to GE, I would actually look at the $16 and $15 strikes where you are deeper in the money, with less time premium. You are not getting the same leverage, yet less risk.
Maksim are you still in GE jan 17.5 calls?
would you pick some more this morn.
thanks in advance
badabing1us
Whatever you want it to mean. =)
Rolling it out means closing near term option, and writing another one further out on the calendar to collect more premium. =)
If the fees dont kill you, I would write them monthly... less you think the implied volatility will go down.
I am bullish through jan, fed march may be ugly.
Why not write the 11 day calls, Jan 42's for $1.15 or so, then at any time you can roll out.
My only concern is that once the obama sizzle is done when he takes office, and in feb, march, unemployment still going up, there is a chance we may see selloff, which makes treasuries rally.
What the other thing you can do is March 42 for $4 to $4.40
Unless you reallly need premium today, or fear the company goes belly up, try not to go out more than 3 months as the rate of decay is highest in the near 3 months, more specifically in near month.
doesn't roll out mean closed the option and didn't write any other options on those underlying shares?
Will have to make it a testimonial. =)
So you closed out the Jans at $.55? What did you roll out to?
ok maksim - took the premium from the GNW jan 2.50's i wrote last month avg .725 and made a few trading, then rolled out this morning at 0.55 -
without this board i would have missed some primo opportunity -
thanks buddy.
Maksim, Greetings and Happy new Year.
I have been reading your board with interest and have decided to try my hand at covered call writing. My selected play is focused on the recently called "bubble" in the safe haven of US treasuries.
Thus I bought shares of TBT and am looking for some guidance on the best strategy in writing calls on this ETF. Currently the June 43 calls are fetching a nice premium at about $6.00 but I was wondering if you'd counsel a shorter time frame?
Thanks for your thoughts!
Good luck!
-Fritz
Got your message, thanks. =)
I wish everyone a VERY happy new year! May 2009 be good to us all, and profitable as well.
Dont party hardy today as 2009 Trading begins on FRIDAY!
2008 Year End Current Positions. (options, not including ira's etc holding UIT's)
Spreads/Buy Write
10 F Jan 2010 $2.50 Calls @ $1
-10 F Mar $3 Calls @ $.34 ($.75 of premium paid for)
10 CY Jan $5 Calls @ $.30
20 CY Jan $5 Calls @ $.05 (bought today 12/31/08)
20 AUY Jan $9 Calls @$.25
20 GE Jan $17.50 Calls @.24
10 UYG Jun $7 Calls Used for Spreads but currently uncovered
Bought 20 more Jan $5 CY Cypress Semiconductors calls.
Fed now going to use TARP money for assisting companies involved in auto making process.
CY consolidated a bit.
If you did this covered call, you can now buy back your Jan 9 $7.50 calls for $.05. Would do that.
Stock is down, so what you can do is either roll down to collect more premium, roll out, or both.
You can write the Feb 09 $5 calls for $.45.
total would be $1.20 premium taken in.
Cash at 18-Year High Makes Stocks a Buy at Leuthold (Update4)
Email | Print | A A A
By Eric Martin and Michael Tsang
Dec. 29 (Bloomberg) -- There's more cash available to buy shares than at any time in almost two decades, a sign to some of the most successful investors that equities will rebound after the worst year for U.S. stocks since the Great Depression.
The $8.85 trillion held in cash, bank deposits and money- market funds is equal to 74 percent of the market value of U.S. companies, the highest ratio since 1990, according to Federal Reserve data compiled by Leuthold Group and Bloomberg.
Leuthold, Invesco Aim Advisors Inc., Hennessy Advisors Inc. and BlackRock Inc., which together oversee almost $1.7 trillion, say that's a sign the Standard & Poor's 500 Index will rise after $1 trillion in credit losses sent the benchmark index for American equities to the biggest annual drop since 1931. The eight previous times that cash peaked compared with the market's capitalization the S&P 500 rose an average 24 percent in six months, data compiled by Bloomberg show.
