December Capital Gains – EDC

From the Direxion website:

Upcoming Distributions

Please be advised that the Direxion Shares ETFs in the table below, are planning to pay income distributions according to the following schedule:

  • Ex Date – Wednesday, December 21st, 2011
  • Record Date – Friday, December 23rd, 2011
  • Payable Date – Thursday, December 29th, 2011

2011-12 - Direxion ETF Income Distributions


Cashflow Report Updates – June and October

Over the holidays, I lost some files from my hard drive. I’m still in the process of figuring out what is missing, but the most important set of documents lost was the folder containing all my charts/graphs/spreadsheets for option trading.

Needless to say, I was a little less than happy. The silver lining is that being forced to recreate trading logs made a 2011 year-end review very easy.

As I pulled things together, I noticed that there was an error in two of my previous cashflow reports. I’ve updated the posts, and am in the process of creating a graph that reflects these changes for my December cashflow report and the 2011 Year In Review.

The first error occurred in June; shareholders of EDC received a dividend (paid in June) and a short-term capital gain (paid in July). At the time, I assumed that both were paid on the same date (in June). Unfortunately, the change means that I came up short of the June cashflow goal by $44. Considering I surpassed my July cashflow goal by $400+, I decided that I can still call June a success.

The second error occurred in October; I sold two calls against ERX, but just didn’t add the premiums together properly. The cashflow was $914 instead of $1,014.

January Option Investing – Covered Calls Part 2

Trading ranges settled down towards the end of the week, but still rose enough to give us the Santa Claus rally.  FAS climbed back into the mid-60’s causing my Christmas eve calls to be exercised.  Monday was a holiday and the markets were closed, so this week’s FAS premiums were a little lower than those of previous weeks.

A quick look at the charts, and selling out-of-the-money (OTM) calls is the best way to go. DRN, FAS, and ERX broke their July downtrends. EDC actually broke through as well, but hasn’t moved higher like DRN. Given this environment and the potential upside, I added another call for EDC. I could have sold a call closer to the current price (75.50 or so) for a higher premium, but I’ve seen many low volume rallies between Christmas and NYE and I couldn’t pass up a 5% return on an $80.00 EDC call.

I entered orders on Tuesday, and here is where I ended up.

  • EDC – $80.00 calls @ $3.80
  • FAS – $68.00 calls @ $1.32 (These calls expired Dec 30th)

Look for my December Cashflow Report to come out later this week, as well as a year-end review for 2011.

January Option Investing – Covered Calls

The first two trading days of the new month provided some pretty large price swings; Monday was down, then Tuesday prices went back up.

My December calls for DRN, ERX, and TMF were exercised and the EDC and FAS options expired.

Basic technical analysis shows that we should see confirmation of downtrends or the start of something new.  Rather than trying to guess where prices are headed, I in-the-money (ITM) and out-of-the-money (OTM) calls based on profit.

Here’s a quick example:

Assume that DRN was trading at 48.50. The first ITM call would have a strike price of 48 and the first OTM call would have a strike of 49.

  • Jan $48 call sells @ 3.50
  • Jan $49 call sells @ 3.20

In this example, DRN is selling at 0.50 above the strike price, so I lose 0.50 if the call is exercised and the equivalent price is $3.00.  I would sell the $49 call.

I entered orders on Monday, and here is where I ended up.

  • DRN – $49.01 calls @ $3.30
  • EDC – $72.00 calls @ $7.00
  • TMF – $73.50 calls @ $4.00
  • FAS – $59.00 calls @ $2.10 (These calls expired Dec 24th)
  • ERX – $43.00 calls @ $3.70

Premiums were lower across the board (compared to October and November), with the exception of EDC.

December Capital Gains – DRN and TMF

From the Direxion website:

2011 Capital Gains Distributions (Record Date – 12/15/11)
Please be advised that several Direxion Shares ETFs are planning to pay capital gain distributions according to the following schedule:

  • Ex Date – Tuesday, December 13th, 2011
  • Record Date – Thursday, December 15th, 2011
  • Payable Date – Tuesday, December 20th, 2011

Direxion ETF Capital Gain Distributions - December 2011

December Technical Analysis – DRN, EDC, TMF, FAS, and ERX

For those of you visiting for the first time, I use technical analysis to help make trading decisions related to a covered call strategy. Each month, after options expire, I review price and market action since the previous option expiration date, as well as my commentary from the previous month’s analysis.

