Weekly Wrap-Up

What a great week that was!

Unlike the Fed rallies, where the gains came so quickly we got blown out by our callers, this was a nice, manageable run-up followed by a good, sensible consolidation that was nearly perfect for our virtual portfolios.  We took a cautious stance into the weekend with 3/4 covers on most of our positions as we have a ton of profits to protect and it doesn't pay to be greedy in this market but, so far this weekend (other than a strange move by the DOE that makes it seem like they are worried about something) the news looks pretty tame.

• Our $10,000 Virtual Portfolio has just one uncovered position, TWX and is now up to $14,695 and still a week shy of it's second month (started 2/19).
• The $25,000 Virtual Portfolio also started on 2/19 and is back on track with $33,952, a 36% gain and just 3 of 11 positions are naked, also protecting profits after a very nice week.
• The Short-Term Virtual Portfolio was an underperformer for the week, gaining just 14% because we took MASSIVE hits on our protective DIA puts as well as our oil puts.  That's the price we pay for trying to balance the virtual portfolios but it's to be expected as those DIA puts are our biggest winners in the down market weeks and I do sleep better on the weekends knowing we have a buffer.  This is the first week we've really regretted our insurance and the insurance is still there – these are just unrealized losses.  The virtual portfolio overall is up 225% for the year and MOST of those gains are from DIA puts, you can't win them all!  We have 33 open positions with just 14 naked calls overbalanced by 9 naked puts of greater value as we're really protecting the LTP. 
  • Note that our STP is back to 80% cash though so, when I say we are bullish, we are bullish WITH THE POSITIONS WE HAVE, not all gung-ho bullish overall.  Still cautiously optimistic on the whole.
• The Long-Term Virtual Portfolio was the star of the show this week with an explosive 24% gain (making a neat double for the year so far) as we had let the STP carry the burden of protecting our long positions into the weekend and that worked out very, very well.  Now we have some very nice gains to protect and just 17 of 41 positions are still naked.
• Our Day Trading Virtual Portfolio also had a fantastic week, jumping another 52% from last week, leaving us up 170% as we close out our first month.  We covered 8 of 13 positions, which is very un-day-trade-like so I guess I was kind of nervous about the weekend after all! 
• The Stocks Virtual Portfolio even had an exciting week and would have been more exiting if I hadn't gotten out of MRB too early but we still managed to add 10% for the week on our 5 positions and we're up 49% for the year, not bad for pokey old stocks.
• Complex Spreads had a banner week, with a 36% gain (153% for the year) as it is really the Google/Apple/Crox virtual portfolio at this point and what a great week it was to be in those three companies.

Apple was the play I stomped my foot on Tuesday as I said in that morning's post " You would think we couldn’t want any more Apple as it’s our largest virtual portfolio holding but it may be time to buy MORE APPLE!  If you have it now, or even if you don’t, it’s time to add a layer of higher calls like the Jan $150s at $22.50 (more this morning) or the 2010 $150s at $36.10."  The Jan $150s finished the week at $27.62 (up 22%) and the Jan '10 $150s did a dollar better at $42.65 but that's up just 18%, still a very nice deal with 20 months of Apple gains remaining!

It was a very smart week to be a PSW reader as my first public pick of the week was AZN Oct $40s, which opened Monday at $2.40 and finished the week at $5.10, that one was very easy with the Vytorin news that started the week.  My XLE May $73 puts were my worst public pick of the week, they are down almost 50% from Tuesday's open but, they were the hedge of the set and we've rolled them up and doubled them down into the May $79 puts, still down 34% in the DTP with a basis of $5.45. 

My other two Tuesday morning picks (I was on a roll) were XLF Apr $25s which went from $1.50 at the open to $2.50 the next day but are now back to $1.75 and are the poster child for learning to take profits off the table (we did).  My fourth Tuesday morning selection was MSFT and the April $27.50s flew up from $1.65 to $2.20 THAT DAY and pulled back to $1.80 over the course of the week but the May $29s have been more steady, up just a nickel from their $1.30 open on Tuesday after hitting $1.60 on Tuesday afternoon and those are still a buy.  The only other main-page pick I made for the week was Friday's ANF Aug $80s, now $6.20 but it was a spread that ended up costing just $4.70 so I wouldn't go jumping on it for more than that. 

If I'm making a lot of early picks in the morning post that's always a good indicator that I'm seeing a rally but, if you are a free reader, be aware that we are stressing that members take profits off the table – this is not a buy and hold market!

We are getting better though and I'm very happy with the Big Chart progress we made from Monday, when I predicted that the past two weeks of consolidation (and getting Bush out of the country) would lead to a rally week.  We added a green box to the Nasdaq and are just 10 points shy of our "Feeling Better" level of 2,380 after starting the week at 2,261.  The semis finally carried their weight with a 10% gain for the week.  Transports picked up despite a recovery in oil and gave us a green box and the Russell finished a point over the "Feeling Better" zone of 712 – those are very strong signals if we can hold them…

Despite Monday's slow open we picked up a LOT of new positions on Monday and that was the secret to our week's success as Tuesday just tore it up with a rocket launch out of the gate.  It was fantastic to see a huge rally DESPITE a major commodity sell-off on Monday but as soon as Congress ended their BS energy hearings with no action being taken, the energy industry went right back to raping and pillaging as usual and jacked the price back from the hearing day low of $99.55, back to $106.23 by the end of the week despite an 8M barrel build in crude inventories on Wednesday (just shy of a full day's US imports).

We took the money and covered on Tuesday and, although we did poke a little higher on Wednesday, Tuesday's close was indeed the top of the week.  I made the call to ditch all our April calls (not callers) on Tuesday as we enter into the rapid decay period in the two week's before expiration.  Wednesday I said we would be just happy to hold our levels for the week and Wednesday night I pointed out how sad it is that the only levels we seem to hold consistently are high oil prices.

Thursday morning we were thrilled to just not get caught in another bull trap as we continued our theme of cautious optimism and I wasn't happy with GS's attack on the dollar boosting commodities back during the day.  Friday morning we shook off a really horrible jobs report and managed to hold flat for the day but you can't just shake off a loss of 80,000 jobs in a month so that's how we ended up 3/4 covered into the weekend (and anyway, the callers are paying us very well to be cautious!).

Considering all the day trades we are now listing in our weekly closes it was another fairly quiet week with just 83 positions closed for an average gain of 67%.  For the first time in a long time, the only DIA gains we made were on our short put covers with our 3/31 callers expiring worthless and our April callers getting blown out of the water on Tuesday.  Other than that, it was a very nice spread of profits and, of course, our real winners are still riding in the virtual portfolios, but well covered for whatever may come next week: