“Szelhamos Rules” Redux
Szelhamos Rules?
It only made sense that I should take the advice of the long ago, but loyal readers of my one time blog, dedicated to the memory of my father. The “Szelhamos Rules” ran for precisely one year.
But it was a core group of loyal readers that first convinced me to start a newsletter. It was through their gentle pushing that Option to Profit was born.
Now, they’re telling me that I need to write a bit. Of course, maybe if I charged them for their subscriptions, they would keep their advice to themselves.
But, sorry guys. I do value the advice, but it won’t be like the old days. I don’t have the energy to write drivel 5 days a week, and although my wife never thought that I was humorous, I think that I am even less so, now.
So, here’s the deal. A couple of times a month, I’ll put fingers to keyboard, mostly to explain what’s going on with the recommendations. Maybe there’ll be an occasional observation or anecdote.
August 19, 2009
I had great hopes for this month.
After an incredibly boring past week, with very little volatility, the market showed some flashes of its hot tempered ways on Friday and this past Monday.
On Friday, it reversed losses and had a really strong close. For me, that wasn’t very good, because I had already sold lots of options earlier in the month and many were now in danger of being pulled away from me.
But on Monday, my frown became a smile as the Dow fell nearly 200 points. Most of my positions were now near the money and now I had the chance to begin some wheeling and dealing to squeeze extra premiums out of my stocks.
Today, the market reversed early losses.
But because of this near term uncertainty, this month’s choices are all currently very close to their strike prices. This way, if the market goes down, the options will appreciate nearly penny for penny. If the stocks go up in value, this month’s return will be more in the 1-2% area, rather than the 2-4% range.
But you never know.
Remember the rules and good luck.
July 19, 2009
For those that did not close positions on Friday, Monday should be a very good day. All of this month’s selections were profitable, including the Citigroup Put Sell speculative play.
The big surprise was the large jump in price for Mosaic and then its rapid price decline. Since Mosaic gapped up in price, if you followed Rule #3 , you would have adjusted your option strike price to the next level. Had you done so, you would have gotten a very nice premium, as the volatility was driven by some buyout rumors.
Based on the recommendation of a number of subscribers, the OTP Toolbar will now also be used push buy and sell timing recommendations to subscribers.
For my personal trading account, I also made call option sales trades in my existing positions in Goldman Sachs, MasterCard, Sallie May, Halliburton and Freeport-McMoran. The Goldman Sachs and Freeport-McMoran positions were assigned, but I expect to repurchase them as they retrace in price, as I believe they have risen too quickly to be sustained at current levels.
Remember, if you still need to closeout your positions on Monday, watch out for any early volatility. If you are holding a healthy gain in Mosaic, get out as early as you can if there is a market downturn at the open. If there is an upward trend, just wait to sell until some stability returns and volatility is reduced.
See you next month.
By the way, for those that asked, there are plenty of trading opportunities such as the ones I recommend, all through the month. The problem is that to capitalize on them, you essentially have to sit by your computer all day long, looking for the right opportunity.
If there are any subscribers that do have that kind of interest, send me an e-mail and I may put together a special service with real time delivery through the OTP Toolbar.
Or not.
July 15, 2009
Let’s hope this month is better.
The last few days have seen some significant gains, and with them, some growing options premiums.
In addition to the typical recommendations and their associated options, I am offering one speculative play.
That one, will need a little bit of explanation.
For the past several months I have been very successfully “selling puts on Citigroup”. What this means is that I have obligated myself to buy Citigroup stock at a specified price by a certain time.
To do so, your broker will require “collateral” in the form of cash in your account. For example, if you sell 4 Citigroup put contracts at a $3 strike price, your broker will set aside $1,200 to pay for your potential need to purchase 400 shares at $3 per share.
With Citigroup at $3.17, the July $3 put contract has an $0.08 premium per share. The options will expire worthless if Citigroup closes at or above $3 after Friday’s close of trading. In this case, you are not purchasing the underlying stock, but you must be prepared to do so, if the option is exercised.