"There is a store of cash out there that is able to take the market higher," said Eric Bjorgen, who helps oversee $3.4 billion at Leuthold in Minneapolis. "The same dollar you had last year buys you twice as much S&P 500 as it did a year ago."
Leuthold Group, whose Grizzly Short Fund returned 83 percent in 2008 thanks to bets against equities, said in its December bulletin to investors that stocks offer "one of the great buying opportunities of your lifetime."
Obama, Fed
The S&P 500 rose 16 percent from an 11-year low on Nov. 20 as the government rescued New York-based Citigroup Inc., President-elect Barack Obama pledged to stimulate growth with the biggest infrastructure investment since the 1950s, and the Fed cut interest rates to as low as zero percent to combat the worst financial crisis in seven decades.
U.S. stocks fell today as Dow Chemical Co. and Rohm & Haas Co. plunged after financing for their merger fell through, raising concern companies may be unable to complete deals. The S&P 500 slipped 0.4 percent.
The ratio of cash on hand to U.S. market capitalization jumped 86 percent in the first 11 months of the year, the biggest increase since the Fed began keeping records in 1959, as the U.S., Europe and Japan fell into the first simultaneous recessions since World War II.
So-called money of zero maturity, the central bank's measure of U.S. assets available for immediate spending, is mostly held by households, according to Richard G. Anderson, an economist at the Federal Reserve Bank of St. Louis.
‘Dry Powder'
"What the cash pile on the sidelines represents is dry powder," said Fritz Meyer, the Denver-based senior market strategist at Invesco Aim, which manages about $358 billion. The firm's $1.17 billion Aim Diversified Dividend Fund beat 96 percent of its competitors this year, and the $3.95 billion Aim Charter Fund topped 93 percent of similar mutual funds.
"Recovery in the second half of the year will probably play out," Meyer added.
Any recovery will depend on a rebound in corporate profits and the economy after $30 trillion was wiped out from world equities this year, according to Frederic Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Oregon.
Jobless claims reached a 26-year high this month, while economists surveyed by Bloomberg estimate household spending will fall 1 percent next year, the most since the aftermath of the attack on Pearl Harbor. A 13 percent slump in the median home resale price in November from a year earlier was likely the largest since the 1930s, the National Association of Realtors said last week, damping speculation the housing market is close to a bottom.
‘Biggest Cannon'
Analysts estimate profits at S&P 500 companies will shrink 10.3 percent in the first three months of 2009 and 5.8 percent in the second quarter, bringing the stretch of earnings declines to a record eight quarters, Bloomberg data show. Gross domestic product will contract in the first half of the year before growth resumes in the third quarter, according to a Bloomberg survey of economists.
"The fuel supply is there, but people have to have a reason to use it," said Dickson, who helps oversee about $19 billion. "The Fed fired the shot out of the biggest cannon they know. Now the question is, will it hit the right mark?"
This year's slump has left S&P 500 companies valued at an average of 12.6 times operating profit, the cheapest since at least 1998, monthly data compiled by Bloomberg show.
Cash in interest-bearing checking accounts at U.S. banks earns less than 0.1 percent annually, minus inflation, according to national data compiled by Bankrate.com. Ten-year Treasury notes yield 1.03 percent after adjusting for the cost of living, and yields fell to the lowest level on record this month.
Benjamin Graham
Seth Klarman's Baupost Group LLC, which held 40 percent to 50 percent of the Boston-based hedge-fund firm's more than $14 billion in cash, reduced its hoard by half to take advantage of falling asset prices, according to the December issue of Harvard Business School's Alumni Bulletin.
The 51-year-old investor who seeks shares of companies trading at discounts to measures such as assets and cash flow was the lead editor for the sixth edition of Benjamin Graham and David L. Dodd's "Security Analysis," which laid out the principles of value investing followed by billionaire Warren Buffett.
Klarman has generated an annual compound return of 20 percent in the past 26 years, the Bulletin said. He declined to comment in an e-mailed response to Bloomberg News.
