Covered Calls

Monday Morning Observations May 14th

admin — Mon, 14 May 2012 13:37:08 +0000

What’s another 2 billion?

Futures are in the red again this morning in the wake of JP Morgan’s disclosure that high-risk trading activities caused a $2 billion loss. This revelation capped a bad week for the markets, which is continuing in today’s futures market. The Dow has taken the brunt of the decline, falling 3% since the end of April (dropping 7 of the month’s 9 trading days.)

Did anyone sell in May and go away?

Although the indices are still up for the year, Friday’s trading saw a continuation of the current down draft. The S&P 500 fell 4.6 points (0.34%) to end the week at 1,353.39. The DJIA dropped 34.44 points (0.27%) to close at 12,820.60 (still below the 13,000 range.) The NASDAQ slipped only 0.18 points (0.01%) to 2,933.82. As a result, the VIX ended the week just below the 19 level. As we head into option expiration week, it’s important to keep an eye on Europe – despite the headlines from JP Morgan and Facebook.

There was some good news last week as investors saw a stronger-than-expected consumer sentiment report. The University of Michigan’s consumer sentiment index hit its highest levels since January of 2008, as it rose to 77.8 for its mid-May reading from 76.4 in April. Additionally, producer prices unexpectedly dropped 0.2% in April due in large part to lower energy costs. (Most experts expected a flat reading.)

Oil Prices – U.S. crude oil prices for June declined to $96.13 from $96.51 per barrel. Oil prices continued to fluctuate with economic reports.
Gold- Gold futures declined to $1,584.
U.S. Dollar – The U.S. Dollar advanced versus the euro and the Yen.
U.S. Treasury Rates – The ten year treasury yield declined to 1.84% from 1.88%. Ten-year bond yields have bounced between 1.80% and 2.10% for several months. After a slight rally in yields above this range we have now fallen back.
Asian shares were down in overnight trading.
European markets are down this morning.
U.S. Stock Futures are down this morning.
Facebook – Facebook is slated to launch its IPO this Friday. The expected valuation could be as high as $100 billion.

This week’s earnings announcements will be highlighted by Groupon.

For a detailed discussion on this month’s changes to our ETF Portfolio, please respond to this e-mail or register below for our May “State of the Market” Conference Call tomorrow. Our Portfolio Management Team will discuss the specifics behind the changes made in the model for option expiration week. The call will be tomorrow at 3 PM EST, please try to make time to dial in. (We promise to keep it under 30 minutes. If you are unable to make the call but would like to review our updated asset allocation breakdown, just respond to this e-mail and we can get you the data with the proper disclaimers.)

Click “Register Now” to reserve your spot!

REGISTER NOW!

Thank You and Have a Great Week!

Kevin Simpson, Capital Wealth Planning, LLC
Covered Call Strategists
Coventry Square
840 111th Street North
Suite 1
Naples, Florida 34108
t 239.593.2100

ETF Covered-Call Equity Income – May Conference Call

admin — Thu, 10 May 2012 11:21:20 +0000

“State of the Market”

May Conference Call

Click “Register Now” to reserve your spot!

REGISTER NOW!

Please join Capital Wealth Planning for our Monthly “State of the Market” Conference Call. Our Portfolio Management Team will review the portfolio’s YTD performance. They will also discuss in detail the tactical changes in the ETF holdings for the summer of 2012 and the income expectations for the year. Additionally, they will share their thoughts on today’s markets and outline what they will be paying close attention for the second quarter. Finally, they will review the impact of May expiration on the covered call overlay.

Title: “State of the Market” May Conference Call

Date: Tuesday, May 15, 2012

Time: 3:00 – 3:30 PM EST

After registering you will receive a confirmation email containing information about joining the Conference Call. Although we host our calls on the GoToWebinar service, the calls are audio only. You can dial in or log-in to listen.

Kevin G. Simpson

Portfolio Manager

Capital Wealth Planning, LLC
Covered Call Strategists
Coventry Square
840 111th Street North
Suite 1
Naples, Florida 34108
t 239.593.2100
c 239.290.4351

Monday Morning Observations 5-7

admin — Mon, 07 May 2012 16:02:25 +0000

European Headlines – Remember Them?

