Friday, June 27, 2014

Weekly: The Fun House Mirror


The stock market has a dip down mid-week then comes back to near unchanged. I found some intereting quotes from Bill Miller (ex-Legg Mason), Investopedia link.

>> Bill Miller writes:
"I often remind our analysts that 100% of the information you have about a company represents the past, and 100% of a stock's valuation depends on the future."

"The market does reflect the available information, as the professors tell us. But just as the funhouse mirrors don't always accurately reflect your weight, the markets don't always accurately reflect that information. Usually they are too pessimistic when it's bad, and too optimistic when it's good."
>>

As for my week, option expiration frees up some capital and I put some of it to work. Mostly, I open August positions in stocks I had already. One new long is Monsanto, which moved higher on news. Here is the recap

Fri Sell ASH Aug 95 puts @107.7. I open an August position in Ashland.
Sell VRX Jul 105 puts @127.7. I add to my long position in Valeant Pharma.

Sell MON Jul 120 puts @124.9. New long position in Monsanto. MON broke out earlier in the week from 122 on news. Decent chart support at the 120 level.

Wed I open August positions on Honeywell HON and Schlumberger SLB. I am already short July puts on both.

Sell HON Aug 85 puts @92.7. I step in to buy Honeywell on the third down day in a row.

Sell SLB Aug 97.5 puts @113.3. Schlumberger jumping on a better outlook.

Tue Sell SPY put backratios @194.7 consists of buying SPY Sep 178 puts, selling 2x SPY 173 puts for a net credit. This is delta positive trade (net bullish) with the possibility of a large profit on a decline to SPY 173. These backratios provide some downside protection on a modest decline, with the risk of large losses during a crash. If the market is up, I get to keep the small credit.

Mon Sell IWM Aug 105 puts @118.1. I rebalance my position in the Russell 2000 etf. I am still net short, but less so, after selling another batch of puts.

Sell JWN Aug 62.5 puts @67.7. Nordstroms downgraded this morning. I am a buyer and open an August position.

Sell AMGN Aug 100 puts @118.8. I open an August position in Amgen. Staying with one of my big winners for 2014.

Position summary:
long AMGN APC ASH EPI EWG
long HON JWN MON SLB UNH VRX WAG
net neutral DAL DIS GLD SPY
net short IWM

No comments: