Sunday, February 18, 2018

Could have been assigned, but took in a bit more premium ...

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Let me start with closing the "story" on last week's thought process to being assigned.  In last weekend's blog entry here I gave excruciating details on three stocks/option plays where the underlying had been put to me.  The three symbols were AMAT, MU, and SQ.

The gist of the story was that I had maximum profit potential at the following levels in these three stocks, which were all part of individual covered-calls:
  • AMAT:  $300 maximum profit (put to me at $50 and potentially called away at $53)
  • MU:   $300 maximum profit (put to me at $41 and potentially called away at $44)
  • SQ:   $150 maximum profit (put to me at $41.50 and potentially called away at $43)
These underlyings were all in the money (ITM), so would have been called away with options expiration.  The closing values for each were:
  • AMAT:  $54.90, ITM $1.90
  • MU:  $44.21, ITM $0.21
  • SQ:  $44.11, ITM $0.11
I noticed that as we were coming up into 3:59 pm ET, I had an opportunity to close the option leg and then close the stock, as the combined proceeds of closing the leg and selling the stock would have been greater than simply having the underlying's called away.  So I (rapidly) closed the following trades (ignore AVAV -- not part of this story) to capture the excess premium:

Here is how that story turned out:




So, for SQ, I was anticipating a $150 maximum profit but was able to capture $260-$71 = $189.  For both MU and AMAT I was expecting $300 maximum profit but was able to capture $321.25 + $4.00 = $325.25 for MU and $504.25 - $178 = $326.25 respectively.

I readily acknowledge that this is not the norm but I was able to do this, resulting in $90.50 increased value capture ($840.50 versus an anticipated $750).  The final numbers for each of these trades is as follows:

AMAT
  • Premium from CSP (incl commission): $40
  • Premium from CC:  (incl commission): $29
  • Days from selling CSP to CC expiration:  12
  • Original CSP amount:  $5000
  • CC-CSP Value:  $300 (if ITM)
  • Additional net premium/value received from sale:  $24.25 =  ($504.25 - $300 - $178 - $2)
  • Total profit:  $393.25 = $40 + $29 + $300 + $24.25
  • Return on AMAT transaction chain:  $393.25 / $5000 = 7.865%
  • Annualized return on AMAT transaction chain:  7.865% * 365 / 12 = 239%
MU
  • Premium from CSP (incl commission): $44
  • Premium from CC:  (incl commission): $24
  • Days from selling CSP to CC expiration:  19
  • Original CSP amount:  $4100
  • CC-CSP Value:  $300 (if ITM)
  • Additional net premium/value received from sale:  $23.25 =  ($321.25 - $300 + $4 - $2)
  • Total profit:  $391.25 = $44 + $24 + $300 + $23.25
  • Return on MU transaction chain:  $391.25 / $4100 = 9.542%
  • Annualized return on MU transaction chain:  9.542% * 365 / 19 = 183%
SQ
  • Premium from CSP (incl commission): $29
  • Premium from CC:  (incl commission): $39
  • Days from selling CSP to CC expiration:  19
  • Original CSP amount:  $4150
  • CC-CSP Value:  $150 (if ITM)
  • Additional net premium/value received from sale:  $37 =  ($260 - $150 - $71 - $2)
  • Total profit:  $255 = $29 + $39 + $150 + $37
  • Return on SQ transaction chain:  $255 / $4150 = 6.144%
  • Annualized return on SQ transaction chain:  6.144% * 365 / 19 = 118%
So, the plan worked out in my favor. It doesn't always go this way, but I wanted to close the loop so that you can see how to do a cradle-to-grave analysis on the trades.



