The Saturday Investor’s Review – Aug 4 2018

The Saturday Investor's Review

S&P Closed Up Every Week Of July

This past week the S&P ended the week up 21.53 points ending the day at $2840.35 on Friday. The S&P is once again within easy striking distance of making a new all-time high, probably next week.

SPY ETF Trade Ahead Of Jobs Numbers

My SPY ETF Trade ahead of the jobs report is up following Friday’s rally and I expect better returns next week. Since introducing this strategy in 2008 every jobs report entered, has been profitable. That’s quite a record.

NASDAQ Rebound

The NASDAQ recovered from two weeks of moving lower and managed to end the week up 74.60 points to close at $7812.02, just 122 points away from the all-time high. Next week looks like it might be time to buy the TQQQ ETF once again.

The Stock Market Analysts Hate

The market that analysts continue to hate is holding on despite tariffs, threats of global trade war, the rising dollar, rising bond yields and rising interest rates.  This week saw Apple Stock become the first US listed corporation to reach a $1 Trillion market value.


Weekend Investing Strategy Reading List

Saturday’s are a chance to relax, kick back and review some strategy articles to work toward becoming a better investors. Here are some strategy articles from the archives that are worth a refresher.


These articles are open to all investors not just members. 

1) The Strategy Of Rolling Covered Calls Down

This article is open to all investors. This article from 2011 looks at a strategy of rolling covered calls lower to continue to earn income while a stock is in decline. This type of strategy would be handy for Molson Coors Brewing Stock (TAP) for example, which collapsed a couple months back and has been stuck in a lower trading range for some time.

This article looks at Caterpillar during the market collapse of 2008.


1) Understanding Daily Volume and Price

Here’s another strategy article open to all investors. One of the more important aspects of investing in equities is understanding the combination of Daily Volume and Price. These two when combined can be powerful tools that can tell investors everything from entering a trade and exiting a trade to when to place stops or even when to drop a stock from a watch list.

Volume is the heart of stock market investing. One of the most interesting aspects of Volume is doing a quick daily review to see changes within volume. Investors often ask how they can tell if a stock is under buying or selling pressure daily. When a stock trades, for every seller there is a buyer and vice versa. The price movement in a stock combined with candlesticks is the way in which investors can determine daily buying and/or selling pressure. The close at the day is always marked by a candlestick which also indicates buying and selling pressure in a stock. The volume indicators during the day and at the close of the day are the keys to understanding buying and selling strategies based on volume.

This strategy article from March 2013, uses a Canadian Bank stock, Bank of Nova Scotia (BNS) which trades on both New York and Toronto.


These articles are for members only.

1) Rolling Down Put Options Using History As A Guide

This article for members might have been handy for a few investors in the month of July as a number of stocks collapsed leaving some investors holding deep in-the-money short put options.

The article is from March 2013 and looks at an example in Aflac Stock and how by studying the history of a stock, an investor can gain some insight into how to structure a potential repair through rolling short put options lower and out further in time.


2) Buying To Close Naked Puts Early Makes Cents

Another article for members from 2013 looks at the strategy of not letting short put positions expire, but closing them early to lock in profits and return capital for more trades. The stock reviewed in McDonalds Stock (MCD) from 2013.


 

3) Understanding Risk and Return On Selling Short-term or Long-term Options

The last article for your weekend review is for members. When volatility drops such as we saw in 2017 and recently this past week, option premiums become smaller on many stocks. This becomes a problem for investors who sell options for income. The temptation is to either move higher, which means selling options closer to where a stock is trading, or to move a lot further out in time, such as 5 or 6 months or even longer. The farther an expiry is, the higher the option premiums will be.

This article from February 2014 was prompted by an investor on my Yahoo options forum, wondering why those who sell put strikes would choose what looks like a riskier put strike that expires in two weeks versus selecting a further out of the money put strike which pays more and has over two months to expiry. It would appear that the less riskier trade is taking the two month out trade. The answer though comes down to understanding risk to capital versus the reward to a portfolio.




Enjoy the rest of the weekend. I will be writing more this weekend so come back and check early evening.


 

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