Clawing Back into the Index Game

This afternoon, the BHW Port bought back the double diamonds index (DDM), which has taken quite a drubbing since it was called away at 75 back in April. The buy-basis (after commissions) was $60.9998, which is like pocketing $1400 after that April 75 sale. Not bad.

The next step is to find a suitable opportunity to write a call against the newly acquired DDM. Might wait for a bounce of some sort (anybody believe in such a thing in this market?) before writing…

May 08 Expiration

Friday was May expiration. Of the Port’s three May calls, two expired worthless and the third resulted in assignment, as follows:

• NUAN May 20 expired, with NUAN closing Friday at 19.79
• ACAS May 40 expired, with ACAS closing at 32.82
• CYBS May 15 assigned, with CYBS closing at 19.21

With the CYBS assignment, the Port is now sitting on 11,274 in cash to sink back into CYBS and into DDM, which was assigned last month. The recent strength off of lows for CYBS and DDM has resulted in better performance for the Buy-only notional portfolio for these 2 symbols. In DDM, the Buy-only strategy is doing a little over 4% better. In CYBS, the Buy-only strategy is doing 7.5% better than the Buy (Hold) Write strategy. That being said, the B(H)W strategy is performing about 3% better than the BO strategy since inception in late October 07.

Also as of Friday, the Port is without any covered calls. The most likely candidates for selling June or July calls are EGLE and ACAS. Both are showing some recent strength, particularly EGLE which on Friday scored a 52-week high.

DDM April Assignment

DDM was assigned via the Apr 75 call (which put 74.80 cash into the account after subtracting the assignment fee). Considering the Port’s 64.05 basis for DDM was established a little over a month ago, the 16% return isn’t too shabby. The plan was to roll out to one of the May calls if the price hovered near 75 by day’s end on Friday. That obviously did not happen, and so the Port will watch for an opportunity to re-establish a position in DDM. Or, possibly establish a position in QLD, an index ETF with meaty option premiums that seeks to double the results of the NASDAQ 100.

NUAN Busts a Move

As predicted last week, NUAN was setting up for some upside movement. The past couple days have seen that upside movement, and while there may be some additional appreciation from here, the Port went ahead and sold the May 20 call for 1.45 (adjusted for commissions it added 1.34 to the account). Breakeven on NUAN is now 18.72.

NUAN Triangle

Something is up with NUAN. The port currently has no calls written on NUAN, but instead of writing a May 20 for a buck last week, the port has held off to see what happens next. The chart (see below) indicates an intriguing story: while seemingly trading sideways, the range between highs and lows is getting squished, essentially forming an ascending triangle. The lows, particularly, are getting higher and higher. From a technical perspective, a breakout to the upside appears in order, which, in turn, should bolster the value of the 20’s and 22.5’s. The thing is, NUAN said this week that it was buying a company called eScription, in part funded with below market sales of NUAN shares to a private financier, potentially eroding the current share value. Plus, broader recessionary market conditions can spell b-r-e-a-k-d-o-w-n for any stock. So which way from here? This port is gonna hang out to see what happens next week, itching to write a 20 or 22.5 if we see a turn higher, but prepared to ride out a drop in price from here.