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I closed a couple of other trades this week; here is the accounting:

  1. AVAV 180216P50 was sold on 1/16 and I collected $0.90 at $1 commission.  I bought the position back on 2/16 for $0.05, netting $90 - $5 - $2 (commissions) = $83.  The duration was 32 days, inclusive of start/ending dates.  ROO was $83 / $5000 = 1.66% and AROO was 1.66% * 365 / 32 = 18.9%, including all commissions.
  2. EXEL 180216P28 was sold on 2/5 and I collected $0.50 at $1 commission.  I bought the position back on 2/15 for $0.05, netting $50 - $5 - $2 (commissions) = $43.  The duration was 12 days, inclusive of start/ending dates.  ROO was $43 / $2800 = 1.54% and AROO was 1.54% * 365 / 12 = 46.7%, including all commissions.
  3. TSN 180223P70 was sold on 2/12 and I collected $0.30 at $1 commission.  I bought the position back on 2/15 for $0.05, netting $30 - $5 - $2 (commissions) = $23.  The duration was 4 days, inclusive of start/ending dates.  ROO was $23 / $7000 = 0.329% and AROO was 0.329% * 365 / 4 = 30.0%, including all commissions.
  4. XEL 180216P27 was sold on 2/8 and I collected $0.30 at $1 commission.  I bought the position back on 2/15 for $0.05, netting $30 - $5 - $2 (commissions) = $23.  The duration was 8 days, inclusive of start/ending dates.  ROO was $23 / $2700 = 0.85% and AROO was 0.85% * 365 / 8 = 38.9%, including all commissions.
  5. NVCR 180216P20 was sold on 2/12 and I collected $0.35 at $1 commission.  I bought the position back on 2/15 for $0.05, netting $35 - $5 - $2 (commissions) = $28.  The duration was 4 days, inclusive of start/ending dates.  ROO was $28 / $2000 = 1.4% and AROO was 1.4% * 365 / 4 = 128%, including all commissions.

I did not have one losing trade all week.

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Here's how I am positioned going into the President's Day shortened week:

COP 180223P55 is ITM right now, with the underlying sitting at $54.77.  If nothing changes this will be put to me at the end of the week.   I bought this on 2/5 and received a premium of $0.50.  Maximum option pain indicates a bit higher movement is possible this week, but of course, this is pure speculation (option pain does not always reflect reality):



PYPL 180223P75 is OTM right now, with the underlying sitting at $78.16.  I collected $1.00 in premium on 2/5.  Option pain suggests that this could come down towards my strike by the end of the week:


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SQM was Put to Me

I sold SQM 180216P55 on 1/18 for $0.95.  Friday's SQM close was $54.56, so I was put the stock at $55.00

From a Greenfield perspective, SQM meets all of my criteria.  I do not mind holding this stock at all, except that a month is a long time to wait for the next OE :)

SQM reports earnings on 2/28, after the close.  I am expecting that EPS will be higher but revenues will be lower, and given where we are in the ER cycle as a whole, I think they will get punished.  

An ATM credit straddle is showing about $3.20 expected movement from Friday's close, using the March expiration.  Of course, this needs to be re-evaluated the day prior to ER, but this suggests that I should be looking to sell a call at least above $54.56 + 3.20 > $57.76, or at a strike greater than $58.  The nearest strike is $60, so at a bid premium of $0.80, let's see if it meets the 20% requirement.  With 25 days left to March expiration, we have:

$80 / $5500 * 365 / 25 = 21.2%

Barely.  The delta at the 60 strike is 0.26, which (loosely) infers that there is a 74% chance of being OTM and holding the position at OE.  I like deltas 0.20 or lower.  

The order for Tuesday (Monday is a holiday) is STO 180316C60 limit $0.85.

SQM Trade Analysis

If the price of SQM rises above $60, I'll make $500 from the stock appreciation (put to me at $55 and called away at $60), plus the premium from the CSP of + $94 (incl comm), plus this CC premium of $79 (premium of $80 less $1 comm), so $173 in total premiums, for a total of $673.  The original amount invested was $5500 on 1/18 (cash secured put), so for 33 + 25 = 58 total days the annualized return is (673/5500) * 365/58 = 77%.

If the price of SQM is above $55 but below $60 then I'll still have the amount above $55 as paper profit plus the banked premium of the CSP ($94 incl comm), plus the banked CC premium of $79 (incl comm).  The call will expire worthless and I keep the premium.  The AROO for all premium received ($173 incl comm) and amount tied up ($5,500) is 19.8% (= $173 / $5500 * 365 / 58).  I could sell the shares on the market to collect the paper profit or I could sell another call against the underlying.

