LOL!'s Market Timing Newsletter

[NW-Bound]

I just bought back 15 contracts on various individual stocks/ETFs, with expiry of 11/16. They are down to the pennies now, and I would get a few hundred bucks more by waiting till then, but it's not worth it. So, I bought back to close them out, and wait to sell them again at different strike prices, most likely lower.

Netted around $2K on these contracts. Minuscule compared to the drop of the portfolio value (not even 1% of the loss), but still a $2K gain compared to doing nothing. Still have two dozen contracts out, all hopelessly out-of-the-money, but the prices are not in the pennies yet.

 

[LOL!]

With the nice gains today in MTUM, I am [-]going to sell[/-] have sold all the shares bought yesterday. 870

 

[NW-Bound]

Wow, you are really a day trader.

As often said here, I mainly sell covered call options or cash-covered puts on positions that I already have. And I sell options 1 month out, which means my holding period is usually 1 month for the options, and nearly forever for the shares themselves.

With the market going as crazy as it has been, I have been buying back options as soon as a week after I sell them, in order to book the gains. But holding for only 1 day? I am not there yet.

 

[LOL!]

Wow, you are really a day trader.

Historically I think the current volatility means that the general trend will be down until there is capitulation.

So when there is a mini-gain after a drop like yesterday, then I am happy to make a few thousand dollars in a tax-advantaged account. I rationalize it so: My bond fund made 2.5% to 3% in a few hours and bond funds are not supposed to do that. Of course, the rationalization is wrong because I was invested in a risky asset for those few hours.

I cannot tell if yesterday was a sign of capitulation either, so if things keep going up from here, then I don't feel like my bond fund allocation needs any more 3% gains in a day.

 

[NW-Bound]

Last post on this thread was more than 1 month ago.

Since then, I have made many option trades, mainly selling out-of-the-money covered call options. This market is so crazy, I would sell the options on an up-market day, then buy them back cheaper on a down-market day. Rinse and repeat every week or two. Earlier in the year, I would wait for the options to expire worthless, but with this crazy market I would take smaller profits earlier, and try to make it up in volume.

And at this point, I am only $300 from the projected number of a six-figure income from call premiums. There's still another month in the year.

Don't get me wrong. I am still in the red for the year, due to international stocks, semiconductor and energy stocks. I just lost $100K less by selling options.

And with the market no longer in the bullish mode, I have been selling options on nearly every position that I have, not just the more volatile biotech, EM, and semiconductor holdings.

 

[NW-Bound]

What a difference a speech by the Fed Chaiman can make! His soothing words send the Dow up more than 500 points.

Good thing I bought back dozens of contracts on various stocks in the last few days. These are of Dec 21st expiry, and we are still in November yet.

The covering of the options freed up the stocks, so that I can write more call options soon.

 

[COcheesehead]

Dovish comments really mean things are slowing. So let's not get too carried away here.

 

[aja8888]

Dovish comments really mean things are slowing. So let's not get too carried away here.

Things may be slowing, but consumer spending through the holidays appears to be starting off with a bang. This could equate into a year end rally.

Now if the auto companies can get some cars sold too, that would help.

 

[NW-Bound]

The exact reason I have been active writing out-of-the-money covered calls is that I expect subdued stock returns going forward.

When a stock is at $81/share, and somebody pays me $1.4/share to be able to buy it from me at $84 in less than a month, that's more than 5% in a month!

What can I do, but to say "thank you much", and take his money?

I would suggest that the person getting carried away is the other side of the trades I have been making.

 

[COcheesehead]

Things may be slowing, but consumer spending through the holidays appears to be starting off with a bang. This could equate into a year end rally.

Now if the auto companies can get some cars sold too, that would help.

Cars are a different story. I am not sure they will ever reach the recent levels again. Young people just are not buying them like past generations. With all the car sharing/Uber/Lyft options, two car households I think will be a thing of the past.

 

[kgtest]

Cars are a different story. I am not sure they will ever reach the recent levels again. Young people just are not buying them like past generations. With all the car sharing/Uber/Lyft options, two car households I think will be a thing of the past.

Skype, remote workers, increased public transportation and the advent of the gig economy will all depress sales.


Owning a car will revert back to a luxury. Not a necessity.

 

[COcheesehead]

I have a customer who supports the auto industry with parts. They are laying people off.

 

[aja8888]

Cars are a different story. I am not sure they will ever reach the recent levels again. Young people just are not buying them like past generations. With all the car sharing/Uber/Lyft options, two car households I think will be a thing of the past.

I'm hoping for a December rebound with autos, not eternity.

I have three cars, and won't give them up....but I understand the younger folks.

 

[COcheesehead]

I'm hoping for a December rebound with autos, not eternity.

I have three cars, and won't give them up....but I understand the younger folks.

Well if it helps, I just bought a new car last Friday. American made in Toledo Ohio. So I did my part.

