Buzz's Buzz History for 2008

2008   2009   2010

December 26, 2008

In my December 7 BUZZ, I said I would review how our November Aggressive and Conservative "Stocks-to-Consider" lists did at expiration  weekend in December (see below). Well, I went back and checked what the difference would have been with these lists if we had not sold the call contracts and just let the stocks themselves run. The returns are impressive. If you had bought all the stocks on the lists and sold no calls, the Aggressive list would have been up 46.9% on December 20. The range of returns for the Aggressive list was -15.4% (we had to exercise the get-out price on one stock) to 116.4% (four stocks more than doubled). The Conservative list would have been up 26.2% on December 20. The range of returns for the Conservative list was -5.6% to 101.3% (two stocks more than doubled). These returns are almost enough to pull most portfolios out of the losses incurred in the crash of 2008. Since our strategy is to sell covered calls (for insurance, as indicated below) our Aggressive list was up 32.0% and the Conservative list was up 25.8% since many stocks got called. Not as good as letting the stocks run, but I'll take the returns and the insurance. These lists will be closed out on January 17, 2009. The movement of the markets during this same time period (November 22 to December 20, 2008) was DOW up 6.6%, NASDAQ up 13.0% and S&P500 up 11.0%. In either case, this demonstrates that the Analyzer knows how to find good performing stocks.

December 21, 2008

We have posted our results and new buy/writes this weekend for our subscribers. The new buy/writes will run until January 17, 2009 when all our lists and portfolios will be closed out. I will review 2008 then. This weekend we were able to take advantage of a month of upward movement in the markets. Although choppy, the market average was up 11.0% since November 22. All of our lists did much better in that time (19.1% to 32.0% - see table). Our $100K Retirement Portfolio, which has run all year, improved from (22.1%) to (11.8%) since November 22. Our $10K Aggressive Portfolio, which has run all year, improved from (26.1%) to (8.1%) since November 22. For the year, the markets are down and average of (38.6%). We expect the portfolios to improve between now and January 17 and we should close the year near breakeven. We are in an interesting time for the Analyzer. You will note that buy/writes found by the Analyzer for our conservative lists and portfolios ($!00K Retirement Portfolio and Conservative "Stocks-to-Consider" lists), generally have lower premiums and farther our strike prices. The Analyzer calculates the return if the stock is called by recognizing the premium PLUS the appreciation of the stock price to the strike price. Big returns with low premiums implies that some professionals think the stock price will run up a lot before expiration. For our Aggressive portfolios and lists ($10K Aggressive Portfolio and Aggressive "Stocks-to-Consider" lists) we go for the big bucks up front and select those buy/writes that have the highest premiums when running the Analyzer for stocks with "hi PE or no warnings". Frankly, I don't know which way the markets are going next year. If you have a "feeling" one way or the other, you can use the Analyzer to help in your investment strategy. If you think the market is going up - go conservative. If you think the market is going down, go big bucks premiums.

December 17, 2008

The last expiration weekend of 2008 is just a few days away.  Indications are that Friday will be busy with volatility rising sharply as mutual funds, hedge funds and big time traders unwind their positions to attempt to show better end of year results. We hope to be able to take advantage of this action by using cash generated by called stock (every stock in the $100,000 portfolio is above the strike price today), write new positions and take advantage of good call premiums. We will not close out our positions for the $10,000 Aggressive and $100,000 Retirement Portfolios until the January 2009 expiration, since we will place call contracts on all our December 2008 positions. We hope to see a double whammy - high premiums and recovering stock prices into January.

December 13, 2008

Next week is expiration (December 20) and we will be happy to see it come. We will make one more set of trades in 2008 that will expire on expiration weekend on January 17, 2009. You will not see much change in the percentages for our lists and portfolios this week (watch our table to the right) because most of our positions are above the strike price and are maxed out. This is a good thing, but doesn't provide much excitement. Even if the markets experience continued volatility  this week, our positions are pretty well locked in. But next weekend we will be cashed out of the "above strike price" positions and can execute new buy/writes that should add cash to our positions in the form of call premiums. Then, if the Analyzer's picks produce the kind of upward movement the November selections produced, we just might pull our $100,000 Retirement and $10,000 Aggressive Portfolios into positive territory for the year. Not bad when the markets' average will be down more than 30%. Remember that we suspended our get-out price (-15%) in September for both lists and portfolios, so we took a bath just like everyone else in that month. Stay tuned. We will be starting new portfolios and lists on January 17, 2009. You may want to subscribe now and get familiar with how the Analyzer works and be prepared to take advantage of a better 2009.

December 7, 2008

I will be happy when this year is over. We can start new portfolios and we expect our lists to look more like our currently opened November lists that are up considerably (see table). They are well above how the markets have performed since November 22, when we opened these lists. I will also be happy to get to the final expiration weekend (December 20) in 2008. We may be able to pull both our $100,000 Retirement and $10,000 Aggressive portfolios to breakeven for the year. We have calls to sell in December and expect the markets to continue to move upward in a choppy rally. If we can take advantage of call premiums and some movement up to the out-of-the-money strike prices for stocks in these portfolios, we may be able to get to even. We will be closing our 2008 portfolios and lists on January 17, 2009, when any January calls, purchased in December, expire.  September Aggressive and Conservative Stocks-to-Consider will remain open into 2009 to see how long it takes for these lists to break even - hopefully before the markets do. Remember we suspended the get-out price in September and these stocks crashed with the markets. We will be replacing called stocks with new buy/writes identified by that Analyzer each month going into 2009. There are a few interesting things that are happening with our recent lists and portfolios. This weekend, twelve of the stocks listed on our November Aggressive Stocks-to-Consider List are above the strike price. None have gone below the get-out price (-15%). This weekend, this list is up 29.2% (see table) since being opened two weeks ago.  If the stock were not encumbered by the strike price, this list would be up 36.2%.  I predict that at the expiration weekend, some of you will say, "Why did we sell calls and lock in a top, rather than just let the stock prices run up?". It's insurance. We didn't know there would be a run-up. We put almost $8,000 of no-risk money in our pockets by selling the calls on those twenty stocks. We will look at the stocks with calls vs. the same stocks without calls on December 20. Either way, the Analyzer found some spectacular stocks that have risen well above the average markets in these last two weeks, with or without calls written on them.

December 2, 2008

It's a traders market. Every run-up is followed by profit taking. We saw a huge selloff yesterday that was supposed to be tied to bad news - that we have been in a recession since last year. This is earthshaking new news??? A lot of the selloff what just plain profit taking. Volatility is high and traders can make money on up and down trades if the volatility is high. We need to be prepared for a continuing of these daily volatile up and down moves for the foreseeable future. We can hope call premiums remain high and that we can take advantage of them.