If the price of SQM is below my new break even of $55.00 - $0.94 (CSP) - $0.79 (CC) = $53.27 (3.14% reduction off of retail) or lower I'll still be underwater (but owning a quality stock).  I keep all the premiums and will sell another call to further lower my basis.

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I have the following CSPs in play right now:

EXEL 180316P25
SRNE 180316P5
ECHO 180316P25
SQM 180316P50
SAIA 180316P70
NAV 180309P35
PYPL 180223P75
COP 180223P55

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If you see anything wrong in my calculations, please let me know.  I think I have all of the bugs out of the spreadsheet that I used, but ya never know until others look at it.

As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd

Sunday, February 11, 2018

Being Assigned is Not Necessarily Bad

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Investing in cash-secured puts (CSPs) and covered-calls is a cyclic process.  Here's a flow-chart that captures the essence:



I was assigned a few positions this weekend after a few of my CSPs were in the money (ITM) as of yesterday's (2/5) close.  What follows is an accounting of the math I'm using to show the CSP side of the equation, snapshot the picture facing me immediately after assignment, and see how to turn these into winning trades.

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Three stocks were assigned this past weekend:  AMAT, MU, and SQ.  I go into some detail on AMAT and the calculations, but condense this analysis for MU and SQ.



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First Assignment:  AMAT

Rule 1 of CSPs:  only sell puts on stocks that you would have no issues owning.  AMAT is a quality stock in terms of EPS and revenue growth. 

I sold the weekly AMAT 180209P50 on 2/5 for a credit of $41.00 ($0.41 * 100).  At the time the price was $51.35, and the historical volatility was 43%.

If the price closed above $50 the unexercised return on the option (UROO) would have been 0.81% including commissions; I typically try to buy these back at $0.05 or $0.10.  Using the $0.05 value my actual closed return on the option (CROO) would have been 0.69%.  The annualized return on the option (AROO) using the forced closed numbers, and knowing there are only 4 days that the order is alive, results in a AROO calculation of 62.54% (  = CROO * 365 / # days to exp ), including round-trip commissions ($2 total).

If assigned, breakeven for the stock is the strike price minus premium + commission, or $50 - $0.41 + 0.01 = $49.60.

The underlying closed ITM at $48.35, so the stock was assigned to me overnight.  The average price from my broker is the strike price of the put, in this case, $50.00/share.  

Any rise in the price above $49.60 is profit.  If I sell a call against it, as long as the call is above $49.60 (less the premium received), I'll make money.

So, what to do next?

AMAT is coming up on an earnings release next week, Wednesday, Feb 14, after the close (ATC).

I'm slightly bullish on AMAT in terms of REV and EPS, so I think it will bump to the upside.  

There are a couple of ways to calculate an expected move:

(1)  The first way to calculate the range is to see what the market thinks the current range could be.  Of course, this needs to be recalculated just before earnings release, and that's not always feasible (it certainly is not for me). In general, the expected trade range can be calculated using a short at-the-money (ATM) credit straddle, multiplying this by 0.85 (see this link), and then adding/subtracting it to the current price.  The $48.50 strike has a call bid of $1.63 and the put bid is at $2.13.  Doing the math shows that we could see a move of +/- $3.20 or so if the earnings report was tomorrow.  This gives us a rough expected range of $45.15 to $51.55.  Using this method, as long as my call is above $51.55, there would only be a 32% chance of having the position called away (e.g. a 68% chance exists that the price would be below the strike if it were perfectly at $51.55).

(2) Method 2 is the same as method (1) above but does not multiply by the 0.85.  Link here.  This suggests that we have the credits for the ITM short call and put totalling $3.76 and with the last close of $48.35, the implied volatility is 7.78% with 7 days to go (3.76/48.35).   Multiplying the last close by 1.0778 = $52.11.

Method 2 is more conservative so I'm going to use that for now.

So, it appears as long as I have a strike above $52.11 there will be a better than 68% chance that I will be out of the money (OTM) on expirations day.

