Weekly: Frustration and losses

It was a below average week for me. In early August, I sold layers of calls on the market weakness. This past Wednesday I closed three of these short call positions (BRKB MRK SPY) for big percentage losses. As it turns out, I could have gotten out at better prices before or after. I also opened a few October positions and many of those turned against me. Despite some poorly timed moves, the tail wind of option decay and very small moves in the stock market meant an up week for me. 

The AAII sentiment reading fell back below 50% bulls, which I see as a positive for the market. Another positive is that the transports (IYT) made a new high, confirming that new highs in the S&P 500 (SPY). This is a bull market that many still hate. Public mood remains tepid. Virtually no one is asking me for stock tips or investing advice. The local CANSLIM meet up has low attendance and the few that come are not excited about investing in the stock market. Yes, there are some signs of froth, such as Alibaba about to be the highest valued IPO in U.S. history, but overall the mood is disbelief. 

I will remind readers that the ten year cycle and four presidential cycle point to an upside acceleration starting September 30 and lasting about 18 months. Seasonal indicators are not that reliable, but have some value.

Here are this week's trades:
Fri Sell BRKB Oct 130 puts @138.2. I open an October position in Berkshire.

Sell AMGN Oct 155 calls @137.2. Rebalance my position in Amgen, selling these way out calls for a tiny premium.

Thu Sell AMGN Oct 125 puts @138.8. Rebalance short Sep strangles on Amgen by going out to October. My streak of not-so-good intra-day timing continues as AMGN fades from its morning pop.

Sell IWM Oct 105 puts @116.8. I open an October position in the Russell 2000 etf. I closed the short IWM Sep 95 puts to free up some buying power. I also close out some SPY Sep 173 puts to free up buying power. I often let these way out of the money options expire worthless. However, right now, I am into the red zone as far as buying power. One good thing about my broker ThinkorSwim is that closing out short options at 0.05 or less, is commission free.

Sell SLB Oct 95 puts .32 @106.2. I open an October position in Schlumberger.

Wed I cover some of the calls I sold in early August for huge losses. Captain hindsight tells me that I should have covered much earlier. Why today? One reason is that if the puts come in safe, I'll come out above the line for BRKB and MRK. SPY had more cushion.

Cover short BRKB Sep 135 calls @138.2. Ouch. I cover these short calls for a huge loss. I sold these for not much premium when Berkshire was much lower, and cover for about a 900% loss, basis the premium collected.

Cover short SPY Sep 200 calls @201.6. Double ouch. I cover these for about a 350% loss (basis premium collected).

Cover short MRK Sep 60 calls @60.5. Trifecta. Merck calls covered for about a 500% loss (basis premium collected).

To add to the frustration of big losers, by later in the day BRKB and SPY are well off their highs.

Sell JWN Oct 65 puts @69.8. Rebalance short September strangles in Nordstroms by selling October puts.

 

Position summary:

long BRKB GLD MRK

net long AMGN ASH DIS IWM JWN SLB SPY

net short MSFT XLU

net neutral APC FB FDX HON SWK VRSN