November 25, 2008

If you had written buy/writes on all twenty (20) of those listed in our latest Aggressive Stocks-to-Consider list (published four days ago on November 22), you would be up almost 30% right now. See table at right. You may say, "Well sure, the Markets have been up three straight days". True, but by only 6.1% on average. The individual returns for each position, including the received call premium, range from a low of 5.2% to a high of 54.6%. Fifteen of the twenty positions are up over 20% today. This is an aggressive list and is expected to make big moves. Our Conservative list is up 21.5%, well above the market's average. What this means is that the Analyzer can find those buy/writes that should do better than the markets. Our two portfolios, started in January 2008, are negative, but not near where the markets are year to date, meaning that the Analyzer can also blunt the effects in downward markets. We will have our last look at our portfolios on January 17. 2009 (expiration weekend).  We will make new buy/writes and sell calls on stock that remains in the portfolios on December 20 (expiration weekend) one last time. Both portfolio will be closed/sold out at the January 2009 expiration, and new portfolios will begin for 2009.

November 24, 2008

The DOW was up 397 points today, or 4.9%. Our preferred measure, the S&P500, was up 6.5%. I did not publish an expiration weekend Buzz  yesterday because I wanted to see what happened today, the Monday after expiration and after we published out new lists and portfolios. It was worth the wait.  Our September list of Aggressive Stocks-to-Consider is coming back nicely since it open on September 20 and has remained open since the crash without any exercising of the get-out price. It is now down 26.5% vs. the market average which is down 31.1% since September 20. Our September Conservative list still lags the market average since the crash, but it is coming back faster than the markets. Our $100,000 Retirement and $10,000 Aggressive portfolios have move up sharply today. Since Friday, the market average jumped 5.9%, but our new November lists (Aggressive, Conservative and ETFs)  jumped double digits. The percentages are presented in the table at the right. There have been two consecutive days with good upward movement in the markets. Two things should be considered. First, we might be seeing the beginning of and upward trend after after bouncing along a bottom for several weeks. Second, the Analyzer selections are demonstrating greater upward movement than the markets because better stocks are being identified; ones that should do better than the averages. Both bode well for our lists and portfolios going forward. Five (5) stocks in our $100,000 Retirement portfolio and three (3) stocks in our $10,000 Aggressive portfolio moved above their strike prices today. That's just what we want to see happen.

November 20, 2008

I don't like the daily announcement that the DOW dropped so many points. It's not points that count, it's percentages. Today the DOW dropped 445 points or -5.6%. Back on October 15, the DOW dropped 743 points, only -3.7%. What matters is where you are on the chart. Percentages also tell us what has to happen to get back to where we were. As you can see from the above table, the DOW is down 43.1% since the beginning of the year. In order to get that back, the DOW has to rise 75.6%. Every dollar we can eek out of call premiums will help us dig out faster. You can see the effect of the call premiums in our portfolios and lists above. They are all down but not nearly as far down as the markets. Even though the DOW gets all the press, I like the S&P 500 because it represents a bigger basket of a wider variety of companies. This weekend is expiration and we expect to see a jump in our lists and portfolios as we sell more calls with very high premiums. A lot of traders think that when the turn comes it will be dramatic and they will make a lot of money with the calls they have bought. We will just keep taking advantage of that. Another aspect of our strategy is that it is like "dollar averaging". When the markets start moving up, we will get called away (even at overall losses because we have lowered the strike prices on many of our positions. But this will generate cash each month that will permit the purchase of new positions with lower basis points that probably won't get taken out by our get-out price. Almost all of our October positions have been taken out by the get-out price. The difference in the list returns (above) and the Markets is call premium. Remember, that we are keeping our September Aggressive and Conservative lists open since we suspended the get-out rule for these lists, during the crash, to allow us to see how long they take to recover vs. the Markets. We will see what the future holds for the Analyzer.

November 7, 2008

The markets continued lower this week and still seem to be testing lows. Our portfolios are doing well for the year when compared to what the markets have done. The lists are hanging in but bouncing with the market levels since they were opened within the last two months.. Many analysts have been suggesting that investors "take some money off the table" during these periods. The professional traders are continuing to churn the markets by "taking profits when the market goes up one day, creating a volatile down the next day. The Analyzer strategy allows us to review our positions each month at expiration weekend an have the opportunity to replace stocks that were called or sold because they hit the get-out price. This is similar to what the analysts are suggesting (take some money off the table) and the traders are doing (take profits). The advantage of getting out of some stocks each month (get-out or called) allows the recycling of money which is very similar to what the analysts and traders are suggesting or doing to dig out of the crash. With premiums for calls high due to volatility, we will continue to take advantage of the Analyzer strategy on expiration weekend, November 22.

November 2, 2008

The markets started to show some life last week, but is it sustainable? I don't think anybody knows. Tuesdays upcoming election could cause some major movement. As you can see from the table above, we have changed the presentation for our portfolios, which have been running since the beginning if 2008 and our lists, that generally run for two months and are then closed out. Thanks to the build-up of premium income in the portfolios ($100,000 Retirement and $10,000 Aggressive), both are in pretty good shape. The $10,000 Aggressive portfolio is actually up over 5% this weekend, while all the markets are down 30% or more. Those investors who have stock portfolios and don't use covered calls, could have seen their values drop commensurate with the markets. We have two more months to sell calls on November and December expiration weekends that should help improve our portfolio performance as we head to the end of the year. Our September lists were hit particularly hard.  If you remember, we suspended out get-out price during this period and rode the stocks down. The September Aggressive Stocks-to-Consider list is currently down (8.3%) and the September Conservative Stocks-to-Consider list is down (27.1%). From September 18 (expiration weekend when these lists were started), the markets are down too - Dow (15.4%), NASDAQ (21.7%), and S&P (19.7%)). We are going to keep our September lists open indefinitely and see if we can dig these lists out of the negative numbers more quickly than the markets by selling out-of-the-money calls on the next few expiration weekends, rather than closing them out in November.  Our Aggressive list is already well ahead of the markets in recovering, but still down (8.3%). We will periodically show our progress in the table above.

October 24, 2008

It looks like we are finally in a recession. I started talking about recession back on February 16, 2008 when I said "Politicians, media and the general public are saying “we are in a recession”. But we weren't. The last time I mentioned recession was on August 2, 2008 saying we were still not in a recession, even though the media had changed their phrasing to "it sure feels like a recession. The next two quarters will have a negative GDP and there may be several more after that. It will make investing and making money very difficult. I want to differentiate between our lists and portfolios in this Buzz. The lists are published "as new" each month on expiration weekend. The Aggressive Stocks-to-Consider list contains 20 buy/writes identified by the Analyzer using our default parameters and $5,000 as money available for each stock purchased, and selecting "Include Stock/Call Combinations with hi PE or negative earnings". We then select the 20 that have the highest dollar incomes from the sale of the calls. The Conservative Stocks-to-Consider list contains 20 buy/writes identified by the Analyzer using our default parameters and $5,000 as money available for each stock purchased, and clicking on "Analyze These Stock/Call Combinations". We then select the top 20 the Analyzer lists. The ETFs-to-Consider list contains 10 buy/writes identified by the Analyzer using our default parameters and $10,000 as money available for each ETF purchased, and clicking on "Analyze These ETF/Call Combinations". We then select 10 buy/writes from the Analyzer lists that represents a variety of ETFs. All three of these lists are monitored for only two months. On the second expiration weekend, we identify which stocks/ETFs were called, sold at the get-out price or more calls sold if the stock/ETF did not get called. On the next expiration weekend, all positions are called. The final values at the end of the two months are shown on our results pages. These results represent only two months of "holding". The $100,000 Retirement and $10,000 Aggressive Portfolios are started at the beginning of the year and are monitored each month. Each month's activity of stocks called, sold at the get-out price or retained in the portfolio and more calls sold are explained. Money from sold stocks is reinvested into the portfolio. Subscribers beginning their portfolios during the year can use our free Analyzer spread sheet to keep track of their portfolios.

October 20, 2008

What a difference a weekend makes. The DOW rose 413 points today and really helped all of our lists and portfolios. Here is what happened in one weekend. Our September lists, which were under a suspension of the get-out rule and all buy/writes remained open, improved even though the numbers are still brutal. The September Aggressive Stocks-to-Consider list went from (9.0%) on Friday to (7.2%) today. The September Conservative Stocks-to-Consider list went from (29.9%) on Friday to (26.1%) today. An incremental move for both. Our new lists and portfolios, opened this weekend, did much better. The October Aggressive Stocks-to-Consider list went from +8.0% on Friday to +15.2% today. The October Conservative Stocks-to-Consider list went from +4.7% on Friday to +13.2% today. The October $100,000 Retirement Portfolio went from (5.2%) on Friday to (0.4%) today. The October $10,000 Aggressive Portfolio went from +11.1% on Friday to +15.1% today. The October ETFs-to-Consider list went from +5.0% on Friday to +9.2% today. We expect the markets to remain choppy and volatility to remain high in the next few weeks, but the trend should be up. A few more days like today and we will be happy. Note that the Analyzer is finding stocks that do better than the market averages on up days and decrease less than the market averages on down days.

October 18, 2008

We can put August and September behind us. The "crash" caused our three "to-Consider" lists to take big hits, but not as bad as the markets in general. Our two portfolios ($100,000 Retirement and $10,000 Aggressive) held up pretty well, with our $10K portfolio currently up 11% since the beginning of the year. Our Conservative list and Retirement portfolio did worse than our Aggressive list and Aggressive portfolio. A look at the stocks in each identifies why that happened. Profitless airlines played a major roll in keeping the Aggressive list afloat as dropping oil prices boosted airline stock prices. Our Conservative list ( and the $100,000 Retirement Portfolio contained profit making energy and commodity related stocks and one profitable airline. We start this month on expiration weekend with new "to-Consider" lists that are all green because we have applied the call premium to the current value. Premiums are very high right now because of volatility. We got an 8% premium on the Aggressive Stocks-to-Consider. A few years ago, getting 4% was considered good. We expect the markets to be near the bottom and anticipate some bouncing along the bottom. There will have to be some testing of the lows,  but we don't anticipate another precipitous drop. Therefore, we are reinstating our get-out rule at -15% starting October 18. Positions that remain open from before October 18 are not affected by the rule and are currently way below the -15% level. We hope to see them recover somewhat. We were able to add some nice call premiums at their current level. That implies that some people out there think these stocks are going up in the next month.

October 13, 2008

It was a good day. We expect the remainder of the week to be choppy, as we move towards expiration weekend.

Update for today. Applying the same strategy today that we mentioned yesterday of buying next out-of-the money strike price high premium November calls would have improved our $100,000 Retirement portfolio return from (7.8%) to (4.7%). Our $10,000 Aggressive Portfolio would have improved from (2.9%) to +4.0%. Some of the stock prices moved above the next out-of-money strike price, so moved the strike price up and sold the new calls to see what we would get. In some cases, the call premium was higher than what it was Friday after the strike price was moved up today. We have four more days to go before expiration. We still don't know what we will do this weekend but check back with us to see.

October 12, 2008

The numbers above look bad. Our stuff averages (24.8%). The markets are down and average of (37.6%). Both represent change since the beginning of the year, not from the market highs of last October and November (2007) which are much worse for the markets. We have not used out get-out rule throughout the slide. Because the "crash" occurred so rapidly, it may not affect our lists much, because these are lists that we publish and then sell out of within two months. If we sold out our August Aggressive list now, which we will do next week on expiration, the loss would only be (6.7%). This is because many of the positions on that list were called or sold at the -15% get-out price, before the crash. Our August Conservative list would be down (8.9%) and the August ETF list would be down (7.2%). Our portfolios will take a lot more work to recover, but they are not down as much as the markets. What will work for us going forward, is that our portfolios get a cash injection each month on expiration weekend with the sale of calls. Or we can sell losers and buy another stock that has a very good premium on its calls. Premiums are very high right now. If we sold November calls for the next out-of-the-money strike price, on all our "tanked" stocks that we have held on to, the $100,000 Retirement Portfolio loss would be halved from (14.9%) to (7.8%). Similarly, if we did the same in our $10,000 Aggressive Portfolio, the loss would go from (16.9%) to (2.9%).  We may or may not do this on the weekend of October 18. I think we will see our held stocks actually go up next week and that 8200 on the DOW will serve as a floor from which we will see a rebound. I also think it will be easier climbing out of the crash using covered calls.

October 6, 2008

All our lists and portfolios went red today, but not as bad as the three markets we follow. It was a bad day and it is not clear when the economic crisis is going to be over. In what was called a “dramatic statement,” Jim Cramer emphatically urged any investor who has money they may need in the next five years tied to stocks to pull their dough out. We have continued to suspend our get-out -price rule, but hope our subscribers used their own judgment in determining if they should "pull out". We did not feel it appropriate to recommend a full pull out because if every advisor and analyst suggested that, recent results would have been much worse. We believe that the get-out rule is a must in a stable market, not in very volatility markets, especially when volatility goes over 50. So, we have taken the hit like most and now must live with the results. We will continue to monitor our lists and portfolios and publish the results. We anticipate that there will be a recovery; hopefully not five years like Crammer may have implied. Many of the stocks in our lists and portfolios have very low PEs, good expected earnings and some have dividends over 2%. Investors will look for those kinds of stocks when they begin to commit cash again. We will look at all our position next expiration weekend, but will continue with the suspended get-out rule.

September 30, 2008

I have not wanted to write a Buzz since expiration weekend.  We are continuing to suspend our get-out price rule. Volatility spiked to over 45 yesterday on the failure to pass the "bailout" (bad word) plan. Now the plan is referred to as the "economic recovery" (better words) plan. Yesterday there was a lot of temptation to sell out everything, but that would only lock in very big losses.  We feel that the government will either pass a plan or the market will work itself out of the hole it has put itself into. Today the market responded to the "hope" that Congress will try another vote on Thursday. That hope resulted in a 485 point jump in the DOW. If we had published our results (box above) yesterday, the numbers would have been terrible. Waiting one day allowed our $100,000 Retirement and $10,000 Aggressive portfolios to continue to look good in this volatile time. Our three lists (Aggressive and Conservative Stocks-to-Consider and ETFs-to-Consider) published on September 20 are getting hit very hard but not as hard as the markets. We will continue to hold these positions as long as the volatility remains high. Maybe by next expiration (October 18), we will be recovering from this mess, as capital starts to flow again.

