As I said this morning to Trader K; "I feel like a Summer Sport Journalist, in winter". Maintaining a non directional blog in this market has become difficult. I try to stay serious and make use of educational opportunities the market tosses in our direction. So bear with me, the market and the blog will improve.
I did some analyzes on my covered calls, here are some results.
JAVA and PRU are closed trades both with loses. Both cases I contribute the loses to lack of trust in my original home work. The analyze look great - till the market turned against me and I started to doubt this work. What do we learn - 1. Size, could have been smaller for the risk; 2. Both should probably not have come through my initial screening. JAVA because they sit on good cash, but I lack information on their business plan. PRU because they are a good company, but in every sell off you wonder if someone knows anything you don't know regarding their investment portfolio.
The first sell off in PRU I managed to trade very well (profitable) the fierceness of the second sell off has caught up with me. Both positions are closed.
The other covered calls/naked puts are still in the market. I rolled all Novembers to Decembers.
MSFT valued @ 22.11, I am short the 22 put and 23 calls
PCU valued @ 11.27, I am short the 15 put and calls
CHK valued @ 19.09, I am short the 15 puts and 20 calls
CNH valued @ 13.78, I am short the 12.50 puts and 15 calls
HAL valued @ 18.36, I am short the 20 calls
Take CHK as an example. I originally bought the stock on 22.97, selling in the 25 calls for 2.45 and the 22.5 puts for 3.10. Taking all trades into account I paid 19.09 for the stock. CHK had quite a range during the last month. Not always comfortably, I have to admit, but I am convinced the Natural Gas fields are worth their value - so I am happy to sit with a little pain. I made good use of the moves by closing the puts when we moved to 25 and moving the original calls down, when it lost support.
All in all - originally the trades came on because I expected a sideways - upward market for a couple of weeks. As you know we did not get that, we had two or three major sell off in 4 weeks. With the exception of JAVA and PRU I am not dissatisfied with the current holdings. If assigned on the short calls I will bank some profits.
My favorite candidates for another set of Covered calls would be; JPM, ERF, HTE, HAL, INTC, HPQ.
I would leave MSFT out, since the (possible) YHOO merger could round up some volatility. I left CNH out because lack of Option volume, it was difficult to get fills in CNH.
I personally will not add to my portfolio this month. I have enough going as is, plus I have a week off coming - next week it will be Bahamas and beach time. So I need less excitement not more.
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