Options Trading Strategies July 23, 2012 Market Strategies Newsletter

Options Trading Strategies

Where To Invest Now

Market Strategies Newsletter

Options Trading Strategies

Covering High Return Balanced Investing Options Trading

Strategies, Where To Invest Now and Stocks To Buy

A Publication of Princeton Research, Inc. (www.PrincetonResearch.com)

Contributing Staff: Michael King, Bill Chippas, Charles Moskowitz

  July 23, 2012 Market Strategies Newsletter

Where To Invest Now, Stocks To Buy And

Options Trading Strategies


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Options Trading Strategies

$10,000 Options Trading Portfolio

The $10,000 Options Trading Portfolio had a Gain last week of $4565

increasing our gains for the year from $6,075 to $10,640.


This Where to Invest Options Trading Portfolio has produced a

Year To Date Gain Of Over 106%.


Currently Approximately only $1,770 funds are in use.

A full $10,000 trading portfolio is not fully necessary since

only portions of the portfolio are used for each trade.


The Market Strategies Newsletter features our balanced investing options trading strategies. We enable our trade alert and newsletter subscribers avoid extreme moves in either direction. We can produce high returns in up or down markets.


Trader’s Commentary:

This week was relatively quiet with the market moving slightly higher on what can only be described as disappointing economic numbers. The S. & P. 500 range was 1345 to 1380, making a slightly higher high for the month. The importance of these slightly better levels is that they continue to peak at just under the level from which the markets broke out of the “bear flag” in early May. I believe this area will continue to halt rallies until we have some relief from all the uncertainty which the markets dislike. Decisive news out the Eurozone, or some signs of bipartisan agreement on the Fiscal Cliff, a better feeling about the presidential election and its current polling at “no clear lead” would help relieve the uncertainty.

We had an issue this week with one of my trading recommendations. We had several subscribers who followed my order to buy 2 CMG 8/375 puts @ $5.10, while others using the texting service followed my Alert and lowered their buy point to $4.30. The opportunity to purchase took place on Thursday when the stock hit $404.59 and closed @ $403.86 + $5.80. After the close, CMG reported lower than expected earnings and revenues. The stock opened down $75.41 @ $328.45 and continued to $307.20 before closing @ $316.98. The reason I am noting all this in detail, is that while I changed the order, we had several subscribers who paid $5.10 and one (who called to say it was the best two days of his life in trading) sold the puts @ $65.00. This leaves me with the problem of how to represent this trade in my accounting. The only way I can see to do this is to allow the trade in the $100,000 account, where the texting service is not at issue since the portfolio is more balanced with stock positions…I will only use a half position in the Options Only account since at least one other subscriber called to congratulate Mike and myself, since that subscriber in fact follows Options Only, without the texting service and only bought 1 put in his account.

As we discussed both Tuesday morning and Thursday evening on the radio, the issue of valuation supporting price needs to be viewed with a critical eye. The momentum stocks, like CMG was priced for perfection. It had a trailing PE of 55 times and a forward PE of 36. It also has NO YIELD. In contrast, MCD, with a PE of only 17, roughly the historical norm and a yield of 3% has “reasons” to be bought and held, not just traded. This is not to say we shouldn’t trade CMG, just that we need to realize that at these levels unless earnings and revenues continue to grow unabated at unsustainable rates, someone will get stuck as they did between the close Thursday and Fridays open.

We will continue to seek overvalued stocks to purchase puts and stocks above their 200 day moving averages at support for call purchases….CAM

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Market Laboratory – Weekly Changes

Prices are copied from Barron’s Weekly and Yahoo Finance and may be incorrect









S&P 500








Russell 2000




Nasdaq 100
















Heating Oil




Unleaded Gas




Natural Gas







Put/Call Ratios


S&P 100



Put/Call Ratios

CBOE Equity




151-25 +0-19

2.55% -0.03%

10 Yr Note

134-29 +0-116                                               1.46% -0.04%





CRB Inflation





Barron’s Confidence







5 Yr Note

124-25 +0-98                                                   0.58% -0.05%





DJ Utilities















+0.9 %

M1 Money  Supply


M-2 Money



M1…all money in hands of the public, Time Deposits Traveler’s Checks, Demand Deposits

M2 adds Savings and Money market Accounts both compared with the previous year.