September 22, 2008

We are continuing to suspend our get-out price rule. Volatility will probably continue through Congress's debate on the "plan" to save everybody. That could take up to two weeks, but Congress wants to adjourn by October so they can go home and campaign to keep their jobs. This past weekend was expiration and we updated our lists and portfolios. Today the markets started out very weak and it is unlikely that our subscribers who selected buy/writes from our updates got the actual stock and call prices that were listed. We run the Analyzer on expiration weekend and use the prices as of the close on Friday. So how do you get in on a Monday when things start out going South? You could just wait a couple of days and then run the Analyzer to make your own selections. Or you could put your trades in at the market price on Monday morning and and see what you get. This may sound crazy but let's look at what might have happened. HUN was the first listing on our Aggressive Stocks-to-Consider list. If we assume we got in at the low of the day ($9.81) and sold the $15.00 call at the low of the day ($0.95), the real return would be 61%. The real return for the weekend listing of HUN would be 46%. Granted, the stock price would have to rise more to get the $15.00 strike price, but in this volatility, it could easily happen. Looking at the first buy/write for each of the other lists and portfolios would have produced the following:

Conservative Stocks-to-Consider     CAL        Using Friday's close: 28%  Using Monday's lows: 40%

Retirement Portfolio CAL was first)   EJ           Using Friday's close: 13%  Using Monday's lows: 18%

10K Aggressive Portfolio                   UAUA     Using Friday's close: 28%  Using Monday's lows: 49%

ETF List                                                SRS        Using Friday's close: 40%  Using Monday's lows: 41% the call premium went up to $3.00

We don't know what will happen these volatile times but the Analyzer is programmed to find good buy/writes and since stock and call prices move in tandem, the returns should be good even if the stock price goes down on Monday. We will report on these Monday purchases on October 18, the next expiration.

September 15, 2008

We have once again suspended our get-out price rule. The volatility is just to violent. This probably doesn't sound good to some investors, but our lists and portfolios have not been hit as hard as the general markets that today dropped significantly - down about 18% since the beginning of the year. Our three lists have been hit the hardest since they represent buy/writes suggested by the Analyzer just last month (August 16). Since that time, the markets are down 6.4% (DOW), 11.1% (NASDAQ) and 8.1% (S&P). Our August 16 Aggressive list of 20 buy/writes is down 5.2%. In this list, three of the stock prices are above the strike price today. We have exercised our get-out price (-15%) on 13 of the list, and have suspended the get-out price on the remaining four. If we had not exercised the 13 get-out prices when they hit -15%, this list would be down 10.1%, not quite as bad as the NASDAQ but still pretty bad. Remember this is an "aggressive" list. Our August 16 Conservative list of 20 buy/writes is down 3.0%. Three of the stock prices are above the strike price today. We have exercised our get-out price (-15%) on 7 of the list, and have suspended the get-out price on the remaining ten, although most of these 10 are well above -15%. If we had not exercised the 7 get-out prices when they hit -15%, this list would be down 8.1%, the same as the S&P. This is a "conservative" list. Our portfolios are hanging in there in positive territory because we are enjoying the rolling effect of the portfolios since the beginning of the year and the call premiums have added up over the months to cushion the recent drops. This may not be solace to some of you, but think of those investors who are just riding the downward spiral and waiting for the "upturn".

September 6, 2008

All of the markets dipped to their lowest level so far this year (see above), all down about 15%. Volatility has been brutal for the last few weeks, leading to vulnerability for many investors. Once again this emphasizes the need for a get-out price. In these kinds of volatility swings, dropping stocks tend to drop more before they come back. Maintaining the attitude that "It can't drop much more" or "It will eventually come back" makes the investor vulnerable to bigger losses. Some may say that all (4) of the Airlines that were listed on the August Aggressive Stocks-to-Consider dipped below their -15% get-out price (and we got out). These airline stocks have since recovered to above their get-out prices. The airlines are living at the whim (defined volatility) of oil prices. The average of the four airline stocks listed remain 7.4% below their purchase price and would have remained a drag on the list average. In our August Conservative Stocks-to-Consider, we have had to get-out of three (3) stocks at -15%. Currently, those stocks are down an average of 19.1%. Besides Volatility and Vulnerability, the investor should consider Selectivity and Security. Proper selectivity leads to security. We feel that the Analyzer provides a good selectivity tool. But that doesn't mean that the investor doesn't need to do their own research of each stock listed and make their selections accordingly. That is why we provide links with every listing to either Yahoo Finance or MSN Finance where you can find much more data than is found on the Analyzer Consider pages. Use them and do your research before selecting them, and improve your own security in the selection.  I remain optimistic.

August 31, 2008

This weekend, the NASDAQ OMX Group, Inc (NDAQ) showed up on the Analyzer. This company defines itself as "The NASDAQ OMX Group, Inc. provides trading, exchange technology, and public company services worldwide. It offers trading across various asset classes, including equities, derivatives, debt, commodities, structured products, and exchange traded funds; capital formation solutions; financial services and exchanges technology; market data products; and financial indexes."  This company provides a lot of services for the "trading" community. Sometimes this kind of company can provide insight into what the the professionals are thinking about the future for the markets. This stock had been dropping from a high of $48.21 on November 6, 2007 to a low of $23.70 on July 10, 2008 (chart). Since then it has risen to $32.69 on last Friday. Sometimes these kinds of service companies can provide a look into the future. This company is what the Analyzer is all about - where are the markets going and how can we take advantage of them. I'm optimistic.

August 23, 2008

Volatility is again creating a problem for investors who maintain a get-out price and stick to it. We have continued to maintaine a -15% get-out price on our lists and portfolios. We have thought about suspending the get-out price or dropping it from -15% to -20%. We did neither and had some stocks sold when they reached the -15% get-out price only to rebound nicely after the sale. We did suspend the get-out rule from January 25 to September 22 in 2007. We did it again in January of this year. You can see by the VIX chart that these suspensions were justified. Since early July, the volatility index has been trending down, so we have continued with the -15% get-out price strategy. If you look at our results pages, you will note that all of our Stocks-to-Consider lists (Aggressive at +10.7%, Conservative at +4.9%  and ETFs at +4.4%) were positive in July. This is the first time since March, 2008 that this has happened and could bode well for the rest of the year. Our stock lists (Aggressive and Conservative) contain a total of five (5) airlines and four (4) financials (out of a total of forty picks). This shift from financials to airlines is obviously driven by the drop in oil prices. However, since publishing these lists last weekend, one airline and one financial dropped below the -15% get-out price and were sold. The airline (LCC) recovered the next day. On the positive side, five (5) of our selections are already above their strike price.

