Options Trading Strategies

Where To Invest Now

Market Strategies Newsletter

Covering High Return

Balanced Investing Success Strategies For

Where To Invest Now,

Stocks To Buy And Options Trading

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

 July 16, 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 $275

increasing our gains for the year from

$5,800 to $6,075.

 

This Where to Invest Options Trading Portfolio has produced a

Year To Date Gain Of Over 60%.

 

Currently Approximately only $1,085 funds are in use.

A full $10,000 trading portfolio is not 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 to avoid

extreme moves in either direction.

We can produce high returns in

up or down markets.

 

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Trader’s Commentary:

This was a slightly positive week in which we made the bulk of the gains on MCD again. Once again we were looking for a defensive, high dividend paying stock with an order below the previous close. This again illustrates why we place orders near support rather than trying to buy options on breakouts. MCD didn’t really break to the upside until it traded up through 90.75 or so and then continued to 92.50 on Thursday. Our gain was over 100% BEFORE that breakout with the balance of an additional 150% on the breakout day.

I want to point out that the problems we faced last week, last month, and last year all still with us. The Euro issues, our unemployment numbers, trade deficits and overbearing national debt have not begun to see any real resolution. Neither candidate has come up with a plan. This makes for great uncertainty and we all know that above all, markets hate uncertainty.

The sharp rally on Friday, like the one on June 29th are common occurrences in weak markets. The continued demonization of the banks and business overall coming from Washington are still the rule. The number of legislators who have spoken out on Jamie Dimon deserving to lose his job or have his salary “clawed back” is pervasive. While this is not a soapbox, my feeling is that if someone operates in good faith, within the scope of their authority clawbacks should not be an issue. Clearly the traders and supervisors in London violated this rule and deserved what they got.

The debt issue is the same now as last year and we got a break from this same area (S. & P. 1370) of 20% in just 4 weeks. The election and all the other assorted issues mean we are vulnerable. We will continue to maintain our balanced approach and attempt to buy support and sell resistance….CAM

 

Market Laboratory – Weekly Changes

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

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:

 

This week marked the second week in a program to write weekly expiring options against core positions in financial stocks. Beside the balanced approach of owning BAC (and the B warrants) as well as JPM versus being long the FAZ (the REVERSE financial index) we also have started writing the just out of the money weekly calls. The results have been as follows: Long 150 JPM with an average cost of $34.28 a weekly gain in week 1 of $35 or .23/share and a loss of $100 in week 2 or .66/share currently .70 proceeds for this week or .47/share adjusted price of $34.24. Closing price $36.07

 

This means that we either continue to own the stock at the lowered cost basis, or we lose it to the options owner @ $36 for a gain of $1.76 / share. If the stock is not “called away,” we will write a call against it next week. This strategy allows us to continue to lower our cost, or sell it higher. In an indecisive market, we get price protection and we also collect the $ .30/share dividend quarterly. This is one of the methods we use to balance protection of principal with potential profit. The need to avoid headline risk in today’s world is getting more important every day. The connection of our markets with Euro, China, and political issues grows daily….CAM

 

INDEX OPTION RECOMMENDATIONS

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 $ 3260 in a mixed week.

Our gain for the year was $17,576.85 and

with last week’s gain has increased to $20,836.85.

 

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 $ 170 in the options positions and $ 81,327 in the 16 long stock positions for a total of $ 81,497 with $18,503 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

Fundamentals

Utilities led the way up 1.66% leading all Dow Industry Groups, most unusually, in a small Dow up-week, for the first time in several months. All fifteen Dow Utility components were positive led by Exelon ( EXC $ 38.52 ) up $ 0.97 or 2.58%: Utility stocks have rewarded patient investors with modest but consistent returns. The Utility ETF ( XLU: $ 37.34 ) closed at its highest level in four years, since September 2008.

Health Care rose 1.24% and the beleaguered Financial sector added 1.10%, a relief rally led by J.P. Morgan Chase ( JPM: $ 36.07 ) up 2.17 on the week, or 6.4%. Wells Fargo ( WFC: 33.91 ) + 0.86 added 2.6%. Both earnings were better than expected providing a much needed boost to the financial sector.  The improving housing sector helped provide a solid quarter. Apparently the huge J.P. Morgan loss has been partially closed out with losses of about $ 5.8 B. Citigroup ( C: $ 26.65 ) will report Monday before the open. $ 0.90/sh is expected down from $ 1.09 last year.

Stocks rallied on Friday due to a sharp drop in the dollar, rally in the Euro. The greenback still managed to close at 83.66 its best close since the week of July 14, 2010. The Euro finished its week at 1.2240.