‘Same Scenario'
Cash holdings peaked one month before equities began to recover during the two longest recessions since World War II. In July 1982, money of zero maturity as a percentage of the U.S. stock market's value rose to 95 percent before a 20-month bear market ended and the S&P 500 began a six-month, 36 percent advance, data compiled by Bloomberg show.
Cash on hand reached $604.5 billion in September 1974, representing a record 1.21 times U.S. stock capitalization. That preceded a 31 percent gain in equities between October 1974 and March 1975, Bloomberg data show.
"If history tends to repeat itself, we're in the exact same scenario," said Neil Hennessy, who oversees $650 million as president of Hennessy Advisors in Novato, California. "Once the money starts to come back into the market, buying is going to beget more buying. People don't want to be left behind."
Hennessy's Focus 30 Fund beat 96 percent of its peers this year.
Lighting the Match
The last time cash accounted for a larger proportion of market value was 1990. The ratio peaked at 75 percent in October of that year, after the savings and loan industry collapsed, Drexel Burnham Lambert Inc. was forced into bankruptcy and the U.S. fell into a recession. The S&P 500 rallied 23 percent in six months and almost 30 percent in a year.
Robert Doll, the chief investment officer of global equities at BlackRock, has been buying stocks anticipating the S&P 500 may rise as much as 20 percent next year. The firm oversees $1.3 trillion.
"It's a mountain of cash," Doll, who is based in Plainsboro, New Jersey, said on Bloomberg Radio. "Somebody's just got to find the match and light it."
To contact the reporters on this story: Eric Martin in New York at emartin21@bloomberg.net; Michael Tsang in New York at mtsang1@bloomberg.net.
same to you buddy. be well and here's to many a happy trade in the new year.
Went Long GE Jan 17.50 Calls today at $.24
Current Positions. (options, not including ira's etc holding UIT's)
10 UYG Jun $7 Calls (used for calendar spreads) Uncovered
10 F Jan 2010 $2.50 Calls @ $1
-10 F Mar $3 Calls @ $.34 ($.75 of premium paid for)
10 CY Jan $5 Calls @ $.30
20 AUY Jan $9 Calls @$.25
20 GE Jan $17.50 Calls @.24
I wouldnt usually have this much long calls, however things looking really good for Jan rally. Most of the premiums for long calls came from buy-writes from Ford and UYG calendar spreads.
GE, CY are green plays, AUY is a gold play. UYG is uncovered at this point as I think we will have a broad based rally, will write against it when UYG closer to $7 or $8, or near month premiums hit around $.70.
You are simply buying a stock, selling a call.
I think your firm is referring to some trades where you can specify that you want both trades to be completed at once, or not at all, hence why net credit or debit.
So for example...
Stock at 5, option to write at $.50, so net debit to your account is $4.50. So if you set it that way, it could end up being $4.95 for stock, $.45 for option, or $5.05 for stock and .55 for option.
Keep it simple. =) Unless you are getting a trade discount, enter it by self.
Question on buy-write
On leg 2 of the buy write, what is the advantage of choosing one buy type over one of the others? net debit vs even, even vs net credit etc.
Also, here is the new 2010 Fusion
http://www.motortrend.com/roadtests/sedans/112_0812_2010_ford_fusion_quick_drive/index.html
Add in the fact that the new Ford Focus (european model) is coming over, and new Ford Fiesta.... I think we are in the early stages of a come back.
I know for a fact that one of the fund family managers I spoke to, has said that there were discussions of adding even more to their Ford holdings.
The New Ford Taurus, 2010 model.
http://www.edmunds.com/insideline/do/News/articleId=138388#2
I am really liking the direction ford is going, which is making me more and more optimistic on the company. I am more than happy to be holding the 2010 Calls and writing near month options on them.
Also, here is a great looker from GM
http://image.motortrend.com/f/government/nhtsa-gives-automakers-a-break-postpones-crash-test-changes/12648439+w562+cr1+re0+ar1/2011-chevrolet-cruze.jpg>
Here is an idea for you all.
Sore as heck from skiing this weekend, however made it into the office. Got the volume spike report... and the biggest one of interest... LVS.