New Stock Recommendations

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Model Portfolio Comments/Changes

As we mentioned last week, we have started to write calls against our positions on several of our high dividend holdings. This is done for two completely different reasons, the first is to add another level of protection from a down market or headline risk, and second to increase income from the positions. In an environment that is pushing many to accept more and more risk to gain incremental increases in yield, we are seeking greater income without extreme risk.

By writing weekly calls we added an additional $70 (on a 150 share position) or $ .4666 / share.

While that might not seem like a lot, it was 1.3%…in a week. This is not possible to do this every week but the return is dramatic.  We are also writing calls in BMY and will explore the opportunities in AAPL and FB.



For those of you who do not buy puts to protect your portfolio, there are many ETF’s that are the inverse of the DOW. The symbols are DOG, SDS and RWM, whichgo up when the DOW, S&P 500 and Russell 2000 go down and down when they go up. The DZZ goes up double when gold goes down.

New Stock Option Recommendations


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Option and overall Comments

We had a Gain last week of $ 9,425 in a mixed week.

Our gain for the year was $20,836.85 and with last week’s gain

has increased to $30,261.85.

We have Four options positions remaining.

The options call for a $ 2,500 investment unless otherwise started, while each stock position requires $ 5,000 unless specifically stated.

We are basing money management on a hypothetical $ 100,000.00 and are using $ 4040 in the options positions and $ 83,364 in the 16 long stock positions for a total of $ 87,404 with $12,596 in cash.

These figures are approximate. We do not count commission costs and there may be errors.

Executions that have occurred at or near the open or close of trading sometimes vary from our actual numbers.  For example, when something opens down and it is through our price, we take the next trade whether it is an uptick or continues lower.  This sometimes results in a 50% trade that is slightly above or below the exact number…


Previous Week’s Recommendations

and Rules for the $ 100,000 account


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  • All options count for about $ 2,500.00 for model portfolio calculations unless otherwise stated.
  • When the option has doubled sell half the position.
  • Stop Loss protection is either half or offered with each trade.
  • The cost of the option is the asking price (or the price between the bid and ask, whichever is more realistic)
  • The options will be followed until closed out.
  • Option Symbols are stock symbol with expiration month and strike price
  • Call  702 650 3000 for up to date information.

This Weeks’ Economic Numbers

and Media Data

Monday Investors will assess weekend comments and events.
Tuesday 10:00 hrs FHFA Housing Price Index May ( NA vs 0.8% )
Wednesday 07:00 hrs MBA Mortgage Index 07/21 ( NA vs 16.9)

10:00 hrs  New Home Sales Jun  (  374K vs 369K )
10:30 hrs Crude Inventories 07/21 ( NA vs -.089M )

Thursday 08:30 hrs Initial Claims 07/21  ( 375K vs 386K )

08:30 hrs Continuing Claims 07/14 ( 3300K vs 3300K )
08:30 hrs  Durable Orders Jun ( 1.0% vs 1.3% )

08:30 hrs Durable Orders – ex Trans Jun ( 0.0% vs 0.7%)

10:00 hrs Pending Home Sales Jun  ( 0.7% vs 5.9% )

 Friday 08:30 hrs GDP-Adv. Q2  (  1.2% vs 1.9% )
08:30 hrs Chain Deflator-Adv. Q2  ( 1.5% vs 2.0% )
09:55 hrs Michigan Sentiment – Final  Jul  ( 72.0 vs 72.0 )


The summer doldrums continue with little direction. The week began with four good days followed by a one-day reversal that wipes out the gains. Volatility remained very low however indicating no panic. Expectations for earnings had been low and handily beaten. Top side earnings, however, are lagging badly as the revenue misses caught up Thursday afternoon.