FOMC minutes failed to mention QE which was depressing to equities. Earnings expectations have been downgraded due to the slowing economy. Next week earnings season will be in full momentum and have direct influence on market movement. The markets are back-grounded with a bearish tone.

 

Economic Data

Initial Unemployment Claims fell to 350,000 for the week ended July 7^th, the lowest since March 2008 mostly as a result of seasonal adjustment factors mainly due to the retooling in the motor vehicle manufacturing plants. Motor vehicle sales have been stronger than expected all year leaving very low inventories. All the manufacturers, the big ones, Ford and GM as well as Chrysler and Nissan kept plants open to replenish inventories. The numbers over-adjusted for the usual number of layoffs coming from this huge sector. Continuing Claims were also lower falling for the week ended June 23^rd to 3.304 million.

Consumer Credit for May came in at a huge $ 17.1B. Consumer Credit is fully in an expansion phase as banks are more willing to lend.

The PPI was up 0.1% above the consensus of -0.6%. The CORE PPI is at a +0.2% same as the past several months.

The May Trade Balance was -$48.7B a little better than expectations of -$ 48.9B and  3.75% below the -$50.6B in April.

 

Technical Information

Support Levels:  

S&P 500           1346; 1322

Resistance S&P 500   1377; 1399

 DOW            12,680; 12,530 

Resistance DOW        12,890; 13,040

QQQ             6270; 6190

Resistance QQQ         6417; 6509                     

Nasdaq          2874; 2829

Resistance Nasdaq      2937; 2972                                         

                                      

CYCLES

Top performing ETF sectors in June were:

Leveraged Long (7.0%), Biotech/Pharmaceutical (+6.5%), Real Estate (+6.2%), Telecom (+6.1%), and Healthcare (+5.9%).

After all sectors but two sectors were brutalized in May, only two failed to advance in June.

On a year-to-date basis and over the last twelve months, Biotech/Pharmaceutical is the best performing sector, gaining 20.3% and 15.5% respectively. Consistent with the theme of select foreign ETFs performing best in June (seven of the Top 10 Winners), Direxion Daily India Bull 3x (INDL) was the best performing ETF from the Leveraged Long sector, advancing 24.4%. From the worst performing sector in June, FactorShares 2X: Oil Bull/S&P500 Bear (FOL) was the biggest loser, shedding 13.4%, as both sides of the spread went against the fund.

Although the second quarter came to a close with sizable gains on June 29th, longer duration bonds were still the biggest winners in the quarter with these funds occupying six of the Top 10 3-Month Winners list spots. PIMCO 20+ Yr Zero Coupon US Treasury (ZROZ) was the best bond fund to own in the quarter, advancing 20.1%. Housing, Biotech and Natural Gas related funds took the remaining four spots on the quarter’s Winners list. Natural gas could finally be finding a bottom after trading at its lowest level in more than a decade earlier this year. After repeated appearances on the new 52-week Low list, United States Natural Gas (UNG) was the top performing un-leveraged ETF of the second quarter, gaining 21.1%.

As the slowing global theme gained traction in the second quarter, select BRIC and energy related funds were hard hit. Solar and wind energy continued to tumble lead by a 30.4% decline by Market Vectors Solar Energy (KWT). China’s tremendous growth is primarily fueled by coal, so when concerns about its growth rate increased, prices for coal slumped, dragging Market Vectors Coal (KOL) down 23.1%. Fears of over-leveraged consumers in Brazil (sounds familiar) amidst slowing growth there lopped 23.4% off Global X Brazil Financials (BRAF) in the second quarter. Argentina’s storied past had investors and traders aggressively exiting that country in Q2 as unfavorable government policies were enacted. Global X FTSE Argentina 20 (ARGT) has been sinking for quite some time, appearing on four of the five Losers lists.

Average daily trading volumes for the Top 10 Most Active were moderately lower in June when compared to May, but are still slightly higher than they were in the first quarter of 2012. Barring a major exogenous event sometime in the next few months, daily trading volumes are likely to continue to dwindle, especially in July and August, the summer doldrums. New 52-week highs and lows both contracted in June. New highs are at their lowest level since December 2011 while new lows remain at their second highest reading of 2012. Many of June’s new highs were bond related funds peaking early in the month while many of the new lows were commodity related. Slowing global growth, Europe’s debt debacle, and expectations of additional monetary stimulus boosted bond demand and pulled capital out of commodities in June.

 

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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.

CONTACT

Please Direct All Inquiries To:

Mike King

Princeton Research

3887 Pacific Street, Las Vegas, Nevada 89121

 

Phone: (702) 650-3000

Fax: (702) 697-8944

 

mike@princetonresearch.com

 

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Options Trading Strategies