The delta of a specific option can be taken as the percent likelihood that the position will finish ITM.  This is not an exact 1:1 relationship, but it's close enough, certainly to the nearest 10% or so.

I like any delta less than +0.3 for selling calls and less than -0.3 for selling puts.  I also require that any call or put I purchase have an AROO in excess of 20% (annualized).

5 trading days exist between me and expirations. If I require an annualized return of at least 20% and I have only 5 days left, the equation is:

20% * 5 / 365 = CROO (Closed Return on Option) = 0.27%

So, any premium that results in me getting at least 0.27% in 5 days is worthy of my efforts.

My cost basis on the stocks is my break-even * 100 shares, or $4,960.

0.27% of my cost basis is $13.59, or $0.14.  Because there is a $1 commission in here I'll add another $0.01 to show I need at least an option premium of $0.15 to make this 20% minimum.

So, here's the criteria for selling the call:

1) It has to be of a strike higher than $52.11.  This implies at least $52.50 or $53.
2) Whatever the strike, I have to collect at least $15, and prefer to do it with a delta under 0.3.

One (laborious) way I do this is plot the bid/ask midpoints/delta for each of the call strikes, and look for discontinuities in the curve.  Here's an example for AMAT and call options that expire on 2/16 (this week):



This plot shows the change in premium received / change in delta for each strike, as well as the raw premium received / delta.  As you would expect, as the strike moves further away from today's price  the delta drops, and we also see that the premium received also drops.  The ratio is not constant though, and as we get further OTM premium drops faster than delta. This can be interpreted "less chance of a strike being ITM, the lower the premium received".  The red dots are almost in a straight line, but the blue dots are not.

It doesn't always look like this, but the discontinuity for selling an AMAT call at strike = $53 (at a delta of 0.1648, not shown), is kind of a beacon to me to sell this strike.  It basically says "there is an 84% chance that anything you collect here will be pocketed, and although you may collect more at the $52.50 strike, the risk is disproportionate."

Think about it.  The blue dot is change in premium received from the next lower strike / change in delta.  So, when moving from the 52.50 strike to the 53 strike, EITHER the premium did not drop as much or the risk (delta) went down far more than expected.  Discontinuities do not last long in the market so the midpoint price (bid = $0.42 and ask = $0.31) of $0.36 could be a limit sell of $0.30 and still I would make all my targets.

Whatever the cause, the $53 strike calls for me.

A final check is to ensure that there is open interest (OI) at the strike.  The $53 call in AMAT has 717 contracts as I write this.

The order will be STO 1 AMAT 180216C53 Limit $0.30 DAY.

AMAT Trade Analysis

If the price of AMAT rises above $53, I'll make $300 from the stock appreciation (put to me at $50 and called away at $53), plus the premium from the CSP of + $40 (incl comm), plus this CC premium of $29 (premium of $30 less $1 comm), so $69 in total premiums, for a total of $369.  The original amount invested was $5000 on 2/5 (cash secured put), so for 12 total days the annualized return is (369/5000) * 365/12 = 224%.

If the price of AMAT is above $50 but below $53 then I'll still have the amount above $50 as paper profit plus the banked premium of the CSP ($40 incl comm), plus the banked CC premium of $29 (incl comm).  The call will expire worthless and I keep the premium.  The AROO for this premium ($29 incl comm) and amount tied up ($5,000) is 42.34% (29/5000*365/5).  I could sell the shares on the market to collect the paper profit or I could sell another call against the underlying.

If the price of AMAT is below my new break even of $49.60 - 0.29 = $49.31 or lower I'll still be underwater (but owning a quality stock).  I keep all the premiums and will sell another call to further lower my basis.

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2nd Assignment:  MU

I sold MU 180209P41 on 1/29 for a credit of $0.45.  With 11 days to expiration, the unexercised return on option (UROO) was 1.09%, the closed return on option (CROO) was 0.94%, and the annualized return on option (AROO) if I closed early at $0.05 would have been 31.08%.  At the time there was a 78% chance that the option would close OTM.  I sold the -0.2234 delta.  My break-even for the position is $40.56, including commission.

