Buy BA, PG (sell puts)

Buy PG via selling Apr 67.5 puts @76.8

I was already short Mar 70 puts. This is my third position for April, which I see as a low number. Chart support at the 50 day moving average at 72, and at the base of 70. Proctor and Gamble is sometimes labeled as a defensive stock. However, its options are trading at 25% implied volatility vs. about 19% for SPY. 

 

Buy BA via selling Apr 67.5 puts @76.9. I still like Boeing, am already short Mar 70 puts. Chart support at 70, one strike lower gives me a margin for error. These two moves give me four open positions for April, 14 open for March. March is another short time month for options because the month starts on a Friday.

Long BA BRKB IWM LGF MON PG QCOM SPY

Net long APC KORS

Rebalance APC (sell calls)

I rebalance my complicated position on Anadarko Petroleum by selling Mar 87.5 calls @78.7. I was already short Mar 90 calls, Mar 75 puts, Mar 67.5 puts x2. As APC moved toward the 75 strike price, my positive delta (bullish bets) increased. The recent highs at 85 are chart resistance.

The markets are too fast for my tastes. I am not in front of a screen all day, and I tend to plod along, more like a turtle. Yes, there are opportunities for the nimble, but I am not in that group of the more nimble traders that can take advantage of these day-to-day moves.

My most recent moves last Friday were akin to slipping on a banana peel. Oops and ouch. A lot of ideas cross my mind. ThinkorSwim (my broker) seems sluggish this week. The volatile markets might be a factor. 

 

Long BA BRKB IWM LGF MON PG QCOM SPY

Net long APC KORS

Spano: Fear of Missing Out

Kirk Spano at Marketwatch (link) has an article about the fear of missing out. Some symptoms are checking your account much more frequently, considering much more volatile stocks or instruments. After a 150% rally off the stock market lows in March 2009 (in round numbers SPY 67 to 150), and a strong start to 2013, more and more folks are infected.

That said, some other talking head on TV pointed out that virtually no one at the coffee shop is bragging about their stock market profits or talking about their high flying winners. So it hasn't reached epic proportions that might signal a major top.

Again, I find that anecdotal stories can be powerful sentiment indicators. At the March 2009 lows, someone told me they were selling all their stocks, the exact week of the lows. At the height of the Internet bubble one of the little old ladies at church bragged to me about opening up a brokerage account for the first time in her life. During the run up in silver when it went from $14 to $49, several novices seemed to think they could not lose by being long silver.

Of course, it is easy in hindsight to see these turning points. It is not so easy in real time. It is sometimes difficult to distinguish a smart player from the classic dumb money, and rarely do they signal the exact market turn. At market tops there are a relative maximum number of buyers, at market bottoms the opposite, a relative maximum number of sellers. Nothing can change that, it is how markets work.

There are thing an investor can do to guard against the disaster moves. Avoid the all in, all out mentality. I tried very hard to tell the person that wanted to sell at the 2009 lows to scale out, to sell 20% now and then maybe another 20% in a few months. But they were too scared to consider anything other than their fear. At market tops, the opposite, there are a hundred reasons (usually all fundamentals) about why whatever they are buying will continue to go up.

Scaling in, scaling out is a reasonable strategy. I came into 2013 way underinvested in my trading account. I scaled in, day by day adding one position at a time. This way, if the market did turn, I had a variety of prices.

Another thing is to look at the chart. Runaway markets often form a parabolic blow off top. Markets don't always peak like that, but when a chart looks like a rocket taking off, ala silver running to $49, the risk for longs (and shorts for that matter) is high.

A person can learn by listening, by watching. Not the talking heads on TV which is 80% noise, but ordinary people that have always invested in something or always avoided something. When those folks move and want to talk about it, it might be useful information.

Buy BRKB LGF SPY (sell puts) hedge KORS

Buy BRKB via selling Apr 90 puts @100.7

Berkshire Hathaway has a chart base at 90, which is also where it broke out at the start of the year.

Buy SPY via selling Mar 142 puts @151.4

SPY is the S&P 500 ETF, the first ETF, and still the biggest. There is a gap at 142 to 145, again from the start of calendar 2013. I believe 145 will be support, and 142 gives me an extra margin of safety.

Buy LGF via selling Apr 19 puts @20.6

I also add to my longs in Lions Gate Entertainment by selling Apr 19 puts. Chart continues to look constructive to me, with a shelf of support at 19.2.

Sell KORS via selling Mar 65 calls @59.3
Michael Kors priced a secondary offering at 61.5 and that put pressure on the stock. The principle is also selling some of his shares. The recent high was 65.1. I am already short KORS Mar 55 puts.

