Retest of highs likely – but then what?
The market has left little doubt that the current trend remains up, as the weekly trend picture for all the major market indices and sectors confirms. The key U.S indices have now reached resistance levels that are just short of the July highs – i.e., 13,850 for the DJIA, 1535-1540 for the S&P 500, and 2670-2680 for the Nasdaq.
Given the strength of the move so far – the market’s come a long way in a short time since last month’s lows – a move up through these resistance levels and a retest of the highs seems likely. The question is, if/when that happens, how much “fuel” will the market have left to continue? Something to keep an eye on in the coming days and weeks.
Options Expiration Results
- ConocoPhillips (COP) – The September 85-strike calls I sold against my long position in COP (purchased 8/17/07) expired ITM and my shares were called for a total 10-week net return (based on the original put sale) of about 3.9%.
- Vodaphone (VOD) – The September 32.50-strike calls I sold against my long position in VOD (purchased 8/17/07) expired ITM and my shares were called for a total 9-week net return (based on the original put sale) of about 7.3%.
- Weyerhaeuser (WY) – The September 55-strike puts I sold against WY on 8/16/07 expired out-of-the-money (OTM) for a 5-week net return of about 2.5%.*
New positions
No new positions this week.
Watchlists
New stocks of interest showing up on this week’s “upside strength” scans include AT&T (T), General Electric (GE), Johnson & Johnson (JNJ), MetLife (MET), Sysco (SYY), and Verizon (VZ).
New candidates of interest on the “oversold” scans include Comcast (CMCSA), Harman International (HAR), Pacer International (PACR), Sony (SNE), and Time Warner (TWX).
* 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.
Dear Sir,
Congratulations on the great returns, very impressive. I did notice the number of posted trades was less then normal. Are you finding less opportunities, just posting only a few of your returns or becoming more cautious of the market overall?
One questions I would like to ask, that I have been researching for years, but no real progress. That is what to do with cash sales from the puts while your waiting for the next expiration? I understand to find a high yielding MM and hang it out there until needed, which is what I do now.
However, several years ago I came a cross and article on using short term treasures some how to leverage capital for these kind of trades, Was never able to find the article again, and have been researching how best to structure your trading method/style for holding cash, and it just seems to simple to just hold in the highest yield MM, but the article whih I can’t find seemed to indicate a better method. ?
Any thoughts or comments would be appreciated. No reply to this is understandable as well..
Regarding the market, I still have my concerns. Still chicken to get in, with this increase in volatility. The 10+ percent retract from the low in July should have been my clue to start legging in, but I never expected the rally like we just had, short-term pop and then slow turn to the downside is what I expected.
I work with many companies around the world, and I keep asking about over all sales prospects, and they all seem to be consistent, starting to show signs of weaking. ASIA is still very strong, but not at the pace for the past 5 years. Still not clear if it’s a slow to normal pace now, or a slowing overall. Think we need two more Q’s to start to get a trend. Thinking maybe this Q will start to show some signs. Worry because the increased volatility is not comforting.
Other question, been dying to ask about. Any new thoughts on the Leap’s strategy? Just finished Jeffery Cohens book “Put Options” and found very interesting. Actually have read it a few times, but just getting to understand it I think.
Thank you for your continue posts.
F.S.
Hi,
I wish the reason for the number of trades this month (and in some previous months) being less than normal was deliberate. Unfortunately my schedule has recently been such that I simply haven’t had the time to do the necessary preliminary work (and to enter orders) on the regular daily basis that is really needed to keep the turnover high – at least the way I’ve structured my strategy.
As you can see from my watchlist postings each week, I am almost always finding interesting opportunities. The stocks on these lists usually remain on my radar screen for several weeks or longer – I just don’t repeat the same stocks each week – so my total watchlist of candidates at any given time is usually quite large.
I’m not sure if there’s a better way to get the best yield from your cash deposits than the one you describe. In my account I have selected to have my cash deposits swept into a municipal bond MM fund.
Having concerns about the market is good. It probably means it is going to go higher.
Seriously, though, as I’ve mentioned before I don’t worry too much about the overall market and instead try to focus on individual stocks and trading opportunities.
Thanks for your insights on the economy from the perspective of the companies you work with. It will be interesting to see how it all plays out. I do follow the economy in general, but find it difficult to base investment (and certainly trading) decisions on it.
No further thoughts on LEAPS yet – just haven’t had any time to research it further. I also have Cohen’s book on put options, and thought there were some interesting ideas there as well. I’ll be taking another look at all of these strategies once I find the time.
Thanks again for your continued interest and interesting comments.