MU closed at $40.54, below the strike of $41, so the stock was put to me.

MU does not report earnings until Thursday, March 22nd, after the close, so there is nothing there to worry about in terms of impact.

Let's take a look at the expected range of MU for the next week:

Short Call bid:  1.07
Short Put bid: 1.67
Total:  2.74

Expected range: 37.80 to 43.28

My target is selling a call at the 43.50 strike or higher.

Here is the plot of "change in premium vs change in delta" for various strikes:


I've put the arrow on the 44 strike because you can see that at lower strikes, the blue dots are below this level -- reward / risk is improving, on a percentage basis, for the $44 and $44.50 strikes, relative to the $43 and the $43.50 strikes.

Yes, I acknowledge that I collect more premium at the $43 and $43.50 strikes, but it's at a higher delta, and this is a higher risk / lower probability that I'll be OTM.

The $44 strike has a delta of 0.163 as I write and a midpoint (premium) target of $0.27.

As from my analysis with AMAT, I am looking to ensure I have at least 20% AROO in the trade.  With 5 days to expiration,  20% * 5 / 365 = CROO (Closed Return on Option) = 0.27%

So, any premium that results in me getting at least 0.27% in 5 days is worthy of my efforts.

My cost basis on the stocks is my break-even * 100 shares, or $4,056.

0.27% of my cost basis is $10.95, or $0.11/share.  Because there is a $1 commission in here I'll add another $0.01 to show I need at least an option premium of $0.12 to make this 20% minimum.  This is well above the $0.27 midpoint at the $44 strike so this delta works.

A final check is to ensure that there is open interest (OI) at the strike.  The $44 call in MU has 22,054 contracts as I write this.

The order will be STO 1 MU 180216C44 Limit $0.25 DAY.

MU Trade Analysis

If the price of MU rises above $44, I'll make $300 from the stock appreciation (put to me at $41 and called away at $44), plus the premium from the CSP of + $44 (incl comm), plus this CC premium of $24 (premium of $25 less $1 comm), so $68 in total premiums, for a total of $368.  The original amount invested was $4,100 on 1/29 (cash secured put), so for 19 total days the annualized return is (368/4100) * 365/19 = 172%.

If the price of MU is above $41 but below $44 then I'll still have the amount above $41 as paper profit plus the banked premium of the CSP ($44 incl comm), plus the banked CC premium of $24 (incl comm).  The call will expire worthless and I keep the premium.  The AROO for this premium ($24 incl comm) and amount tied up ($4,100) is 42.73% (24/4100*365/5).I could sell the shares on the market to collect the paper profit or I could sell another call against the underlying.

If the price of MU is below my new break even of $40.56 - 0.24 = $40.32 or lower I'll still be underwater (but owning a quality stock).  I keep all the premiums and will sell another call to further lower my basis.

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3rd Assignment:  SQ

I sold SQ 180209P41.5 on 1/29 for a credit of $0.30.  With 11 days to expiration, the unexercised return on option (UROO) was 0.73%, the closed return on option (CROO) was 0.61%, and the annualized return on option (AROO) if I closed early at $0.05 would have been 20.13%.  At the time there was a 88% chance that the option would close OTM.  I sold the -0.131 delta.  My break-even for the position is $41.21, including commission.

SQ closed at $39.75, below the strike of $41.50, so the stock was put to me.

SQ does not report earnings until Tuesday, February 27th, after the close, so there is nothing there to worry about in terms of impact.

Let's take a look at the expected range of MU for the next week:

Short Call bid:  1.35
Short Put bid: 1.45
Total:  2.80

Expected range: 36.90 to 42.55

My target is selling a call at the 43 strike or higher.

Here is the plot of "change in premium vs change in delta" for various strikes:



I've put the arrow on the $43 strike because you can see that at lower strike of $42.50, the blue dot is below this level -- reward / risk is improving, on a percentage basis, for the $43 and $43.50 strikes, relative to the  $42.50 strike.

Yes, I acknowledge that I collect more premium at the $42.50 strike, but it's at a higher delta, and this is a higher risk / lower probability that I'll be OTM.  I do not mind holding a quality stock like SQ.

