Tech crack?/Drugs and alcohol pay off
A potential warning sign has appeared in this week’s trend analysis, and it’s coming from the technology sector. While all of the major indices remain either all or mostly positive (as indicated by the dominance of green trend periods in their respective tables), the NASDAQ appears to have sprung a few leaks since last week, as indicated by the splotches of red showing in its still mostly green array of trend periods.
A look at the trend analysis for some selected tech stocks confirms a mixed picture. While Intel (INTC) is already in full retreat – it went negative several weeks ago – now even recently strong semiconductor stocks like National Semiconductor (NSM) and Texas Instruments (TXN) are indicating at least some short-term weakness. If this develops further it could portend further weakness ahead in the market as a whole, so it’s something I’ll be keeping an eye on as I continue to look for put selling opportunities.
Meanwhile, last week was options expiration week and I went into it short September 27.5 puts on Merck (MRK) and September 45 covered calls in Anheuser Busch (BUD). BUD closed the week at 45.20 (so the calls expired 0.20 in the money), so my shares – which were put to me last month – were called, leaving me with a net return of about 1.8% in the two months since I first sold puts on it.
The MRK position did even better. MRK ended the week well above the 27.5 strike, and the short puts expired worthless, for a nice net return of 3.4% in four weeks. As always, the return on this “cash secured” put sale was based on the premium received from the sale of the options against the unmargined capital set aside to pay for the possible assignment of the stock.
So far I’ve yet to sell any October puts, but I’m continuing to place daily limit orders near downside targets on several previously mentioned stocks. I’ll now be looking to sell some more MRK puts (either 25 or 27.5 strike) if the stock drops back to the 25-27 level. I’m also looking at Pfizer (PFE) and Bank of America (BAC) now as well.
