That is how long Greece has been in the headlines and causing volatility in the global equity markets. Granted there have been lulls in the process but it has been painful.
I feel like I have written more about Greece in the last five years than Homer wrote in the Iliad in 800 BC. That work was said to contain 15,693 lines. While I doubt I have reached that total it is still far more than I wanted to write.
If Greece left the eurozone tomorrow, I do not think there would be a significant impact on the equity markets. Everything that can be said has been said and every investor understands that they are doomed as a eurozone country unless a miracle occurs.
The Dow dropped -165 at the open this morning but recovered to trade in positive territory very quickly. Unfortunately, the recovery was short lived and the index spent the rest of the day in negative territory before closing with a loss of -46 points.
There will be no deal signed in 48 hours as Tsipras promised and I would be surprised if one was signed in 48 days other than to ease their exit from the eurozone. I hope the markets have figured out that the future of Greece has nothing to do with the future of the U.S. markets.
I believe investors are ready to turn their attention to the Q2 earnings cycle and let the Greeks deal with their own excesses and defaults.
Alcoa kicks off the earnings parade on Wednesday but the real flurry of Q2 reports will not begin until the following week. Earnings excluding the energy sector are expected to rise +4%. There is room for a positive surprise thanks to the lower oil prices but international companies are still going to be fighting the strong dollar overseas. That dollar got another boost over the last two weeks by the headlines from Greece and that is not likely to change.
The percentage of S&P stocks with buy signals continues to decline so I added more bear call spreads to capitalize on this trend. As long as the market is weakening that is the safest play. They are boring but they have lower risk.
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The fourth column in the portfolio graphic is the earnings date. We will always exit a position before that date unless specifically mentioned otherwise in the play description. For the plays where we will not exit I added the No-X designation in the portfolio.
Current Position Changes
XOP - Oil Exploration ETF (Bear Call spread)
Oil prices are imploding with the close today at $52.96 as producers put rigs back to work, Iran sanctions could be close to ending, Saudi Arabia lowers prices to Europe, OPEC produces a record 32 mbpd and U.S. production has failed to decline. The outlook for the energy sector is grim. Prices could fall back into the upper $40 range as summer begins to fade.
Sell short August $46 Call, currently .97, stop loss $45.45
Buy long August $50 Call, currently .24, no stop.
Net credit 73 cents.
JOY - Joy Global (Bear Call spread)
Joy Global manufacturers mining equipment for the extraction of coal, copper, iron ore, oil sands and other minerals. The coal sector is crashing with a new bankruptcy every week. China's sinking economy has killed the demand for copper and iron. BHP, FCX and RIO are trying to sell mines rather than add to them. There is not much demand for new mining equipment.
Earnings Sept 3rd.
Sell short August $36 call, currently 63 cents. Stop loss $34.95
Buy long August $40 call, currently 20 cents, no stop.
Net credit 43 cents.
LULU - Lululemon Athletica (Bear Call spread)
LULU is struggling again with product quality. They issued a recall last week for more than 300,000 womens hoodie tops due to risk of injury from the drawstrings. The company said there were five incidents in Canada and one in the USA that prompted the recall. Injuries are to the face and eyes from the elastic draw-strings. It seems every other quarter they have a quality recall and the stock can't seem to make any progress.
Recently several top executives left suddenly and unexpectedly to put another cloud over LULU.
The hoodie recall is not expected to hurt the company financially but it is just one more stain on their performance. UBS just reiterated a $67 price target and that is only $3 over Monday's close.
I am picking a strike well over the current price in an effort to avoid some volatility in the stop losses.
Earnings Sept 10th.
Sell short August $70 call, currently .81, stop loss $67.45
Buy long August $75 call, currently .30, no stop loss.
Net credit 51 cents.
New Covered Call Recommendations
New Aggressive Recommendations
New Long Term Recommendations
Existing Play Recommendations
Links to original play recommendation
BHI - Baker Hughes (Covered Call)
HLF - Herbalife (Short Put)
NSC - Norfolk Southern (Bear call Spread)
RDUS - Radius Health (Covered Call)
INSY - Insys Therapeutics (Covered Call)
There are several different formulas for determining margin requirements for naked put writing. These are normally broker specific and some can require larger margin requirements than others.
Here is the most common margin calculation for naked puts.
100% of the option premium + ((20% of the Underlying Market Value) - (OTM Value))
For simplicity of calculation simply use 20% of the underlying stock price and you will always be safe. ($25 stock * 20% = $5 margin)
Prices Quoted in Newsletter
At Option Investor we have a long-standing policy prohibiting the editors and staff from actually trading the individual recommendations in order to conform to SEC rules concerning trades.
The prices quoted in the newsletter are the end of day prices in most cases.
When discussing fills or stops the prices quoted are the bid/ask at the time the entry trigger or exit stop is hit. This is NOT a price that someone on staff actually got using a live order.
For entry/exit points at the market open the prices quoted will be the opening print. The majority of the time the readers are able to get a better fill than the opening print because of market maker bias at the open.
For trades with an opening qualification the prices quoted will be the bid/ask at the time the qualification was met.
All of these rules normally produce worse prices than an active trader would normally get. Because they are standardized there may be some cases where a price quoted was better than an actual fill. If you received a price that was dramatically different than what was quoted please let us know.