Schaeffersresearch.com: Cautiously bullish. This week’s market action was driven mostly by the negative headlines from Europe, ignoring all the better than expected economic news from US. The market appears to be trading in a new range: SP500 1220 – 1280. From Aug to Oct low, SP500 was 1120- 1220. Their advice remains the same as the last week: Technical speed bumps remain overhead, and headline risks linger, suggesting hedging is still a prudent strategy. But a breakout above resistance levels could be very rewarding for bulls, as short-covering activity and an abundance of sideline cash could provide the fuel to drive equities during a seasonal period that favors the bulls.
Chartadvisor.com: Cautiously bullish. The markets appear to be trading a the bottom of the new range.
VIX (32): 24, 30 and 36 remain important levels. The fact that VIX did not penetrate through 40 the last week is good news.
My trade: I, again, took advantage of last week’s weakness to correct my negatively biased portfolio.
CRM is an interesting case to study. As I confessed earlier here that I got scared early October when the markets bottomed. By Oct. 4th (Tuesday), CRM crashed down to ~$113. I have a large position in CRM with strike of $130. Although on the chart, CRM reached a bottom level not seen in a long time, I worried that the markets may further deteriorate and that there isn’t much time value left in my $130 call expiring in 4 days, I traded a call spread: bought back 130 call and sold 110 call expiring in 4 days, for a net credit of $3.5/sh. Part reason of this trade is greed: thinking I could make more on time value. But, as markets can and will surprise us from time to time, I was equally surprised how fast CRM recovered back to 120-130 level. Other than CRM, I also sold more naked calls (as a hedge). Through out the remainder of October and first part of November, the markets zoomed up like a rocket and everyday the market goes up, the margin requirement (for the naked short calls), went up and I was missing all the gains that could have been mine if I didn’t panic and went bearish. But luckily, this time I didn’t cover those positions for a loss. I hang on tough and worked to correct my short positions every change I got. From Oct. 7th, I have been rolling up CRM 110 calls. All of a sudden, Nov. 17th, post CRM earrings report, CRM went back down to 110 levels. From Oct. 4th to Nov. 18th, I rolled up CRM calls several times (weeklys to monthly options). Eventually, I was able to reap all the profits totaling $16/sh, while my CRM shares didn’t change at all.
The CRM story highlights the beauty of my Covered Call + Call Spread strategy in dealing with fluctuating markets.