5times the normal options volume, including 70k calls traded today for Feb 09 - $10 strike. Chart looks better on it as macd trend reversing... if we get a rally in the market, could be explosive.
Skiing was AWESOME, took a bit to get used to the new skis.... going to bed now so lets hope will wake up refreshed. Otherwise, futures look good, and Japan up 100 points.
Quite welcome. going to go skiing tomorrow, monday will see about writing uyg calls, and or Ford, or if will just close them out.
understood perfectly, thanks.
When options are exercised, it does not mean that whoever bought them from you, takes your shares.... exercise is randomized.
But.... just worry about expiration.
If GNW is $3 Jan 16th, that mean your call that you wrote is $.50 in the money, so on the 16th, you can either let them be called away for $2.50, so you keep the $1 premium you wrote, plus get $2.50 a share.
Otherwise, you have a choice, on Friday the 16th, or even earlier, you can buy that call back, for say $.50 and keep the shares. Your total profit off of the call you wrote is $1 (that you got now) minus the cost to buy the call back.
So if on expiration GNW is $2.50 or less, your calls that you wrote will go worthless, and you get the premium free and clear, and next monday you can write another set of calls. (your calls would not be exercised if GNW is $2.49 and if exercised they would pay $2.50 plus fees. Starting recently, say you buy a call... and it is in the money by even 1 cent, your firm automatically exercises the call and buys them.
i have the shares, just wondered what would happen if someone bought my calls for 1.00 and the underlying price of GNW went down to 3 dollars meaning they'd be out .50/share if the person takes the call to expiration -
While it is in the money, there is a small chance it will be called away prior to expiration.
At expiration, if it is in the money, IT WILL BE called away if it is in the money by 1 cent or more. The threshold used to be more, but since then, the brokerage houses made it mandatory to exercise options that are in the money at expiration by 1 cent or more.
Since your GNW calls are in the money, prior to expiration, (american style options) can be exercised at ANY point in time, as opposed to European style, which can only be exercised at expiration.
However, most people do not exercise their calls, but rather just sell them back. 95% of all exercised calls, I would estimate, are exercised last day of options, or expire worthless.
If you have in the money calls (that you wrote), there is nothing you can do if they get called, as it is randomly assigned. If you do get called, prior to... good news. =) you get to keep the premiums sooner. If you really want to, you can just reestablish the trade, or go buy shares to deliver vs the call.
mak - if the jan 2.50 call that i wrote stays in the money will it automatically be called?
I did have a long only call go expire worhtless on me, GE $17.50's @ $.55. Could of take profits same day.... though it went against me. Will discuss this one more later.
Options Expiration Update...
Ford and UYG would of expire worthless today, for a nice premium. I bought back UYG 2 days ago for $.05, and bought back ford for $.02 today.
Usually what will happen is that right before expiration, market makers tend to push the stock closer to the strike price... ala today... Ford closed at $2.95 after being down below $3 most of the day. The issue is, had Ford closed at $3.01 or higher, the calls are automatically exercised, by the broker dealers. With runoffs and late pushes, it was too close, so I just decided to spend $30, and lock in my gains, bought back the calls for $.02.
the thing that most people dont know, is that even though the last day to close calls is Friday at 4pm, the call owner, can exercise as late as Saturday at 12PM.
What can happen, and has happened before, news comes out after close, causes stock to go up after hours, or say a takeover, and your shares get called over the weekend, even though they closed Friday below the strike.
For December, I made on Ford, 33.8% return on the call written on Dec 1, @ $.41, bought back for $.03 (fees rolled in), or 641% annualized. Not including the roughly $.25 cents I am up on my Jan 2010 Leap @ $2.50 strike.
Also, for this month, had UYG bought back, this is the second month for this one. Dec 9, wrote $7 calls for $.36, bought back Dec 18, for $.06 (fees rolled in). $.30 cents gain for 9 days. 11% gain vs my cost basis, or 440% annualized gain. Written against June 09 $7 call with cost basis of $2.54, total collected in 2 months... $1.05 in premiums net of fees.
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