Futures are in the red this morning as investors digest key elections results in France and Greece.

This is a continuation of the downward momentum from Friday’s trading, with the broader market posting its largest weekly decline this year after a disappointing report on jobs in the United States – boosting investor concern about the strength of the economic recovery. The Labor Department reported an addition of 115,000 jobs in April, a sharp slowdown from the 154,000 jobs created in March. Worth noting, the VIX finally popped above 19, while oil prices sank below $100 a barrel for the first time since February.

For the week, the S&P 500 was down 2.4% closing at 1,369.10, the Dow dropped 1.4 % to 13,038.27 (still above the 13,000 level), and the NASDAQ slipped 3.6% to 2,956.34.

Oil Prices – U.S. crude oil prices for June declined sharply to $98.49 per barrel. Oil prices continued to fluctuate with economic reports.
Gold- Gold futures rose slightly to $1,645.
U.S. Dollar – The U.S. Dollar advanced versus the euro and fell versus the Yen.
U.S. Treasury Rates – The ten year treasury yield fell to 1.88% from 1.92%. Ten-year bond yields have bounced between 1.80% and 2.10% for several months. After a slight rally in yields above this range we have now fallen back.
Asian shares were down in overnight trading.
European markets are down this morning.
Facebook – The roadshow begins today, with the IPO slated to begin trading on May 18th.

On the economic front, the consumer credit report is due out today. The trade-deficit figures for March and the federal budget-deficit numbers for April will be released on Thursday.

Earnings announcements this week include: Walt Disney, Cisco Systems, Tyson Foods and Electronic Arts (among others).

For a detailed discussion on this month’s changes to our ETF Portfolio, please respond to this e-mail and register for our May “State of the Market” Conference Call on 5/15/12. Our Portfolio Management Team will discuss the specifics behind the changes made in the model. The call will be Tuesday, May 15th at 3 PM EST, please try to make time to dial in. (We promise to keep it under 30 minutes. If you are unable to make the call but would like to review our updated asset allocation breakdown, just respond to this e-mail and we can get you the data with the proper disclaimers.)

Click “Register Now” to reserve your spot!

REGISTER NOW!

Thank You and Have a Great Week!

Monday Morning Observations 4-30

admin — Mon, 30 Apr 2012 13:14:46 +0000

The S&P 500 recorded its best week in a month as corporate earnings and consumer confidence continues to trump the projections for slower economic growth. The S&P added 3.38 points to climb to 1,403.36 on Friday (up 1.8% since April 20^th – posting back-to-back weekly gains.) The Dow gained 23.69 points, or .18% to 13,228.31. The NASDAQ rose 18.59 points, or .61% to 3,069.20. The VIX has traded down to the 16 range.

Oil Prices – U.S. crude oil prices for June advanced to $104.93 per barrel. Oil prices continued to fluctuate with economic reports.
Gold- Gold futures advanced to $1,665.
U.S. Dollar – The U.S. Dollar was relatively flat versus the euro and advanced against the Yen.
U.S. Treasury Rates – The ten year treasury yield declined to 1.93% from 1.96%. Ten-year bond yields bounced between 1.80% and 2.10% for several months. After a slight rally in yields above this range we have now fallen back.
Asian shares were up in overnight trading. Hong Kong was strong following good earnings reports. Japan and mainland China were closed for a public holiday.
European markets are relatively flat this morning.
U.S. Stock Futures are down slightly this morning.

On the economic front, consumer-spending figures for March are due out today; motor vehicle sales are slated for tomorrow; and the unemployment rate for the month comes out on Friday.

Earnings announcements for this week include: Pfizer, Visa, UBS, Comcast, Kraft and Berkshire Hathaway.

Click “Register Now” to reserve your spot!

REGISTER NOW!

Thank You and Have a Great Week!

Kevin G. Simpson

Portfolio Manager

Capital Wealth Planning, LLC
Covered Call Strategists

Monday Morning Observations 4-24

admin — Wed, 25 Apr 2012 12:33:12 +0000

The roaring market of the first quarter seemed like a long time ago, as the Dow struggled to claw its way back above the 13,000 level. For the week, the DJIA gained 1.4%, the S&P 500 added 0.6% and the NASDAQ fell 0.4% (down for the third straight week.)

