April 29, 2013

Markets advance, wrote EXC call

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Equity markets continued to advance today, reaching a 52 week high.  With that, I sought to trim my long exposure in a prudent manner and  did so by writing a call option on EXC.

I purchased shares of Exelon, a major US utility company, multiple times over the past few years.  Last fall, shares tumbled when the company cut its dividend from an unsustainable 5-7% to a more reasonable 3-5% today.  EXC  participated with the market’s recent advance, most likely as investors chase yield.

Specifically, I sold one call option on EXC at $39, expiring in October.  In this transaction, I too gathered some yield.  By selling the call, I generated 1.8% yield over the next six months.  Annually, the stock yields 3.3% and this layers on another 3.6%, which accumulates nicely for a position that I’m likely to continue to hold through the rest of the year.

Keeping score thus far…

Date Stock Action Shares Price Amount
1/25/2010 EXC buy 30 46.14  $ (1,391.20)
3/10/2010 EXC dividend 30 0.525  $      15.75
6/10/2010 EXC dividend 30 0.525  $      15.75
9/10/2010 EXC dividend 30 0.525  $      15.75
12/10/2010 EXC dividend 30 0.525  $      15.75
3/10/2011 EXC dividend 30 0.525  $      15.75
6/10/2011 EXC dividend 30 0.525  $      15.75
9/10/2011 EXC dividend 30 0.525  $      15.75
12/9/2011 EXC dividend 30 0.525  $      15.75
3/5/2012 EXC buy 70 38.65  $ (2,712.50)
3/10/2012 EXC dividend 30 0.525  $      15.75
4/12/2012 EXC dividend 100 0.14575  $      14.58
6/8/2012 EXC dividend 100 0.37925  $      37.93
6/22/2012 EXC buy 50 36.75  $ (1,844.50)
9/10/2012 EXC dividend 150 0.525  $      78.75
12/10/2012 EXC dividend 150 0.525  $      78.75
3/8/2013 EXC dividend 150 0.525  $      78.75
4/29/2013 EXC wrote call -1 0.75  $      66.75
Current value EXC wrote call -1 0.76  $     (76.00)
Current value EXC 150  $  5,667.00
 $     140.06
 

April 10, 2013

Markets Advance, Trimmed Equities, Sold VIAB

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Last week, I argued that equities continued to look overvalued and consequently sold my stake in Novartis NVS.  Since then, the market has advanced another 2% higher over the past five trading days, and I continue to believe that the current valuation is unsustainable.

Consider…

From a P/E perspective, the Shiller PE ratio, the ratio that averages the previous ten years to account for economic cycles, is 24, whereas a more attractive P/E multiple would be 12-15.  Of equal concern is the abnormally high level of corporate profit margins.  Whereas profit margins typically range from 5.5-7.5% of GDP, profit margins now exceed 10.5%.  A decline in corporate profits will be the likely outcome.  Since the timing of both of these is uncertain, my tactical movements remain tempered–as the data and facts evolve, so too do my opinions.

Sold Viacom

spongebobTo trim my equity position, I sold my stake in Viacom VIAB.  I originally purchased Viacom back in November, arguing that its content investments were not yet reflected by ratings increases, which drive revenue and ultimately shareholder appreciation.  This decision turned out well, netting me a 32% gain in less than six months.

11/20/2012 VIAB long 50 49.91  $   (2,502.50)
12/31/2012 VIAB dividend 50 0.275  $         13.75
4/1/2013 VIAB dividend 50 0.275  $         13.75
4/10/2013 VIAB sold 50 65.55  $    3,270.42
 $       795.42

With the recent equity sales of Novartis and Viacom, cash is now one of my biggest positions.  If equities continue to advance, I have additional positions that I can prune.  Other choices include writing covered calls and buying market puts.

 

April 3, 2013

Sold NVS

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As stocks advance higher, I continue to believe that the US equity market is overvalued.  From a portfolio perspective in this environment, I seek to maintain zero beta exposure (market risk) by keeping my exposure to long positions in line with exposure to short positions.  Recently, my long positions have grown, and I today I trimmed this by selling my final stake in Novartis (NVS) at $71.92.

Buy Low, Sell High Part 3

I originally purchased Novartis for $53.10 back in July 2007.  Since then, I added to the position on dips (from $41-$50) and trimmed the position on advances (from $49-$72).  All the while, I collected roughly a 3.5-5% dividend each year.

Having started ReasonablyThinking in June 2009, the first time I tactically traded NVS was in September 2009.  Then, my goal was to shield taxes by moving the exposure from a taxable trading account to a tax-deferred account.  I conducted this by tactically adding shares to the tax-deferred account while selling shares in the taxable account.  It worked.

I continued to hold the position for three years before further trimming my position again last fall, at $62 per share.  Seven months later and ten dollars per share more, I’m happy to end my ride on top.

NVS Part 3

 

March 14, 2013

Bought Insurance

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The markets have continued to advance in recent weeks, and my SPY $146 put will likely expire worthless tomorrow.  To maintain exposure, I purchased another SPY put, with a strike price of $155, which expires in December.  I paid $8.32 for the position.

 

February 26, 2013

Gold Momentum Trade

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swingI expanded my skill-set today by executing a swing trade, which is nomenclature for trading on momentum.  I shorted 1 gold futures contract for April (QOJ13) and bought it back later in the day.

Keeping score:

Sold 1 QOJ13 @ $1,591.50

Bought 1 QOJ13 @ $1,587.50

Gross Profit net of fees:  $191.46

 

February 19, 2013

Sold Berkshire Hathaway

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BuffettWith the market continuing to rally, and a lot of economic news coming out this week (FOMC, leading indicators, fed speakers, CPI, PMI), I was willing to part with a long position in the portfolio.  Today,  I sold my 25 shares of Berkshire Hathaway BRK.B.  I originally purchased Berkshire back in April 2012 at $80; today, I sold it for $100.

I originally purchased Berkshire knowing that Buffet would keep a floor under the stock in the $70-75 price area.  I was hoping it went lower so that I could sell puts to fund the long position, but I never got the chance.  Instead, I’m still pleased to take a nice 25% profit here in less than a year.

Keeping score:

4/30/2012 BRK.B long 25 80.49  $ (2,019.25)
2/19/2013 BRK.B sold 25 100.80  $  2,512.94
 $     493.69
 

February 17, 2013

China notes

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I found this CNBC clip on China interesting

  • China exports does not match other countries imports from China
  • Low cargo data does not align with export data
  • Electricity usage, manufacturing data, price indices, and corporate results point to a 4% growth rate
 

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