The $43 strike has a delta of 0.2179 as I write and a midpoint (premium) target of $0.45.

As from my analysis with AMAT and MU, I am looking to ensure I have at least 20% AROO in the trade.  With 5 days to expiration,  20% * 5 / 365 = CROO (Closed Return on Option) = 0.27%.

So, any premium that results in me getting at least 0.27% in 5 days is worthy of my efforts.

My cost basis on the stocks is by break-even * 100 shares, or $4,121.

0.27% of my cost basis is $11.13, or $0.12/share.  Because there is a $1 commission in here I'll add another $0.01 to show I need at least an option premium of $0.13 to make this 20% minimum.  This is well above the $0.45 midpoint at the $43 strike so this delta works.

A final check is to ensure that there is open interest (OI) at the strike.  The $43 call in SQ has 3,681 contracts as I write this.

The order will be STO 1 SQ 180216C43 Limit $0.40 DAY.

SQ Trade Analysis

If the price of SQ rises above $43, I'll make $150 from the stock appreciation (put to me at $41.50 and called away at $43), plus the premium from the CSP of + $29 (incl comm), plus this CC premium of $39 (premium of $40 less $1 comm), so $68 in total premiums, for a total of $218.  The original amount invested was $4,150 on 1/29 (cash secured put), so for 19 total days the annualized return is (218/4150) * 365/19 = 101%.

If the price of SQ is above $41.50 but below $43 then I'll still have the amount above $41.50 as paper profit plus the banked premium of the CSP ($29 incl comm), plus the banked CC premium of $39 (incl comm).  The call will expire worthless and I keep the premium.  The AROO for this premium ($39 incl comm) and amount tied up ($4,150) is 68.60% (39/4150*365/5).  I could sell the shares on the market to collect the paper profit or I could sell another call against the underlying.