August 9, 2008

Last expiration weekend, July 19, twenty five percent (25%) of the buy/writes found by the Analyzer for the Aggressive and Conservative Stocks-to-Consider lists were financials. Ten (10) out of forty (40) picks were the much maligned financials. Frankly, I was nervous about listing them because we have been burned so badly by the financial in the past several months. However, we have to follow the rules and so the ten got listed. Lets look at each of them and where they are one week before the August expiration (next week). FED is currently over the strike price and up +28.1%. RF is below the strike price but profitable at +0.4%. ACAF is below the strike price but profitable at +7.8%. We had to exercise the get-out price for SFI (-15%),  but because the call premium was so high, we will only loose -5% on this buy/write. If we had not exercised the get-out price, we would be down -6.8% right now. We also had to exercise the get-out price for WNR (-15%),  but because the call premium was so high, we will only loose -7.6% on this buy/write. The price for WNR is te sameas the get-out price right now. CIT is below the strike price but profitable at +10.1%.  SNV is currently over the strike price and up +13.7%.  ZION is currently over the strike price and up +20.0%. ACF is below the strike price but down 4.5%. TCB is below the strike price but profitable at +11.4%. These are pretty good returns on average. So what do I know. I know that it is best to go with the Analyzer.

August 2, 2008

I want to look back in this "Buzz". Back in my February 16, 2008 "Buzz", I talked about recession, and that even though the media was saying that we were in a recession, in fact, we were not. By definition, a recession is two consecutive quarters of negative GDP growth. Congress has tried to get the definition changed to include some "how do people feel" input. I have mentioned "recession" in five other "Buzz's" (see history), and continued to point out that were are not in a recession. For the last quarter of 2007, the GDP was revised down and was a negative 0.2%. The first quarter of 2008 was up 0.9% and the latest quarter was up 1.9%. (chart) We have not been and are not in a recession. My point if that even though "things may feel bad", there are a lot of people out there who are feeling good and are making a lot of money. The trick is to recognize what is happening in this low water mark of the economy. The bottom feeders are usually the biggest fish in the river. History shows that those who do careful selection at the bottom make out the best in the recovery. I'm optimistic. All our lists and portfolios are positive (+3.5 to +16.2%) and all the markets are down (-13.9% average so far this year). The Analyzer is picking good right buy/writes. Our aggressive stocks-to-consider list of twenty buy/writes has had three stocks sold at the get-out price (very important), three are above the strike price, and this list value is up +7.7%. Our conservative stocks-to-consider list of twenty buy/writes has had three stocks sold at the get-out price (very important), two are above the strike price, and this list value is up +3.5%. Our $100,000 Retirement Portfolio has had two stocks sold at the get-out price (very important), one is above the strike price, and this portfolio value is up +7.3%. Our $10,000 Aggressive Portfolio has had two stocks sold at the get-out price (very important), one is above the strike price, and this portfolio value is up +16.2%. Our Exchange Traded Funds (ETF) list of ten buy/writes has had no stocks sold at the get-out price, three are above the strike price, and this list value is up +2.6%. Since July 19 (expiration weekend), when these selections were made the market average is down -0.1%. Money can be made in these "feel bad" times. You just have to think like the big fish.

July 26, 2008

The markets continue to bounce along here. If you look at the charts, all the markets are having wild swings inter-day. But in the one week since posting our last expiration weekend updates (July 19), the average of the three major markets (DOW, NASDAQ and S&P500) is exactly the same as it was one week ago at (13.8%) down for the year. You would think that we've been on a roller-coaster ride all week. Our subscribers may have noticed that last weekends picks by the Analyzer were quite heavy on the banking, credit and financial companies. Last week, the President was vowing that he would veto any bailout of these types of companies if it was at the expense of the taxpayer. I personally don't like bailouts either. Today, in a rare Saturday session, the Congress passed a really big "bailout" bill and the President has indicated he will sign it. The Analyzer can find those stocks that are going up because "someone" knows something is going to happen. I anticipate a big increase in the share prices of banking, credit and financial companies on Monday.

July 14, 2008

Sorry for the long delay since my last "Buzz" - went to Yosemite for a few days. There was no cell phone or Internet service. Wonderful!!!

What a shock when I got back to civilization. The first thing I hear is that we are now "officially" in a bear market because the DOW has dropped over 20% from its high, which occurred October 9, 2007. That's only nine months and we have had a precipitous drop with high volatility. Our portfolios have held up very well, and our two portfolios are, at this date, both up over 8.5%. Our Aggressive and Conservative list of twenty (20) buy/writes found by the Analyzer have not done as well, but for May and June they are down 8 to 10% vs. a DOW that is down 15% since the May expiration date. These kinds of markets try investor's souls. It's hard to feel that down 8% is good. Well, it's not as bad as down 15%. Good covered calls in this environment provides two offsets to a downdraft - finding the better companies to start with and getting someone else to give you money for the opportunity to buy your stock at a higher price at a later date. This call premium has been a great buffer in these recent months. Our ETF lists are starting to show some good returns - at this date the April list is up 4.3%, May up 0.6% and June a whopping 9.8%.

June 30, 2008

The get-out price is very important, especially while we are flirting with a bear market. We establish our get-out price at -15%. If the stock purchase price drops 15% we sell (after buying back the call at a very low price). Too many investors have too much hope. I've heard this over and over again, "I'm holding because I hope it will come back". Let's look at some numbers. If you have downloaded our Excel spreadsheet for the Analyzer, you could have played around with these numbers. We are looking at our two May equities lists - Aggressive and Conservative - started on May 17,2008 (expiration weekend). May and June have been brutal for these lists. The May Aggressive list of 20 buy/writes has had 13 exercised at -15% so far. Currently, this list is down 8.5%. If we had not sold these stocks at our get-out price, and held them, the list value would be down 16.8%. The May Conservative list of 20 buy/writes has had 11 exercised at -15% so far. Currently, this list is also down 8.5%. If we had not sold these stocks at our get-out price, and held them, the list value would be down 13.7%. The DOW has dropped 12.6% in this time frame. The sale of the call options provided 4.9% for the Aggressive list and 2.7% for the Conservative list. The call premium provides a cushion, but adhering to a get-out price establishes the floor.

June 23, 2008

We just had expiration weekend. The markets are down an average of 7.1% since the last expiration, and !0.1% for the year. Even though we had major hits in our two portfolios, we remain 26.4% above the averages so far this year. Why? Because we have been reaping the benefits of the call premium as well as identifying stocks that the professional investors think are going to "hang in there". These professionals are used to making a lot of money and are working hard to keep their income levels up.