For me, this has worked very well at varying strike prices since January.
Hopefully, it will work for you, as well.
June 22, 2009
This month’s recommendations faced the perfect storm. And not in a good way.
First, the GE dividend capture proved to be a bad move, as GE followed the rest of the market downward on Thursday and Friday. GE is the worst performing Dow component this year, principally because its GE Capital arm is everyone’s focus. Despite the fact that GE Capital is the proverbial tail, GE just languishes.
As the market fell on Thursday and Friday, positions likewise fell. June was a perfect example of why positions should neither be opened nor closed during the first 30 minutes, particularly if large moves are being made, regardless of direction.
Those that followed that directive, to sit and wait and let the volatility die down, did well with all of the recommendations, other than the special dividend capture. Those that jumped in at 9:30 AM on Thursday to buy and 9:30 AM on Monday to sell, bought high and sold low. Worst of all, the options premiums did not cover the poor timing of the trades.
Those that waited made profits.
Remember the rules.
June 17, 2009
This month’s recommendations are made with a bit of trepidation.
The last couple of days have been decidedly negative in tone and call option premiums are reflecting that negativity.
This month’s selections, as subscribers will note, are heavily weighted in the Energy sector and whose related options are predominantly “in the money”.
With a trend such as this one, if your positions are assigned, your profits will be in the lower end of the 2-4% range.
In the best case scenario, positions won’t be assigned and there will be an opening rally on Monday morning, but that’s not something I would pin all of my hopes and dreams upon.
In the meantime, Friday is a “quadruple witching” day, so there may be al ot of volatility. Considering how much we have sold off in the past few days, but on light volume, it might not be surprising to see an upward bias on Friday, but there may be a roller coaster ride awaiting.
May 19, 2009
I know that it’s rude to gloat, but if you followed all 4 selections, you would have been quite profitable in all four, if you traded out on Monday, as directed.
Your Dow Chemical position would have been assigned, but with a profit of nearly 5%, not including trading costs.
The others closed below their strike prices, but rallied nicely at the opening bell on Monday, and depending where you sold, your profits would have been big or bigger.
To assess your individual results, please use the spreadsheet that is available to subscribers.
June’s picks will be posted no later than Wednesday evening, June 17, 2009.
As in the past, if there are no picks, your monthly subscription fee will either be refunded to you or rolled over to the next month, in the form of a credit.
Additionally, if there are any dividend capture trades, we will push the information to you through the OTP Toolbar.
See you in a few weeks.
May 14, 2009
As you know, this month, we gave a freebie. Although it’s too early to know, since positions won’t be closed out until tomorrow or Monday, all of the choices are looking very good.
Barring a huge drop on Friday or Monday, we should exceed the 2-4% profit threshold.
Nice. But let’s not count the chickens, yet.
Typically, as subscribers know, I only give 4 or so recommendations each month.
In addition to the trades that I recommended today, I also made options sales for existing positions in my portfolios.
These were for Goldman-Sachs, Mosaic, Rio Tinto, Financial Spider (XLF), Deere.
I also tried to make options sales for Google and Elan, and retracted an options sale on Riverbed Technology.
The reason that I did not recommend those was that their options premium did not warrant the new purchase of shares.
Also, last Friday, when AIG was at $2.01, I sold $2 call options for a $0.20 premium. I didn’t recommend that one as a special situation, since I will never recommend the purchase of speculative issues. It doesn’t get more speculative than that.
That is unless you also consider the in the money Citigroup puts that I’ve been selling the last few months. Great returns, but too speculative to get others involved.
Oh, and the special situation that I was looking for earlier in the week, never materialized. It would have been a dividend capture of DuPont. The problem was DuPont’s price, relative to the strike prices and the options premiums for those prices. If DuPont would have lingered near one of the strike prices, I would have pulled the trigger, with the hope that both a good option premium and great dividend would be captured.
Oh well.
Anyway, for those of you that aren’t subscribers, I know that it’s hard to make a decision on just 1 month’s worth of results. But for a $12.50 introductory price, what are you expecting?
Results?
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