Going sideways
Aside from some further signs of short-term weakness in the NASDAQ and Russell 2000, the overall weekly trend analysis of the major market indices remains positive. This continues to be consistent with corrective action within the current intermediate uptrend.
The market’s sideways action over the last three weeks has frustrated my efforts so far to initiate any new short put positions, which I prefer to do into market declines. On the other hand, this behavior benefited my December short options positions, all of which expired out of the money last week.
I went into last week’s options expiration short puts on American International Group (AIG), General Motors (GM), Merck (MRK), and Gannett (GCI), and short calls against my long position in Exxon (XOM). Net returns on the AIG, GM, MRK, and GCI puts were 1.4%, 3%, 0.8%, and 1%, respectively, all earned within a time period of five weeks or less. As always, the return on these “cash secured” put sales was based on the premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for the possible assignment of the stock.
Also expiring worthless were the covered calls I’d sold against XOM, netting over a 2% return in less than four weeks against my current long position in the stock. XOM is in a downdraft right now–dropping over 1 1/2 points on Friday–and displaying an unclear intermediate-term trend, so I’ll probably need to act quickly if I want to sell some January calls against it. Meanwhile, I’ll continue to wait for put-selling opportunities in the various stocks on my watchlists.