Some may question why the Analyzer keeps listing CAL (Continental Airlines). Well the professionals keep expecting that CAL will be merged with another airline and produce a big returns. Remember that the professional traders buy the options and not the stock and hope the option price will increase substantially as opposed to the stock. CAL has not been merged and the stock has gone down to our get-out price for several months now, primarily due to the price of oil. This points out that you, as an individual investors, must go with what you are comfortable with. That is why we provide lists and portfolios. The lists are provided to let you select buy/writes that the Analyzer has found. You still need to do your "due diligence" and make selections from the lists that you are comfortable with.

June 11, 2008

Time to panic??? We don't think so. We are still bouncing along the bottom. If you look at the returns for our lists and portfolios, you see that all of them are doing better than the markets. Our portfolios are doing very well because they represent the whole year. We got off to a good start in 2008 and the money we made then is holding the portfolios up up. Our lists represent only one month and May/June have been very bad for the markets in general. We have not been hit as hard because the call premium is acting as a buffer. About one third of all the trades identified in our lists and portfolios in May have hit their get-out price and have been sold without additional loss. It is very important that investors exercise their get-out price, whatever it might be. Ten percent of the identified trades are above their strike price right now.

You may have noticed the changes in our website over the last few months. There may have been times when you noticed changes that were "up" for only a short time and then disappeared. We are working on some improvements. In the next few weeks we will provide "in-the-money" call analysis. We are also working on increasing the amount of data and speed of the Analyzer. Our spreadsheet helper has been updated and is now available for download by our subscribers. We appreciate the many comments from our subscribers and hope to accommodate as many as we can.

May 31, 2008

We started to provide analysis of Exchange Traded Funds (ETFs) in April. There has been some confusion on how to use ETFs in a covered call situation. We, too, are learning how to best use ETFs. One of the first things that you may notice about ETFs is that some of them are designed to take advantage of declining markets. These funds trade their underlying assets as short trades or by playing the "put" side of the market. For example, the first listing in our current ETF list is PROSHARES ULSHT OIL& GAS (DUG). The "SHT" means this is a short sided fund. If you go to the ETFConnect website, you will see that the investment objective for DUG is "The Fund seeks daily investment results before fees and expenses that correspond to twice the inverse of the daily performance of the Dow Jones U.S. Oil & Gas Index".  Note the word "inverse". We will be adding the ETFConnect link to all our ETF lists. It is recommended that you understand what the objective of the fund is before investing in it just because it came up on the Analyzer list. Another thing you will notice is that the strike prices are usually in $1.00 increments. Some have asked why investors are trading calls with strike prices so far from the current price. For DUG, we bought the fund at $27.32 and sold the $33.00 call for $0.50. The Analyzer looks for ETFs that have a high return if called. For DUG to get called the stock would have to rise $5.68 (the spread) and that added to the premium ($0.50) yields a very large return. Someone was willing to buy calls at this level and the Analyzer identified this, even though the likelihood of this happening is small. There are several ways to look at ETFs as an investment tool - buy and hold for a long time selling far out calls and pocketing all the premiums,  or sell close in calls for a higher premium and expect the ETF to be called away soon. We will be monitoring both strategies in the future.

May 20, 2008

Let's talk about beta. We erroneously dropped the beta value for stocks found by the Analyzer when we made changes to out website over the last few months. It's back on our "Consider" page, when you run the Analyzer. Beta can be confusing to the average investor, but it can be a tool in determining which stocks you may want to buy. The formula for beta is . I have no clue what that means. So we will have to use words and examples. Beta is a measure of an individual stock's volatility to the volatility of the overall market. Volatility is a measure of movement (up or down) of the overall market and individual stocks. The S&P500 is the "market" that is generally used to establish the base of the "overall market" for stocks. The overall market always has a beta of 1.0, and becomes the benchmark for individual stocks. If an individual stock has a beta of 2.0, it means that it is twice as volatile as the market. For example, if the overall market (S&P 500) went up 5%, the stock with a beta of 2.0 went up 10%. Likewise, if the market went down 5%, the stock with a beta of 2.0 went down 10%. Volatility is an up AND down thing. High volatility stocks (with high beta) move more dramatically that the market in either direction. This can also be tied to risk. High volatility (high beta) generally means high risk - big losses or big rewards. A beta that is between 0 and 1.0 means that the stock moves "slower" than the market and is generally very conservative. Sometimes you will see a negative beta (-2.0) This means that the stock runs counter to the market. When the market goes down, these negative beta stocks go up. If the market goes up, these negative beat stocks go down. Beta is a general measure of the volatility of a stock to the overall market. Recently, the volatility has been high and, as we have found out, it can reward you or it can hurt you. You fight volatility with diversity.

May 9, 2008

Next weekend is expiration weekend. It comes early this month. Expiration is always the Saturday after the third Friday of the month. The time between expirations is either 28 or 35 days, depending on where the days occur each month. The annualized return for stocks that are called or stocks that have the same price will vary depending on if it's 28 or 35 days till the next expiration date. Annualized returns are always bigger for the shorter time period.

Last week, we introduced Exchange Traded Funds (ETFs) buy/writing using the Analyzer. ETFs are packages of various investment vehicles that allow the investor to diversify their portfolio. They are explained here. ETFs tend to be a more stable investment strategy, because of diversification and options can be sold on them. ETF options may have $1.00 increments rather than the $2.50 or $5.00 increments for equities.  For example, the Analyzer's first result last month was Buy 300 shares of PROSHARES ULTRASHORT OIL& GAS (DUG) at $30.22 and sell 3 contracts of DUG EK (May$37.00) at $0.55.  DUG is and ETF that sells oil and gas futures short (expecting them to go down). Even though the price of oil and gas continued to go up in the last month, DUG didn't do too badly. And the high strike price ($37) means that the ETF will probably not be called this month and we can write more calls. We may be able to continue selling calls for many months as added (but slow) income. There can also be a dividend element in the returns for ETFs.

May 1, 2008

Yesterday the government announced that the GDP grew at a 0.6% rate. So, for the last two quarters the rate was 0.6% and we were not in a "recession" even though many media and politicians had said "we are in a recession" during the last six months. Interestingly these same people have now tempered their comments to "it feels like a recession". So we continue to bounce along the bottom. As I said last week in this blog, people are starting to ask tough question and we, as investors, need to be alert to what is really the right answers to these tough questions. For example, "why is food so expensive?"  Panera Bread (PNRA) announced very good earnings yesterday and shares jumped 15%. My wife love Panera. The Analyser listed PNRA as a possible "gem" when run 10 days ago with default parameters. This jump occurred even though profits fell 17%. Panera's CEO, in a TV interview, said that the company was able to raise prices (wheat went from $5.50 to $13.00 a bushel in one year) but still retained their customer base, including my wife. Their customers understood that "food prices were going up", and were willing to continue eating there. The real "alert" in Panera's case is "the price of wheat has been coming down for the past seven weeks" (see chart) . If Panera can continue to maintain their new pricing because the general public thinks food prices are going up, while paying less each week for their wheat, their profits will soar. Insiders and professionals have analyzed PNRA and figured this out - something most of us can't take the time to do. The Analyzer still finds these gems in this "feels like a recession" economy.