If the price of SQ is below my new break even of $41.21 - 0.39 = $40.82 or lower I'll still be underwater (but owning a quality stock).  I keep all the premiums and will sell another call to further lower my basis.

~~~~~~~~~~~~

So, that's the plan going into next week.  Whether it works out is for all of us to see.

If you see anything wrong in my calculations, please let me know.  I think I have all of the bugs out of the spreadsheet that I used, but ya never know until others look at it.

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd

Saturday, January 27, 2018

Selling CSPs -- Screens for the week of 1-27-2018

Good morning all.  Happy weekend to all of us.

If you're not familiar with a good source for weekly options, especially for the newer folks here, make sure you bookmark the following link:

http://www.cboe.com/products/weeklys-options/available-weeklys

Owing to my own belief that I only place orders for CCs or CSPs in stocks that I wouldn't mind owning, I generate a watchlist every week of stocks meeting my criteria.  I'm happy to share my criteria, and if you have TradeStation, I have a free indicator that I wrote which makes it easy to screen for these.

Dividend-paying stocks that have been in a significant up-trend over the last 52 weeks which make my list are:

PHM
NVDA
AMAT
TOL
WYNN

Note that PHM has an ER on Tuesday, 1/30, NVDA on Thurs, 2/8 and AMAT on Thurs, 2/15, so be aware.

Non-dividend paying stocks that have been in a significant up-trend over the last 52 weeks are:

ALGN
DLTR
SQ
WB
ADBE
NAV
RHT
NFLX
URI
FCX

ALGN has an ER on 1/30 and DLTR is on 2/20, with the remainder all falling after 2/20.

The following stocks, (and 1 ETF -- ITB), also meet my criteria of paying dividends AND having "good" uptrend characteristics:

ADP
MSFT
MA
V
SYY
EMR
FOXA
ZTS
FDX
UNH
BK
KSU
AMTD
VZ
SWK
UNP
ITB

ADP/MSFT have ER on 1/31, MA/V have ER on 2/1, and SYY and the remaining stocks are on or after 2/5.

I like to give at least 1 week of buffer after my expiration date in case I have to repair and roll a position.

Finally, the following stocks pay no dividend and are on my "good" uptrend list are:

ILMN
EBAY
FB
GOOG
GOOGL
AMRN
SHAK
VMW

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If I apply the 1-week buffer criteria and not give much credence to dividends (at your own risk, of course), my list then becomes:

 AMAT
ZTS
DLTR
SQ
WB
AMRN
SHAK
VMW
TOL
ADBE
FDX
NAV
RHT
UNH
BK
KSU
AMTD
NFLX
WYNN
VZ
SWK
URI
FCX
UNP
ITB

This particular list has ER AFTER 2/9 and you'll have to screen for  xDiv and record dates.

A good place to screen for dividend dates is  http://www.nasdaq.com/symbol/cboe/dividend-history

Out of this list only five strikes for CSPs appear that look somewhat probable, but I need to do more work later today to see if I'm going to enter these:

SQ 180202P45
WYNN 180202P175
VMW 180202P145
WB 180202P130
ZTS 180202P80

If I take a look at 2/9 expirations, again, ensuring that the ERs are all beyond 2/16, I have the following possible CSP candidates:

WYNN 180209P175
SQ 180209P45
EXAS 180209P48
FCX 180209P19
WB 180209P130
VMW 180209P145
URI 180209P180
MU 180209P41
RHT 180209P130
NFLX 180209P260
NAV 180209P45

These are listed in annualized rate of return relative to possible premium at the strike.  Actual premium will not be determined until after the open, and the spreads on some of these are misleading.

I note that URI and NAV both have underlying IVRank that is much lower than I like, so I probably will remove these.  I calculate everything else above IVR > 50

I'm sure there are other strikes to consider but these are my weekly CSP lists into Monday.  I always start with CSPs, and then if assigned, sell against the CC until it's called away.

Make it a great weekend.

Paul

Sunday, February 19, 2017

Putting the GGT *Files* on Ice, Effective Feb 21st

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Good evening all,

After considerable thought and going back-and-forth I have decided to put the GGT Stock files, as published to the Dropbox share folder that many of you have graciously downloaded, on hold for the foreseeable future.  The rationale has nothing to do with GGT -- I use the system with one of my accounts, but it has everything to do with the cost of the data service, which is up for renewal on the 24th of February.

Through a convoluted "how did I get here" process I use the database created by HGSI -- High Growth Stock Investor ( http://www.highgrowthstock.com/ ) as the data source for generating the nightly stock file updates.  I also use the same database with my EdgeRater software ( http://www.edgerater.com/ ).  The Metastock export function of HGSI generates the necessary files that I use for GGT, or Edgerater accesses the database directly.  Advantages to using HGSI over Yahoo are numerous:

  • Price Accuracy
  • Volume Accuracy
  • Data does not "move", e.g., it is not corrected later
The downside of HGSI/Metastock is that I'm looking at $700 for a renewal.  For a program as powerful as HGSI but one that I use a fraction of the power, this is a sunk cost that I feel is not easily recoverable.

So, if you want to use GGT methods you'll have to rely on my TradeStation ELD.  If you are not a TradeStation user I can't help you, as I've not written the software for any other trading platform.

Contact me directly if you want to continue to use GGT within TradeStation.  You'll need to maintain a Dropbox folder, as I publish coefficients to files that TradeStation will need to correctly calculate the buy/sell/hold recommendations.

Sorry for this, but I can do what I need to do within TradeStation and not have to rely on HGSI.  The file system will update with Friday's file (2/17) and I'll leave it there for a few weeks; then it will be cleaned out.

Thanks,

Paul

Friday, February 10, 2017

General Update as of Friday, February 10th, 2017