Chipolte ( CMG: $ 316.98 ) fell sharply after the close, off 66.55 pts on the week or 17.4% surprising the street and well below UBS’s lowered target of $ 355. Deutsch Bank, Janny-Montgomery, Goldman followed cutting their ratings. Panera Bread ( PNRA: $ 142.23 ) off 3.5% on the week. However PNRA reversed course also to close below both the 50 and 200 m.a’s.  Starbucks ( SBUX: $ 51.96 ) uniquely made a mirror image technical reversal. In electronic stocks flash memory producer SanDisk ( SNDK $ 38.70 )  up 16% surprised with a glowing forward look; while Advanced Micro Devices ( AMD $ 4.22 ) a chip maker fell 13.9% .

Google ( GOOG: $ 610.82 ) up 6% on the week was a special stand-out and catapulted above both the 50 and 200 moving averages. Revenues grew enormously 39% to $ 9.61 billion well above the consensus of $ 8.4 Billion.

Many other major companies missed on their top line revenues: American Express, Capital One, General Electric, Microsoft, Dole Food and Qualcomm just to name a few. IBM missed but scored heavily on earnings improvements. IBM briefly advanced above its critical 50 and 200 day moving averages but then succumbed below both averages amid Friday’s debacle.

Apple accounts for a significant proportion of the overall earnings of the Standard & Poor’s 500. S&P 500 earnings are expected to show a rise of 5.7 percent in the second quarter from a year ago; without AAPL it would be only 4.8%.

Management can only go so far cost cutting. The present quarter will tell the story whether the market can hold with weaker top line expectations.

Economic Data

Retail Sales last Monday declined 0.5% vs expectations of a 0.3% increase and ex-auto -0.4% against a consensus of a 0.2% gain. It was the third consecutive month of declines. Motor vehicle sales declined 0.6% and of course gasoline station sales were off reflecting lower prices at the pump. Notable declines were seen in discretionary spending such as furniture; electronics health and personal care sporting goods; hobby book and music stores. Core retail sales, which exclude gasoline stations and building materials sales declined 0.1%. This is  negative for the PCE component of 2nd qtr GDP.


The Fed released its Beige book Wednesday indicating moderate growth for the economy. Residential Housing was largely positive while employment grew “ at a tepid pace.” Housing starts for June were positive at 760K above the consensus of 743K. Permits were a little lower at 755K vs 784K and June Existing Home Sales disappointed at a pace of 4.37M vs 4.62M in May.

Then on Thursday the Initial Claims report showed a relatively large increase to 386K from 352K and above a consensus of 365K


Technical Information

Support Levels:  

S&P 500           1346; 1334

Resistance S&P 500   1383; 1399

DOW            12,680; 12,530

Resistance DOW        12,890; 13,100

QQQ             6337; 6257

Resistance QQQ         6483; 6577                     

Nasdaq          2874; 2829

Resistance Nasdaq      2937; 2990   



Typically, bond spreads spike when stock prices slump …. The spread is currently at 3.45% and climbing. It is above the average of 1.97% since 1962 …. It is an anomaly for there to be both a rising spread and stock prices,

Something’s got to give. Historically, when bond spreads have spiked, stocks have tanked. Yet this time, stocks have been reluctant to give much ground. Should equity investors ultimately be proven to be on the winning side of this morass, prices should jump,  But should equity investors be on the wrong side, there is a significant downside.



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Rule 17B requires disclosure of payment for investor relations*

Princeton Research has received about $ 2,500 per month from Lucas ( LEI ) marked with an asterisk.    Princeton has been paid for investor relations in the past and has negotiated a contract to be paid 100,000 restricted shares from Leo Motors ( LEOM ). In addition Princeton has bought shares. Cross Border paid us 25,000 restricted shares several months ago. We do not currently represent Cross Border but we like the company. We own about 3,000 shares. Princeton has 2,281,578 shares of AIVN.

Pursuant to the provisions of Rule 206 (4) of the Investment Advisers Act of 1940, readers should recognize that not all recommendations made in the future will be profitable or will equal the performance of any recommendations referred to in this Email issue. Princeton may buy or sell shares in companies it represents at any time.


Please Direct All Inquiries To:

Mike King

Princeton Research

3887 Pacific Street, Las Vegas, Nevada 89121


Phone: (702) 650-3000

Fax: (702) 697-8944




Visit: www.princetonresearch.com


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