April 25, 2008

It's time to really pay attention to the world around us. You might even say we are getting into critical times. Many more people are changing their thinking about many things that have been taken for granter for many years. This change in thinking is being exacerbated by the economy that is being affected from many sides. The general public is going to start asking tougher questions of our government. They are all going to be related to energy, which means oil, which means food, which means technology. Some questions that are going to be asked are:

Why aren't we drilling for more oil?  Why aren't we building more refineries?  What's wrong with nuclear energy? Do we need ethanol? Why are food prices so high? Should we be eating genetically altered food? Why are we importing so much of their stuff? Why are we exporting so much of our stuff? And on and on. Our citizens are starting to turn inward, looking for answers locally - in the US. As investors, we have to be alert to the changes that are going to be made in the near future. It is an election year and the government is going to try to make it look like they are addressing theses questions of the people. Today Texas asked for a waiver on the use of ethanol in gasoline. What will happen if ethanol is not required in gasoline any more? The stimulus package will start hitting pocketbooks next week. Retailers are jubilant - but will they see much of it? Volatility is down to around 20 from a high of 32 within the last year. Does this mean the "news" isn't hyping the markets as it has in the past year? Are the markets finally getting serious?  Important things will happen in the near future that will affect the markets in dramatic ways. As investors, we need to be attentive to what's really going on. More on this later.

April 19, 2008

This expiration weekend we are introducing Exchange Transfer Funds (ETFs) Analysis with the Analyzer. ETFs offer a different perspective on investing, with funds that provide diversity through a variety of international and domestic stocks, sectors, commodities, currencies and other investment vehicles into baskets that are traded like equities and have options. The same Analyzer algorithms apply to ETFs and will help you find the ones that the professionals are buying (More on ETFs).  We are re-adding "Analyze a Single Stock" at the request of several subscribers.

I want to restate that the values shown in our lists, portfolios and results do not represent the trades that our subscribers will make after reviewing our monthly updates or after running the Analyzer. There is always a time lapse  before trades are executed. We need to use some basis point on expiration weekend to establish those buy/writes that the Analyzer has found. We use the closing prices on the Friday of expiration weekend. By the time these buy/writes can be executed on Monday morning, prices have changed. Similarly, we use a flat $0.05 if we have to buy back the calls if the stock drops below our get-out price. The key thing to remember is that since stock prices and their calls move in tandem, the results should be pretty much the same as what we show in the "Results" the next month. Often, subscribers will email us and say they "actually did better" than our published results. Subscribers can download a spread sheet that allows them to put in their actual trade prices and monitor their progress (daily if they want) on up to four individual portfolios.

April 14, 2008

Today on MSNBC's "the Call", the commentators were talking about all the earnings reports that are coming out this week, including INTC, CSX, EBAY, IBM, AMD, AXP and of course the biggie GOOG. They had a segment where they looked at the option activity for these stocks in hopes of finding out whether they could learn something about how the earnings would be. Their supposition was that if someone on the "inside" knew something about the earnings, they would be trading the options instead of the stocks. Well now, this is the premise that the Analyzer assumes. Someone knows something so let's go find it by analyzing the option activity.

We will be adding two new features this weekend (expiration weekend) - Single stock analysis and analysis of Exchange Traded Funds (ETFs). They are HOT. Check us out this weekend.

April 7, 2008

The new buzz saying from  analysts and brokers is "Plunge Protection".  These words are described as finding some investment vehicle that will not be affected by the next big "plunge". There have been a lot of plunges in the last year and almost all of them have been tied to credit. Mortgages, personal debt (credit cards) and bank liquidity are all tied to borrowed money. How many time have we heard "people in this country need to save more". For a while, companies (and individuals) that are going to do well will be those with cash. Plunge Protection advocates will begin to look more closely at balance sheets. We should be able to ride their coattails with the Analyzer as they find cash rich stocks and start buying their calls. I have been advocating for some time that we are not in a recession. Officially we are not in a recession but the media is preaching a lot of fear right now. Much of it is unfounded as identified in The 'Recession' is a Media Myth by John R. Lott Jr. We need to stay alert to what is happening in the markets and not let our investment decisions be dictated by fear. There are opportunities out there right now. We just need to find some "Plunge Protection" and the Analyzer might just be just the right protection. Our returns have held up quite well so far this year even with all the "gloom and doom" in the media.

April 2, 2008

Well, are we going to bounce along the bottom for a while? We are still in a "high" volatility period and the markets will surely continue in their up and down pattern. Some might argue that the trend since March 10 is up. And it is, if you look at the chart, but it's a pretty short trend. There are a lot of factors at play here. The media continues to preach gloom and doom - "we're in a recession", "things aren't getting better", "when is the next shoe going to drop?". You also have to understand the background of the person who is talking - is it biased politically or personally? The Secretary of Treasury. Paulson, works for the President (political). Bernanke, the FED Chairman, is supposed to be "independent" but has to report periodically to Congress and is trying to establish his creditability (political and personal). The media and TV investor pundits all have their own agenda (personal). One thing is certain - the markets begin to turn up well before everyone "gets-it". I think we are going to bounce along the bottom for a while. But I also think the Analyzer is going to be able to find those opportunities that will make money during this period. There are a number of analysts and insiders who are privy to "stuff" we are NOT privy to. The Analyzer can tap into that "stuff". Many of our March (expiration weekend) picks are above the strike price already. For example, four of the six picks in our $10,000 Aggressive Portfolio are currently above the strike price, and the other two are close. That means we can bounce a little here and not be hurt too much. Subscribers can follow along with these bounces by downloading the portfolio spreadsheet and filling in the particular portfolio or list they are following with actual prices each day.

March 24, 2008

The Market took off like a rocket this morning. Those subscribers who visited here this expiration weekend and made their decisions about what trades to make probably were not able to make them at Fridays closing prices early on Monday morning. This is not a problem. Since stocks and calls move in tandem, if you got in anytime today, you probably maintained the same potential returns. The markets shot up and then leveled off and stayed near their highs. Let's take a look at some of the Analyzer picks and what would have happened if the trades were executed after 10:00am (CDT) on Monday. We will use today's closing prices for our calculations. We will arbitrarily pick the fifth trade from the top on our lists and portfolios for review. RMBS was the fifth on our Aggressive Stocks-to-Consider list and was projected to have a return of 22.4%. If this stock was purchased at the close today and the call sold (stock price $18.75, Apr20 call bid price $2.10) the return would be 17.5%. TSL was the fifth on our Conservative Stocks-to-Consider list and was projected to have a return of 26.3%. If this stock was purchased at the close today and the call sold (stock price $29.24, Apr35 call bid price $0.70) the return would be 21.4%. JEF was the fifth on our Retirement portfolio and was projected to have a return of 14.9%. If this stock was purchased at the close today and the call sold (stock price $17.87, Apr20 call bid price $0.75) the return would be 24.3%.  IDCC was the fifth on our $10,000 Aggressive portfolio and was projected to have a return of 22.4%. This stock blew right past the strike price (Apr20) this morning and closed at $22.31. But buying the stock at this price and rolling out to the next out-of-the-money strike (Apr25) would yield a return of 14.2%. Over all, the returns remain bullish.

