Market seesaws back to positive/neutral
The market trend picture continues to seesaw about in a noisy fashion, typical of what might be expected in consolidative action. There continue to be few identifiable trends in many of the major averages, but those that do appear to be present are short term and – at the moment – positive.
Options Expiration Results
Briggs & Stratton (BGG) – The December 22.5-strike calls I sold on 11/28/07 against my long position in BGG (purchased 11/19/07) expired in-the-money (ITM) and the shares were called for a total two-month return on the position of about 2.3% (not including an expected dividend payout of $0.22/share (about 0.9%) payable in early January).
CBS (CBS) – The December 25-strike puts I sold against CBS on 11/20/07 expired out-of-the-money (OTM) for a 4-1/2-week net return of about 2.1%.*
Foot Locker (FL) – The December 12.5-strike puts I sold against FL on 11/20/07 expired OTM for a 4-1/2-week net return of about 5.3%.*
Nordstrom (JWN) – The December 25-strike puts I sold against JWN on 11/19/07 expired OTM for a 4-1/2-week net return of about 2.3%.*
Limited Brands (LTD) – The December 17.5-strike puts I sold against LTD on 11/09/07 expired OTM for a 6-week net return of about 4.3%.*
MGIC Investment (MTG) – The December 25-strike calls I sold against my long position in MTG (purchased 11/19/07) on 11/30/07 expired OTM for a 3-week net return of about 6.4% on the position.
Wal-Mart Stores (WMT) – The December 47.5-strike calls I sold against my long position in WMT (purchased 8/17/07) on 11/28/07 expired ITM and the shares were called for a total five-month return on the position of about 7% (not including an expected dividend payout of $0.22/share (about 0.45%) payable in early January).
New positions
Home Depot (HD) – Last Monday I sold some January 25-strike puts on HD as the stock dropped along with the market:
The stock is in an intermediate-term decline and appears likely to test support in the 24-25 range. It is oversold, however, so a further near-term decline could set the stage for a bounce of some sort. Fundamentally HD appears to be a reasonable value at these (or lower) levels.
Jabil Circuit (JBL) – Last Friday I sold some January 15-strike puts on JBL as the stock sold off sharply after the company announced a lower-than-expected second-quarter outlook:
The stock has fallen to its 14-15 support level and, although it’s oversold, the strength of the latest down move suggests that JBL may test long-term support at the 11-12 area. From a longer-term perspective, valuation seems reasonable here.
Watchlists
“Upside strength” candidates of interest this week include Annaly Capital Management (NLY), ENSCO International (ESV), and Helmerich & Payne (HP).
New and returning “oversold” stocks I’m watching include Ambac Financial Group (ABK), Applied Materials (AMAT), Bemis (BMS), Black & Decker (BDK), Brunswick Corp. (BC), Cabot (CBT), Darden Restaurants (DRI), First American (FAF), Illinois Tool Works (ITW), Leggett & Platt (LEG), Snap-On Tools (SNA), Sysco (SYY), Whole Foods Market (WFMI), Worthington Industries (WOR), and William Wrigley Jr. (WWY).
* As always, the return on “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.