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General Update as of Friday, February 10th, 2017

I have another blog running with daily entries as I post, in real-time, my performance with my optimized Connors' strategies.  I simply do not have enough bandwidth to support this blog (Trading the Greek Gods) while I'm still getting that blog and process of data entry stabilized.  It's one thing to trade a strategy and record the transactions; it's another thing to make sure errors are minimized when the public is reviewing and following your strategy.

Posts here will be infrequent while my attention is on the other blog.

The Connors Forward Test blog page is https://fwdtest.blogspot.com/

You'll need to subscribe to that blog once you land on that page.  It is best if you subscribe from a computer browser rather than mobile browser, but both will work.

Thanks for your support!

Paul

Friday, January 27, 2017

I've been on Hiatus; Getting back in the Saddle

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Thanks all for the notes of interest on the blog, signals, and my lack of writing.

As many of you know, November/December/January have been very busy months for my family.  My older son recently competed in the Junior Diving World Championships in Kazan, Russia, and that took me there for a couple of weeks.  My wife's travel schedule in December, shortly after my return from Russia, further complicated available time, and then of course, the holidays were what they were.

I'm getting back into the swing of things and will be holding an online meeting on Saturday, January 28th, from 10:30 until (probably) around 1 pm ET.  

I will be discussing some of my findings of Connor's strategies, specifically from his work that he did in 2009 from "High Probability ETF Trading".  I have brought the strategies forward and have tested them, with extensive modifications to moving averages and thresholds, and will be presenting those findings.  While not earth-shattering, I'll present information on how to use 4 of the tested strategies in combination to obtain 5% - 19% annualized with better than 70% chance of the trade working for you.

I have set up a GoToMeeting link.  Here is the conference line:

https://global.gotomeeting.com/join/753850757

You can also dial in using your phone. 
United States: +1 (267) 507-0007 
Access Code: 753-850-757 

Tomorrow's meeting will start at 10:30 a.m. ET, to give a few folks in other time zones the ability to not have to roll out of bed too early.

The GoTo Meeting session will be limited to the first 25 people who log in, as that is the size of my account.

I will have a streaming connection running today (Friday) that you can check your hardware setup.  Click the link after 12:00 p.m. ET Friday and check that your computer is working.  I will display a TradeStation screen or something equivalent.  You should hear music in the background and you can say something if you want -- if I'm in the room I'll hear it.

See you Saturday.

Regards,

Paul



Monday, November 7, 2016

Not taking the bounce today (Monday, Nov 7)

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The news over the weekend has created a large jump upward in futures, indicating that we will rocket upwards today.

Perhaps.

I am nearly 100% in cash right now, and intend to stay there.  I do not intend to buy any CC's or NPs, even though we are at a possible turning point.

The following figure shows that we have some repair to go through before I will start buying:

Click on the image to enlarge.

The top row of plots are daily 52-week new highs (green), 52-week new lows (red), and their net (yellow).  Any time red is over green is a bad sign for buying, as more stocks are hitting lows than highs.

I like to put my money to work in expanding markets, not contracting.

The middle row of plots are daily indications of algorithmic buying.  The number resets daily.  When the red line is above the blue line, more than 500 stocks per minute are ending on an up-tick, meaning that supply is getting more scarce, driving prices upward.  You see the converse above -- supply is becoming more plentiful, driving prices downward.  When we see the afternoons selling off and effectively moving negative, then more people (and algos) are unloading so that they do not have to carry their trades over night.  Now, there is obviously a buyer on the other side of these trades, but the presentation shows that the tick is DOWN after the trade, which means there were more bottom fishers waiting and prices were lower.

When I see the trace heading lower I simply refrain from buying en masse.

The bottom plot is the cumulative tick, and it is a running accumulator that stretches back to 2011 and it shows minute-over-minute net of buying and selling.  When the white trace, which is the real-time CT, is below all of the lines (like now), it means that not only is selling dominating, it is doing so consistently, day-over-day.  The solid red line that you see also shows a negative slope, and historically, this is my threshold.  If that line is pointing down I do not enter the markets on a broad scale.

While I have a few trial balloons waiting to enter the market in my Greenfield Dividends portfolio, for the most part I nearly 100% in cash.

If the presentation or my stance changes in a notable manner I will post an update here.

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Make sure you vote Tuesday if you have not.  As a veteran, we signed a pledge to give our lives so that you have that right.  The least you can do is take the time to exercise that right in accordance with your beliefs.

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As with all my ramblings, you are responsible for your own investment decisions and I am not.  Please do your own diligence, and please take ownership for your actions.

Regards,

pgd