 

[aja8888]

Well if it helps, I just bought a new car last Friday. American made in Toledo Ohio. So I did my part.

Great! In truck country, where I am, there are thousands of new pickups sitting on lots at $60+ K waiting for new buyers (who can get an 8 year loan). I'd love to see those added to the economy!

 

[NW-Bound]

That Fed-induced euphoria did not last long. Darn!

I look around for some stocks I own that are still gunho going up, but found only a couple. So, sold some Dec call contracts on them to collect a few hundred bucks. Then, sit back to wait for the next chance.

 

[Rickt]

That's nice!
I have never sold or bought any options, but reading your posts NW-Bound I am now motivated to venture into the OptionsLand!


Best Wishes to you!

 

[NW-Bound]

Selling covered calls is safe, in that you are willing to limit your theoretical gains and are happy with smaller practical ones, which are more frequent.

In a bull market, you will often end up selling your stocks when they climb out of sight, and if you see yourself keep having your options assigned, then you should learn to stop. Else, you lose all your best stocks.

The chance of stocks going banana on the way up in the near future is not great. I set the strike prices high enough that I rarely get assigned, and keep pocketing the premiums. And if a stock really takes off like that, oh well, I already make money and should not be greedy. And I never sell options on all of my shares. Would hate to have all my stocks taken from me, and sit on all cash during a bull market (which is not likely now).

As I often said, it's around $100K/year, which is a small percentage of my portfolio, but still a nice extra "dividend". I can live on that.

 

[Rickt]

Thanks!
Will request Charles Schwab for Options trading in my account.

 

[LOL!]

Last post on this thread was more than 1 month ago.
...

I've been backpacking in remote areas without a computer and cell service. I got back home last night.

I missed the elections and the pop and drop, so my portfolio is pretty close in value to where it was when I left the modern world a month ago partly because bond funds are up about a percent to make up for slight losses in equity funds.

I'll have to spend a little time catching up to the news and see if I need to make any transactions.

 

[LOL!]

I intend to buy some MTUM later today. It is now trading almost below the price I bought some on 10/24 (sold the next day), so I feel comfortable with submitting an order.

I will likely try to sell any shares I buy today next week.
554
Update: bought my shares.

 

[NW-Bound]

Yesterday, I was taking a break from a home project when I checked the market. Darn, it went down again.

The more than 4 dozen covered call contracts I wrote for Dec 14 and Dec 21 look like they are all going to be worthless, allowing me to pocket their premium. Small condolence when my stocks going down cost me 40x that. But hey, that little extra cash is still better than doing nothing.

I lost more than 2x the annual living expenses in just 4 days of trading. Darn! The stock shrinkage reduced my stock AA to 72%. Darn!

Could not stand this crazy market, so I bought another $40K total of biotech and semiconductor ETFs. This is it. No more buying until I sell something, but I will only sell if the market goes up some. Or I keep the stocks and sell more call options, but I will be selling something. No more buying.

 

[NW-Bound]

At the market low of the day, I bought back 18 covered-call contracts on various stocks, all with expiry Dec 21, at the price of pennies to a quarter a share.

Made $2K for these contracts sold just 2 weeks ago. Minuscule gain compared to the 6-figure loss in the stocks for the same period, but I still feel better making the $2K than not.

The market then turned around and closed in the green. Good! I have freed up some shares to be ready to sell more options.

PS. I forgot about the half dozen contracts expiring worthless last Friday. That should bring my take up to $3K. Need to go back to count my pennies.

 

[NW-Bound]

The crazy market is driving the Dow up 450 points as I write this. Good thing I closed out all but two covered call contracts. These two are expiring this Friday, and it is not likely the stocks will jump 9% in three trading days for them to be in the money for somebody to buy my shares. Hence, I let them be.

At this point, I have met my objective of selling $100K worth of covered call options this year, with 95% of them becoming worthless by expiry. The actual money pocketed is $105K YTD, and I may, just may, be able to sell some more with expiry of Dec 21.

Last year, the premium for covered calls that I pocketed was $50K total. My being more active in tracking the market this year does pay off.

Am I happy? Not really, as overall I am still in the red for the year. Some sectors are beaten down badly, along with international and emerging markets. The extra income from the option writing only helps reduce the loss.

 

[LOL!]

I used to do covered calls and they work when the stock market is not going up. But even though almost all my covered calls made me money by expiring worthless, the few that didn't cost me money in lost gains. In essence, I didn't see that there was a free lunch for the work I had to put into it. I even had a spreadsheet that would change cells from red to green when certain criteria were met, so the effort wasn't particularly hard. But I couldn't have my broker send me an alert to my phone when that would have been better. Basically, I just wanted to be a "program trader" and have the computer do things for me.

In other news, my transaction last week has become profitable enough that I should probably sell. I've got a couple hours to make a decision for today. 140