As I say in my monthly cashflow report, every investor and trader should review their trades on a regular basis, and this effort helps me improve my ability to “read the tape”.


December Market Analysis

The market entered into a correction on November 17th.  Even with some higher volume gains in the past few weeks, the market was still unable to confirm another rally attempt.

Edited IBD Price and Volume Chart for NYSE - 2011-12-18

The market remains range bound between the October low (6,414) and high (7,864). The longer-term downward trend (established in July and reconfirmed in October) is still intact, giving me a negative bias for December (meaning that all things being equal, in-the-money calls will be the default trade).

In addition, with the end of the trading year fast approaching, now is not the time to load up on leveraged ETF’s.  You never know who will sell what at the end of the year to try to create a favorable tax situation.

December Technical Analysis for DRN

Here were my thoughts on DRN in November:

The short-term uptrend was just that – short-term…DRN sits just above the 50 day moving average (SMA).  However, DRN reached the high 50’s (resistance level mentioned in October) and then reversed course, appearing to establish a new, longer-term downtrend.  Since I am sitting on a position, in-the-money calls are the order of the day.  Extrapolating the current downtrend could have us testing the October lows by the end of the year.  On the positive side, a large move to the upside could break the downtrend.

December’s Chart:

Price and Volume Chart for DRN ETF - 2011-12-18

DRN spent the rest of November looking for a low, and the first half of December testing the newly established downtrend.  Currently, DRN seems to be content to ride the underside of the trend.  On the plus side, a sustained positive move would break the downtrend started back in July.  With each of the last two, near-term lows higher than the previous low, there is some upward momentum.  If DRN decides to move higher, the next test of resistance would be in the mid-50’s.

December Technical Analysis for EDC

November’s commentary:

With the 5-1 reverse split, the previous price levels need a bit of adjustment.  EDC rose above the previous resistance level of $100 (formerly $20), but quickly retreated below that level.  Today, EDC is 20% below that level, with another 20% to go before testing the October lows at $60.  A good set-up for naked calls.

December’s Chart:

Price and Volume Chart for EDC ETF - 2011-12-18

EDC did its best to test the October lows, but stopped just short and established a new, short-term uptrend.  Unfortunately, the longer-term downtrend also stayed intact.  As of Friday, we reached a decision point…either we’re going to break the longer-term downtrend, or find support for a side-ways or shallow uptrend.

December Technical Analysis for TMF

November’s Commentary

Soon after last months analysis, TMF reversed course and headed north, quickly reclaiming the 20 and 50 SMA levels.  The lows at the end of October established a longer-term uptrend.  On a short-term basis, TMF could test the October highs by the end of the year.  Unlike the other ETF’s I use for this strategy, I may increase my position in TMF given the positive price trend.

December’s Chart:

Price and Volume Chart for TMF ETF - 2011-12-18

TMF continued higher, finding support near the 50-day moving average.  As long as economic turmoil is front and center, TMF will continue to move higher.

December Technical Analysis for FAS

November’s Commentary

FAS, like EDC, underwent a reverse split in October, so price levels need a little adjustment.  FAS did test and then retreat from the July trendline.  It also broke below the 50 SMA, so the next level of support is around $40 (October lows).

December’s Chart:

Price and Volume Chart for FAS ETF - 2011-12-18

FAS found price support near the $50 mark, and then turned higher to retest the July downtrend.  With the price sitting just below $60, the longer-term downtrend waits to be broken or confirmed.

December Technical Analysis for ERX

November’s Commentary

ERX was unable to get past the $50 resistance mark and sits just above the 50 SMA.  And that level seems to have established a new downtrend.  On a brighter note, ERX has a level of support at $40, which is substantially above the October lows.

December’s Chart:

Price and Volume Chart for ERX ETF - 2011-12-18

ERX did retest the $40 support level, then breifly broke the longer-term downtrend that was confirmed in Oct-Nov.  Much like EDC, ERX is at a decision point, and should either confirm or break that downtrend.

December Option Investing – FAS Covered Calls – Part 4

The covered calls I sold last Monday ($67 calls for $3.40) expired, leaving me with 100 FAS shares.

FAS sat just above the 20 and 50 day moving averages, and was resting on a downward sloping trendline from July/August.

With no calls against my position, I sold a $62 calls for $3.10.

    FAS – $62.00 calls @ $3.10 (expire Dec. 17)
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