All three put sales are low risk, low reward trades. The call sale, a hedge. I am putting some money to work from the 11 positions that expired last week. I am a bit skittish about the stock market because February and March have often seen quick and fast drops. 

Elsewhere, bonds and gold charts have broken down. The weak seasonality for bonds extends to April. Gold doesn't look good, but I am reluctant to trade it from the short side. $1500 on physical gold may provide round number support. Volatility has perked up a little bit.

Long BA BRKB IWM LGF MON PG QCOM SPY

Net long APC KORS

10-1 for February, A- grade

Ten winners, one loser for the February option cycle, I Ten winners, one loser for the February option cycle. I give myself an A- for the month.
 

A bit of luck, and a bit of skill, yield a lot of small winners. The one loser was part of a vertical spread on AMZN, so really there were no losers. Even the worst entry of selling puts on Boeing (BA) before the 787 grounding news worked out, with me making money on both sides of the short strangle (selling puts and calls). I didn't take many risks, so the winners were all small fish. I was a bit lucky especially on AMZN.

The tight and narrow advance looks like big money scaling in. It won't last forever, but while it does last, shorts, especially option buying shorts are being punished. Eventually, the trend breaks, the elephants stall or turn and run. Worst case is that the elephants stampede, and then the stock market bulls get their turn at being punished.

 

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Buy LGF (sell puts)

Buy LGF Lions Gate via selling Mar 19 puts @20.0

I was already short Mar 14 puts. I interpret the short term action as constructive. There is a shelf of short term support at 19.2. I mentioned the Lions Gate earnings report in Tuesday's post. 

I believe the best is yet to come for LGF. For years, this company had losses, so no matter how strong the franchises were, most money managers would not, could not buy. Two quarters of earnings, with upside surprises, may bring in more institutional support. Yes, LGF has had a good run, so there is risk in going long at this time. A SeekingAlpha write up said to wait for a pullback to 19, so there are some small fish likely waiting to get in at that price.

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Expiring this Friday AMZN EBAY GPS LEN TBT

Buy KORS (sell puts) and LGF earnings

Buy KORS via selling March 55 puts @62.6

Luxury goods maker Michael Kors gaps up on earnings. Chart support at 57 and 55.

Elsewhere LGF Lions Gate Entertainment has good earnings. LGF ran up into the report and is drifting lower for the day. The breakout base is at 16, so there is some air in the stock at the 19 range. I am looking at the options, but nothing is compelling. Going out to June means waiting through another earnings report. I may wait until next week when April options become available.

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Expiring this Friday AMZN EBAY GPS LEN TBT

Buy APC BA MON (sell puts)

I sell puts on three stocks: Anadarko Petroleum, Boeing, Monsanto. I already had positions in all three.

Buy BA via selling Mar 70 puts @76.5

Boeing moving up today. The 787 grounding news could not move the stock below 73. I was already short BA Feb strangles, 67.5 puts and Feb 80 calls. There are multiple chart support levels, 70 looks like solid support.

Buy APC via selling Mar 75 puts @82.4

I rebalance my APC Anadarko Petroleum position to bullish. APC moving up after earnings. I was already short strangles, Mar 90 calls, Mar 67.5 puts and Feb 70 puts.

Buy MON via selling Mar 92.5 puts @101.9

I sell Mar 92.5 puts on Monsanto. I was already short Feb 90 puts. Chart support at the 50-day moving average and the gap up, both around 95/96.

Long EBAY GPS IWM LEN LGF MON PG QCOM TBT

Net long AMZN APC BA

Ground hog sees another year of bull, top in 2014

The subject line is an attempt at humor as I type this up on Ground Hog day 2013. During a recent ThinkorSwim webinar (Swim Lessons Thursday January 31, 2012) they spent a lot of time on the long term SPY chart. Here is a link to a similar Yahoo chart.

A lot of traders are focused on the potential of a triple top, and the price for SPY 157 or so. What caught my eye is the time frame. If the next market top is the same distance in time as the others, that gives another year of bull market with a possible top in early 2014. That fits in with the shifting sands of stock market sentiment.

While there are a few headlines trumpeting Dow 14000 and the best January since 1989, there were also articles featuring doom-and-gloomers such as Marc Faber calling for a 20% smash, and another less famous pundit calling for a 50% waterfall decline. These tend not to be the kind of articles featured at long time market tops.

So many seem to be focused on the price level of the two prior peaks, I don't think it will matter that much. Not many seem to be focused on the cycle length.

During the ThinkorSwim weekly market wrap up, one presenter lamented that low volatility grinds higher was one of the worst kinds of markets for his style of trading. It is increasingly difficult for option premium sellers to find good risk/reward situations.