TIB: Today I Bought (and Sold) - An Investors Journal #55 - Amsterdam Index, European Banks, Covered Calls, Bitcoin

Market pullbacks are perfect for looking forwards. Amsterdam Index this time. More work on covered calls and Friday Blues hits Bitcoin.

Bought

AEX Index: Amsterdam Index. Liquidity on December 2021 options contracts has been improving. Bought a 500 strike call option which is in-the-money. What I liked is premium is less than 10% and buys more time. This makes the premium cheaper than buying Bank of America and gives 2 years more time.

AEX Index has traded above 500 for part of 2015 and has just broken through again in the last few weeks. All time high from 2007 is 563 (marked with yellow line). To earn a 100% return price will have to pass the all time high in the next 4 years. Given that US markets have been doing that consistently since the November Election, I am confident that AEX will.

The next chart shows relative performance to US markets (represented by S&P 500 - orange line) and AEX (black bars) is 65% behind the US market taken from the post-GFC low in 2009

In this portfolio, I am already holding December 2019 bull call spread and December 2020 calls.

Jutlander Bank (JUTBK.CO): Partical fill on previous order (see TIB54). I do hate it when the broker charges brokerage again for partial fills. My US and Australian broker charges for the complete order unless the price is changed or for my Australian broker the order is completed either side of a weekend. Price has to move an extra 0.5% to recover the brokerage extra

Credit Agricole (ACA.PA): French Bank. Bought 100 shares to write covered calls. I am happy to hold this stock as Price to Book Value is less than 1 and I am expecting this to rise as interest rates rise. See TIB40 for the rationale for holding French Banks

Credit Suisse (CSGN.VX): Swiss Bank. Bought 100 shares to write covered calls. Credit Suisse is a long term view in all my portfolios - time to derive an income too. See TIB13 for the rationale for holding Swiss Banks, especially Credit Suisse.

Covered Calls

Quick reminder on strategy: Covered call is an income strategy. Sell a call option at one or two strikes above current price with a close expiry date (one or two expiry dates away). If price does not reach strike price, keep the premium as income and sell again. If price passes strike price, deliver the stock and keep the premium but forego the capital gain above the strike price.

Credit Agricole (ACA.PA): Against purchase price €12.31. Sold April 21 2017 Call 12.5 for €0.23 = 1.9% premium plus 1.5% capital gain if exercised

Credit Suisse (CSGN.VX): Against purchase price Sfr 14.66. Sold April 21 2017 Call 15 for €0.23 = 1.6% premium plus 2.3% capital gain if exercised

Daimler (DAI.DE): I already hold this stock. Price (€70.56) needs to move 4.4% to pass the 73 strike calls by April 21, 2017. Return will be 0.18% for 4 weeks - hardly worth the effort but it is income. Capital gain will add 4.4% if exercised.

Deutsche Bank (DBK.DE): I already hold this stock. Price (€15.53) needs to move 8.2% to pass the 17 strike calls by April 21, 2017. Return will be 0.9% for 4 weeks - a bit low after taking into account trading costs. Capital gain will add 8.1% if exercised. 21APR17 17.0 C

Cameco Corporation (CCJ): I already hold this stock. Price ($10.89) needs to move 5.4% to pass the 11.5 strike calls by April 21, 2017. Return will be 1.8% for 4 weeks. This call is 2 strikes out the money

It is important to take into account trading costs when setting up these contracts. First level to consider is what trading costs one incurs to open the initial stock holding. Some brokers charge a minimum commission and then switch to a percentage commission as trade size increases. Buy the largest number of shares needed to absorb the minimum commission to equate to the percentage commission. Options premiums are a lot more expensive in European markets compared to US markets. Example the ACA options commission was €.0209 vs premium of €0.23 per contract = nearly 10%. For CCJ options commission was $0.14 in total for 3 contracts vs a premium of $0.20 per contract = 0.23%. With high options commissions you do not want to buy options back as you will be paying both ways - let them expire and deliver the stock. Stock delivery is cost free.

Cryptocurency

Bitcoin: The Friday thing happened and price collapsed. My revised stop loss was hit for a 5.7% loss = ouch. There is no shortage of weak hands out there. I will be looking for re-entry on the next reversal but this time I will look to close out before Friday late trade (3 weeks in a row is not a coincidence - the weak hands close their trades before the weekend)

Currency Trades

No new currency trades. US Dollar weakened in Friday trade - stop losses are holding. Have closed all pending trades.

Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas. I do participate in an investing group - some of the ideas flow from there.

Images: I own the rights to use and edit the Buy Sell image. All other images are created using my various trading and charting platforms. They are all my own work

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

March 24, 2017