March 22, 2008

I really like Ben Stein's articles. He seems to always identify what's going on in the markets and interprets the situation with optimism rather than pessimism. His recent articles  have blasted what has been going on in the economy and the markets. However his theme is always "there are opportunities in these times". In his March 18th article he states "The good times will come back when you least expect them". With all the bad news and turmoil in the markets, most people feel the worst is yet to come. But history shows that turnarounds start before the hubris and hand-ringing end. One of Ben Stein's articles talks about the fact that housing values in Manhattan have not gone down, while the the rest of the country has seen sharp drops in house prices. Manhattan is filled with investment bankers, analysts and traders that end up in good and bad financial years making a bundle. They play both sides of the trading game. Our covered call lists and portfolios are continuing to do well against the major markets in 2008. One of the reasons we are doing well is the Analyzer finds those buy/writes that these professionals are trading.  Our subscribers using our service should feel good about this.

March 7, 2008

What should I do with my favorite stocks in my portfolio in a falling market? Holding on to stocks in an IRA, college or retirement account, that have done well, that have grown over time, can cause severe angst in these falling market times. You may want to consider a covered call strategy. This goes against our basic strategies in our covered call lists and portfolios, where we want to have the stock called away in a short period, like thirty days, take the profit and move on. However, if you have good stocks in your portfolios, and you intend to ride out the drops, you could sell short term out-of-the-money covered calls on these favorites. It works this way. Suppose you have a stock that you bought five years ago for $20.00. It rose to $40.00 in the middle of last year and since has been moving down to $30.00 today. If you thought the recession talk, mortgage debacle, and other economic factors were going to put downward pressure on your favorite stocks back then, you could have sold short term out-of-the-money covered calls against them. Selling the $45 call back in the middle of last year for $1.00 expiring in one month, would have given you a $1.00 hedge on the stock price. If the stock dropped to $38.00 at expiration you could have sold the $40 call at the next month for perhaps $2.00. Now your hedge is up to $3.00. And so on. You say, “Well what happens if the stock starts to go up and gets called away?” You buy the stock back at the current price and leave it in your portfolio for future growth. If you think your favorites and going to continue to go down in the next few months, you may want to implement this strategy now.

February 29, 2008 (Leap day)

The markets have been “leaping” and falling back so far this leap year (see chart). Some people are making a lot of money, playing both sides of these ups and downs. Others are frustrated that they don’t know what to do in this environment. The DOW has been moving in a 1,085 point range since the year began. The high (13,056) and low (11,971) is a spread of only 9%. Many feel the swings have been much more than that and that the markets are in a downward spiral. Actually we are trading in a “narrow range” that is highly volatile. Our covered call lists and portfolios have been doing nicely so far this year. One of the reasons is that we have been able to take advantage of high call premium prices that are the result of volatility. This cushion has been significant in our lists and portfolios. Since initiating our retirement portfolio in 2005, we were happy to get about $2,500 call premium a month as income. Our actual average for those three years was $2,142. So far in 2008, we are averaging over $5,500 per month in this portfolio. In our $10K aggressive portfolio, the average monthly call premium has been $529 per month since starting the portfolio in March of  2005. So far in 2008 the monthly call premium is averaging $644, up 22% over the previous average. We will continue to take advantage of high call premiums as long as they last. Many non-covered call investors are complaining that “volatility is killing me”. We are not complaining about volatility.

February 16, 2008

Let’s talk about recession. Everyone else is. Politicians, media and the general public are saying “we are in a recession”. The definition of recession is two consecutive quarters with negative Gross Domestic Product growth. The December 2007 quarter GDP was +0.6% (close but not negative). We don’t know what the first Quarter of 2008 will be. If it is negative, that will be the first quarter (March 2008) and it will take another consecutive negative quarter (June 2008) to confirm a recession. Let’s wait and see what happens before we say “we are in a recession”.

Volatility (^VIX) continues to be high, resulting in better call premiums. As a result, we have changed some of the default parameters for the Analyzer – hilo ratio (to 60%), spread and minimum call price (to $0.50), open interest (to 1000), call volume (to 300), and both returns (up 10%)We are off to a very good start for all our lists and portfolios and are well ahead of the market averages. Subscribers may notice that the Analyzer is finding more buy/writes for the second out-of-the-money calls which have very high returns if the stock is called. This indicates that the market makers are willing to run up call premiums for higher strike prices. Take a look at GRA, GIGM and NFLX in our January Conservative Stocks-to-Consider. All three of these buy/writes suggested the second out-of-the-money strike price, and all three were called at these higher prices yielding a very large appreciation before being called. If you are not a subscriber, why not join us?

February 10, 2008

Several analysts and fund managers questioned this week on CNBC about what to do in “this market” responded “consider covered calls”. Most were suggesting that out-of-the-money covered calls be sold against stock in an investors existing portfolio that had declined in price over the recent months, in order to recoup some of their losses. Others on CNBC were suggesting that there are still some good stocks out there that are bucking the trend and rising in this market. “The trick is to find them” they said and then were listing their “favorites”. It’s good to see that these specialists are recommending strategies that are basic to the Analyzer – “find ‘em and sell out-of-the-money calls against ‘em”. If you look at our two covered call lists and our two covered call portfolios opened on January 19 (last expiration weekend), you will see that of the 37 buy/writes found by the Analyzer and published here at our website, 19 are already above the out-of-the money strike price and only one required using the get-out price at -15%. That’s pretty good job of findin’ ‘em. If you add up the call premium realized by the sale of these 37 buy/writes, you get a pretty nice cushion of 6%. In this same period (January 19 to February 10) the DOW went up 0.06%, the NASDAQ went down 1.49% and the S&P500 went up 0.04%. In between there was a lot of volatility (see the VIX index). Next weekend, February 16, is expiration weekend and we will be publishing new lists and updating the portfolios using the Analyzer. By subscribing now you will have access to these updates.

February 1, 2007

Thanks to our subscribers for sticking with us during the last half of 2007. Volatility went crazy with a series of events starting with subprime, then credit, banks, foreclosures, debt and world markets. Although volatility will continue, we think opportunities will increase as we move further into 2008. The basic premise of the Analyzer is to find stocks, and their accompanying calls, that have a good chance of moving up to the out-of-the-money strike price. Our algorithms find stocks that the professionals are buying calls against. They usually know something most of us don’t. There are a lot of good companies still out there. Many were trashed in the recent volatility activity. But they are still good and the professionals are looking closely to find them. The Analyzer found some on January 2 and they have moved up nicely throughout January and all our lists and portfolios are up nicely (see above). Why not join us as subscribers?

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