No economic news was released Friday (option expiration day), but strong earnings reports from GE, McDonalds and Honeywell helped to buffer larger losses from disappointing housing and jobs data from Thursday.

Oil Prices – U.S. crude oil prices increased. Oil prices continued to fluctuate with economic reports.
Gold- Gold futures were relatively flat.
U.S. Dollar – The U.S. Dollar advanced slightly versus the euro but declined against the Yen.
U.S. Treasury Rates – The ten year treasury yield rose to 1.97% from 1.95%. Ten-year bond yields bounced between 1.80% and 2.10% for several months. After a slight rally in yields above this range we have now fallen back.
Asian shares were down in overnight trading.
European markets are down sharply this morning.
U.S. Stock Futures are down this morning. European budgets are front and center. Futures are pointing to a 1% decline across indeces at the open.

Speaking of earnings, Apple reports after the close tomorrow. Last week, Apple shares fell more than 2.4% as shares continued to struggle. AAPL posted back-to-back weekly declines of more than 4% for the first time since late December 2008. Earnings season continues in high gear as AT&T, Caterpillar, Boeing UPS, Pepsi, P&G and Exxon (just to name a few) report this week.

In economic news, the Fed will meet tomorrow and Wednesday to update their economic forecasts.

All eyes will be re-focused on Europe as the political uncertainty raised new questions about how effectively the region would tackle its sovereign debt crisis. The headlines will focus on the Netherland’s budget issues, German manufacturing numbers, and the French elections.

Click “Register Now” to reserve your spot!

REGISTER NOW!

Thank You and Have a Great Week!

Kevin G. Simpson

Portfolio Manager

Capital Wealth Planning, LLC
Covered Call Strategists

Monday Morning Observations 4-16

admin — Tue, 17 Apr 2012 13:28:09 +0000

It was a volatile week on Wall Street as the markets bounced around quite a bit. Stocks fell Friday with the S&P 500 suffering its biggest weekly decline of 2012. (The S&P was down 2% on the week.) Declines were fueled as consumer confidence backed off in April from a one-year high; China’s growth rate slowed to the weakest level in almost three years; and credit-default swaps on Spain surged as the nation teeters on the brink of becoming the fourth euro-region nation in need of a bailout.

Interestingly, during last week’s pullback we did also see the market’s strongest two-day rally of 2012 – remind you of last year?

Gold – Gold futures are down slightly.
Oil Prices – U.S. crude oil prices dropped. Oil continues to fluctuate with economic reports.
U.S. Dollar – The U.S. Dollar rose versus the Euro and the Yen over the weekend.
U.S. Treasury Rates – The 10-year Treasury yield declined to 2.00% from 2.05%. 10-year bond yields have bounced between 1.8% and 2.10% for the past several months. After a slight rally in yields above this range, we have now fallen back.
Asian shares were mixed in overnight trading. Hong Kong and Japan pulled back while Singapore advanced slightly.
European markets are mixed this morning. Germany is up while U.K. is declining.
U.S. Stock Futures are up this morning. All eyes are on earnings data.
Tax Day – Tomorrow is the deadline to file income-tax returns for 2011.

On the economic front this morning, traders will be looking at the retail sales numbers for March and the Empire State manufacturing index.

Most importantly, we have a big week on the earnings landscape as the reporting season kicks into high gear with announcements coming from: American Express, Citigroup, Bank of America, Intel, IBM, Verizon, GE, J&J, Coca-Cola and McDonalds (to name a few).

Click “Register Now” to reserve your spot!

REGISTER NOW!

Thank You and Have a Great Week!

Covered Call Webinar

admin — Tue, 10 Apr 2012 15:52:38 +0000

Click “Register Now” to reserve your spot!

REGISTER NOW!

Please join Capital Wealth Planning for our Monthly “State of the Market” Conference Call. Our Portfolio Management Team will review the portfolio’s YTD performance. They will also discuss in detail the tactical changes in the ETF holdings for Q2 2012 and the income expectations for the year. Additionally, they will share their thoughts on today’s markets and outline what they will be paying close attention for the second quarter. Finally, they will review the impact of April expiration on the covered call overlay.

