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Saturday, January 11, 2014

Weekend Portfolio Analysis (January 11, 2014)

This was the most boring week in the US Markets since this blog started in September 2010. Not even a disappointing jobs report moved anything. But boring is not always bad! Boring is good if you are a credit spread seller and you already have positions in your portfolio that benefit from theta decay without being threatened. Because there wasn't a convincing push higher, I didn't sell the RUT Bear Call spread I planned last week.

An even more disappointing jobs report was issued in Canada this week. We lost almost 46000 jobs. That's a terrible number. Think about the magnitude of that number for Canada. With a tenth of the US population, this number would be equivalent to more than 400 000 jobs lost for the US in a month. The Canadian unemployment rate went up from 6.9% to 7.2% and now after a good while, Canada has a higher unemployment rate than the US (7.0%). Ironically, unlike the SPX, the TSX index did react to the disappointing Canadian job report: It rallied almost 2% this week!! And there are gurus out there trying to predict market direction. he he he. Such is life.

Market conditions
(Click on image to enlarge)
Stochastics: 60 (neutral)
McClellan: +103 (neutral)
65% of stocks are trading above their 20 SMA (neutral)

No man's land. I won't sell neither Calls nor Put spreads under these circumstances. Obviously we're a little closer to overbought than to oversold. Ideally for me, the market goes up a couple percentage points so I can sell February Calls in RUT.

January positions
SPX 1645/1650 Bull Put Spread No problems here.

RUT 990/995 Bull Put Spread No problems here either

These two positions will expire on Friday morning and there shouldn't be any issues here as they are well below the indexes' current prices.

February positions
RUT 1040/1045 Bull Put Spread RUT's trading at 1164, that's 119 points above my breakeven. Only a strong correction of 10% in a month would threaten this position.

Action plan for the week
I'll let Jan. positions expire worthless. As for February I won't touch the 1040/1045 RUT bull spread as there's no need too. I will patiently wait for a market rally in order to complete an Iron Condor. I would like to sell Calls above 1230, maybe the 1230/1235 spread or 1235/1240 with a 90% probability of success and at least 0.50 credit. If we go down this week or remain sideways, I won't do anything. It's better to stay on the sidelines and not force trades when the opportunities are not clear. I'm like a sniper, patiently waiting. I have to be, otherwise this trading system with its unfavorable risk/reward ratios just destroys you.

Income portfolio
I was pretty aggressive this week in my investing account. I initiated positions in 3 companies:
  • Great-West Lifeco Inc. (GWO.TO) - A financial services holding company with interests in the life insurance, health insurance, asset management, investment and retirement savings and reinsurance businesses. GWO trades in the Toronto Stock exchange. I purchased 50 shares at $31.50 on Wednesday. The support level held beautifully. The company pays a $1.22 dividend per share per year which will result in an additional $61 income from dividends in the portfolio, provided I don't sell it before year end.
  • AT&T (T) - A holding company and a provider of telecommunications services in the United States and worldwide. Services offered include wireless communications, local exchange services, long-distance services, data/broadband and Internet services, video services, telecommunications equipment, managed networking, and wholesale services. I purchased 44 shares at $34.00 on Thursday. AT&T had a terrible 2013 compared to the rest of the market, but I think it is safe to assume a company like this won't go bankrupt anytime soon. The 52 week range is 32.76 - 39.00, I like to purchase at this level, close to the 52 week low. AT&T adds $80.96 in dividends to the Income portfolio.
  • Philip Morris International (PM) - PMI’s subsidiaries and affiliates and their licensees are engaged in the manufacture and sale of cigarettes and other tobacco products in markets outside of the United States of America. Its products are sold in approximately 180 countries. The 52 week range is 82.41 to 96.53. I purchased 18 shares at $82.51 on Friday when the stock was making new lows for the year. PM brings an additional $67.68 in dividends to the income portfolio this year.
With all these new investments I currently have positions in 8 Canadian companies and 7 American ones. The expected dividend income this year is now 533.32 CAD and 373.84 USD. For all the details about my Income portfolio, transactions history etc visit the Results page.

Economic Calendar

Tuesday - US Retail Sales
Thursday - Core CPI
Friday - Housing Data

Good luck this week my friends!

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  1. Good day LT. It looks like the guy who only sell put spread wins again :-( My goodness whose buying at this level?

  2. Thanks for the comment LEN! Yeah, selling puts have been profitable, but I wont abandon the idea of selling calls either. This party will eventually stop. We dont know when, but for sure this party will stop, as it always has in previous instances in the past. Careful out there!