More new highs ahead?
Last week’s market action continued to reflect a positive overall trend picture. All of the major indices extended their previous week’s gains, with the S&P500 and NASDAQ actually ending the week at new multi-year highs (but just barely). I would continue to view any pullback here as a correction within the current uptrend.
Last week was also options expiration week, and I went into it short puts on Anheuser Busch (BUD), Lear Corp. (LEA), Pfizer (PFE), and Exxon (XOM). The BUD, PFE, and LEA puts all expired out of the money, resulting in net 30-day (or less) returns of 1.4%, 1.4%, and 1.5%, respectively. 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.
Not too surprisingly (see my October 10th post) my XOM puts expired in the money, and I was assigned the shares, for a net cost of a little over 59. While I don’t mind owning the stock longer term, its intermediate-term trend is unclear, so I’m debating whether to sell some covered calls here into strength or to simply exit the position.
Last week I also initiated two new positions: I sold some December 60 puts on Gannett (GCI) as it sold off after reporting weak October revenue results and amid speculation it might acquire Knight-Ridder; I also sold some December 65 puts on American International Group (AIG) after it dipped following some earnings and SEC-related news.
On my watchlist of “upside strength” stocks, I’ve added General Electric (GE) and Washington Mutual (WM). On my watchlist of “beaten down” stocks, I’ve added Abbott Laboratories (ABT), Avon Products (AVP), Bunge Limited (BG), Estee Lauder (EL), Guitar Center (GTRC), Sonic Automotive (SAH), and Unilever (UN).