Title: “State of the Market” April Conference Call

Date: Tuesday, April 10, 2012

Time: 3:00 – 3:30 PM EST

Kevin G. Simpson

Portfolio Manager

Capital Wealth Planning, LLC

Monday Morning Observations

admin — Tue, 10 Apr 2012 15:35:21 +0000

The short trading week opening the second quarter saw the Dow Jones Industrial Average pull back 1.2%. After the 3-day weekend, we are seeing the market respond to Friday’s unemployment report.

Oil Prices – U.S. crude oil prices gained. Oil prices continued to fluctuate with economic reports.
Gold- Gold futures continued to rise.
U.S. Dollar- The U.S. Dollar has gained versus the euro but declined versus the Yen.
U.S. Treasury Rates – The ten year treasury yield declined to 2.17% from 2.24%. Ten-year bond yields bounced between 1.80% and 2.10% for several months. Positive economic reports have driven yields above the intermediate range.
Asian shares were down overnight trading. Chinese inflation accelerated more than expected in March. CPI rose 3.6%, above the estimate of 3.4%.
European markets are closed this morning.
U.S. Stock Futures are down this morning. The monthly jobs report was released on Friday, when the market was closed. The report was weaker than expected, although the unemployment rate improved by 0.1%. Many analysts believe the unemployment rate is not fully discounting the weakness that remains in the job market.

It will be interesting to see how the markets respond this week following the terrific run-up in the first quarter.

On the economic front, the Federal budget-deficit figures for March are due out Wednesday and the consumer-price index for the month will be released Friday.

For a detailed discussion on this month’s changes to our ETF Portfolio, please respond to this e-mail and register for our April “State of the Market” Conference Call on 4/10/12. Our Portfolio Management Team will discuss the specifics behind the changes made in the model. The call will be tomorrow, April 10th at 3 PM EST, please try to make time to dial in. (We promise to keep it under 30 minutes. If you are unable to make the call but would like to review our updated asset allocation breakdown, just respond to this e-mail and we can get you the data with the proper disclaimers.)

Click “Register Now” to reserve your spot!

Thank You and Have a Great Week!

Kevin Simpson of Capital Wealth Planning

Investing for the new decade

admin — Mon, 04 Jan 2010 09:02:24 +0000

While New Year’s Resolutions abound and the stock market continues its recovery, it is imperative that investors keep several basic investment rules in mind. As we start, not just a new year but, a new decade – it’s a great time to clean the slate and begin anew. What are some of the common mistakes made by individual investors? Here are ten to keep in mind:

1. Not having enough money on hand for emergencies. No one expects to lose their job or become ill. But it can happen and the financial repercussions can be long-lasting. A prudent strategy is to keep a rainy day fund with enough money in a separate account to cover living expenses for up to six months of income. This fund should be easily accessible in liquid money market instruments and short-term CDs. Once your emergency plan is in place, you are then ready to set up a regular investment plan for your future.

2. Delaying the investment process. This can cause real damage to your financial situation, because time is a great ally when investing. It is easy to procrastinate, but don’t! Even relatively small amounts of money grow rapidly over time. For instance, if you invested $100 per month and earned 8% annually, you’d have $41,965 in 17 years. Sock away $200 at the same rate and your account would grow to $83,929. Establish a goal and work backwards to create your plan (using 4 or 5% annually) and stick to it. Continuing your savings discipline is paramount to your success, especially during troubling economic times.

3. Keeping too little in the stock market. In the wake of the 2008 stock market collapse, many people don’t have enough of their money invested in stocks and related investments. That’s unfortunate. While stocks go up and down, history has shown that they perform well over time. Stocks, as measured by the S&P 500 have generated annual returns of about 9.5% for the past 39 years. There were many occasions during those four decades when the markets looked rather shaky, but for those that stayed invested – it paid off.

4. Paying too much in taxes. Millions of Americans could cut their tax bill each year if they would take the time to learn the current codes or work with a qualified tax professional. Here’s good way to cut yours: Contribute as much as possible to your company retirement plan. Too many people have reduced or stopped their contributions because of the declines they witnessed in 2008. Dollar-cost-averaging into a weak market is a good way for long-term investors to accumulate investments at lower prices. You may also be eligible for a tax deduction on the contributions and your earnings will grow tax-deferred. In 2010, it would also be advisable to consider a conversion to a Roth IRA. For many people, this move can be advantageous – check with your financial advisor to see if it makes sense for you.

5. Buying yesterday’s winners. Ever notice how last year’s best investments rarely turn out to be this year’s winners? Avoid buying a security just because it has been rising rapidly in recent months. Before investing in anything, evaluate its potential for continuing the positive trend. It seems obvious – yet so many folks chase the high flyers and end up “buying high” instead of “buying low”.

6. Not focusing on fundamentals. Sometimes investors get caught up in the excitement of the market, buying when things seem hot and selling when there is panic in the market. This is called investing on emotion. It is not a recommended practice because it leads investors to buy high and sell low. Another way to avoid this is to own Index Funds – perhaps instead of trying to pick a handful of great stocks – you would be better off in the long run if you owned every stock.

7. Forgetting to rebalance your accounts. At the start of 2009, rebalancing meant adding to your equity positions after a major decline. This idea goes against common sense and is often the hardest thing to do for the individual investor. It was Sir John Templeton who advised “buying when there was blood in the street.” It always seems crazy at the time but works more often than it doesn’t as long as you are adding to quality investments or the major indices. The recent run-up in the equity markets since the March lows may have tilted your portfolio the other way. If you find yourself overweighted in a particular sector or asset class – rebalance and take some profits off the table. And yes – that may mean moving a little money into something that does not look very exciting like bonds or cash.

8. Being unprepared. Many investors make an investment believing it will only go up in value. Sadly, sometimes stocks go down – they don’t always go up. Be prepared for the opposite to occur – when it does, you are more likely to consider the decline an opportunity to increase your position of a quality investment or an index at lower prices. If you’re investing in more speculative individual stocks – a good practice is to always have a stop loss in place on every position to help limit your downside exposure.

9. Failing to get professional guidance. If you’re like most individuals, you don’t have the time and experience to monitor the financial markets and make decisions based on intensive research. When you have the guidance of a full-time investment professional, you may increase your profit potential and reduce your portfolio’s risk.

10. Not “renting” your stocks or funds. One technique that you may want to explore in the new decade is the art of covered call selling. Selling covered calls is a conservative strategy that many use to generate additional cash-flow on their portfolios. There are a handful of firms throughout the country that specialize in helping clients maximize monthly income streams from their existing portfolios. This is similar to renting your investment real estate for passive income. Do yourself a favor and learn about this in 2010 – stop leaving money on the table!

An efficient frontier

admin — Tue, 22 Dec 2009 13:32:30 +0000

I recently found a useful tool offered by iShares, called the Correlation Calculator. After plugging in your portfolio, it lists how Exchange Traded Funds perform relative to your existing investments. Some move positively in the same direction, while others move in opposite directions. This highlights one of the pillars of intelligent investing, diversification. When constructing an investment portfolio, one cannot afford to overlook diversification. When compiling an investment portfolio, correlation and standard deviation are vital considerations. First, you want to choose investments that don’t always move in the same direction. If they do, you really haven’t diversified. For example, if two investments have a correlation of 1, they move identically. When one goes up 5%, so does the other. And when one falls 5%, so does the other. A correlation of -1 means they move in completely opposite directions (good for diversification!). And when they have a correlation of 0, they have no relationship. One investment goes down, while the other plays golf.

Now let’s consider standard deviation. It sounds very technical but all it really means is how much am I going to sweat while holding this investment? The higher the standard deviation, the more you’ll sweat. Using the same correlation tool from iShares, it gives you the standard deviation of your portfolio, as well as the standard deviation of a list of ETFs as well. We got very excited when we saw that our portfolio actually has a lower standard deviation than the Treasury Inflation Protected ETF (TIP) over the past 3 years. It has also returned over 15% over the past three years, with annual rebalancing, while the S&P 500 has lost around 16%. Also worth mentioning, these numbers do not reflect the covered call overlay that we implement on each of the ETFs in our model, so the standard deviation would be even lower!
Analyzing the standard deviation of your portfolio as well as the correlation between the investments inside your portfolio will help you become more diversified and sweat less. Save the perspiration for the gym!