Sainsbury "Put" Options - Again!

The price of Sainsbury shares at market close on 22nd. July was 316.4p - 23.6p below the "strike" price, (340p) of my December "Put" contracts in these shares.  This means that a counterparty could at any time insist on me buying 2000 Sainsbury shares at 23.6p above the market price.  But there's a long way to go to the expiry date for these contracts - 15th. December - and a glance at the Euronext Option prices (link above) shows me that a counterparty could sell the contracts -  not the shares, in the market for more than 23.6p at the moment. I reckon that's what a sensible option trader would do - assuming he/she wants to dispose of their contracts.  So I will hang on for a while yet  - quite aware that my stockbroker could call any day to tell me I've just bought 2000 Sainsbury shares at 340p!   Then I'd have 5000 shares, so experienced followers of the Sainsbury story will be able to figure out what I would do next.

Addendum 29th. July 2011.  During the week, Sainsbury shares have fallen further and closed today at 304.1p - 35.9p below the strike price.  The argument for doing nothing at the moment remains as stated above. But now I have my fingers crossed!  I don't want to buy shares at 340p.  I could buy 2000  at the present price, which would make the average paid for the 5000 shares 319.79p and then take out the 340p Puts and instead sell 5 x 320 calls - but I think I would come out "cash down" on that deal.  Ho hum!  Who'd be an option trader. On t'other hand, my covered calls in Centrica and Logica are well safe, and the August FTSE contracts are safe also, despite the noises coming out of Washington about the U.S. borrowing requirement.  Today Greece . .  tomorrow the States!

August 2011 FTSE Index Options

I redeemed my July FTSE contracts on 1st. July at a cost of £458.80p leaving me in profit on the opening sale of these contracts (see post below) of £1442.40p. At the same time I sold to open 8 x August 6300 Call Options and 8 x August 5350 Put Options. These sales yielded £2021.20p. Expiry date for these options is 21st. August, but I expect to redeem them before the expiry date. This is now my regular trading pattern. Full results for 2011 to the July expiry are now at the foot of this page.

Sainsbury "Put" Options.

The share price is currently languishing well below the "strike" price  (340p) of the 2 short Put contracts that I hold in the stock, opened in December 2010.  So I could be required to buy 2000 Sainsbury shares for 340p at any time, and I certainly will have to buy them on expiry day, Friday 17th June. The market price is in the 325p range.  I don't want to do buy the shares. So I have bought back the Put contracts and opened 2 more contracts at the same strike (340p) in the December series, expiry 15/12/2011.  Plenty of time for the price to recover, and I'm not likely to be assigned the shares on contracts with 6 months still to run. I hold 3000 Sainsbury shares and the net cost to me, including all receipts from trades in the options, is 330.25p 

July 2011 FTSE Index Contracts

I redeemed my June FTSE contracts on 31st. May at a cost of £538.80p, leaving me in profit on the opening sale of these contracts (see post below) of £1881.40p. At the same time I sold to open 8 x July 6350 Call Options and 8 x July 5400 Put Options. These sales yielded £1.901.20p. Expiry date for these options is 15th. July, but I expect to redeem them before the expiry date. This is now my regular practise. Full results for 2011 to the June expiry are now at the foot of this page.

June 2011 FTSE Index Contracts

I redeemed my May FTSE contracts early at a cost of £698.80p, leaving me in profit on the opening sale of these contracts (see post below) of £1915.80p. At the same time I sold to open 8 x June 6450 Call Options and 8 x June 5500 Put Options. These sales yielded £2,420.20. Expiry date for these options is 17th. June, but I expect to redeem them before the expiry date. This is now my regular practise. Full results for 2011 to date are now at the foot of this page.

May 2011 FTSE Options . . .

I redeemed my April FTSE 100 options (8 x 5350 Puts, 8 x 6350 Calls) for a net £538.80, leaving me in profit by £1642.40p on my April trades.  At the same time I sold contracts for the May expiry on 20th. May as follows - 8 x 5350 Puts, 8 x 6300 Calls, yielding £2614.60, which I keep if the FTSE 100 Index is between 5350 and 6300 at 10.30 a.m. on 20th.May.  However, I find it potentially more profitable to redeem the contracts before expiry and open contracts in the following month.  Readers should study the pricing model on  the Euronext pages to see why this is. (Follow the LIFFE Option Prices link above)

Splashed Out . . .

. . . on 3000 Sainsbury shares this morning, paying 335.8p per share, plus expenses.  The share price had slumped  19p this morning. Sainsbury reported results below expectations, and a rumour is circulating that they will make a bid for Marks & Spencer Group. These 2 bits of business news combined to knock the price off its recent perch in the 380's.  "My Open Contracts" (above) shows I hold 2 x "short" Put contracts on the stock at 340p for the June expiry, so I could be required to buy another 2000 shares at any time up to the June expiry date (17th. June) if the price remains below 340p. I will then have 5000 shares and could then sell 5 Call contracts (covered by the shares) in the September or December series.  

Logica CMG Option Contracts

I was "short" 5 x 140 March Calls (covered by 5000 shares in the stock). These contracts expired at 10.30 a.m today. The share price was 127.3p at the time. So I keep the shares because only an incompetent would buy the shares from me at 140p (the Call strike) when he can buy them in the market at 127.3p. And I keep the £316 that I received when I opened the contracts in October 2010.  I could now sell 5 more contracts in the June or September series at the same strike price (140p), but I will wait a to see if the shares  recover following the recent slide in the UK markets. At the present time I would get less than £30 per contract for the June 140 Calls and little more for the September 140's.  Watch this space.

Monday, March 21st. I renewed the 5 x 140p Calls which expired last Friday. I am now "short" 5 x 140p Calls in the September series, expiring on 16th.September. I received 6.25p per share for this opening sale. I have now paid 121.08p per share net of all expenses. The shares are valued at 133.6p at the present time, so even if I the Call contracts are assigned against me, I have an assured profit of nearly £950.

You Want Your Country To Experience Economic Success?

Ask the Americans to bomb the shit out of you!  That needs some explanation.
The other day my stockbroker forwarded an eMail to me which included a lot of pictures like this . .

Hiroshima, 65 years after America bombed the shit out of it. 

If that needs explanation, or if you are American, or if you are less than about 65 years old, here it is. In August 1945, the Americans dropped the first atomic bomb on the city. The surface agenda was to end WW2.  The hidden agenda was a warning to the Russians and the rest of the World not to mess with Uncle Sam.

But don't be too hard on the Americans.  It's well known that they always operate with the World's best interests at heart, are still sore about Pearl Harbour, and MUST, someday, somewhere, do better than they did in Vietnam. (They dropped another atomic bomb on Nagasaki a few days later. Yup! They're really good at the Massacre of the Innocents.)

Along with the Hiroshima pictures, came a lot of pictures like this . . .

Detroit, 65 years after the Americans bombed Hiroshima.

No, America didn't bomb Detroit, though much of Motown now looks like they did. An "argument" accompanied these pictures - laughable if it wasn't so transparently ludicrous and sad.  Essentially the economic freakster who originated the argument seemed to be saying that Hiroshima had recovered and overtaken the Rust Belt because the Japanese don't have a Welfare System.

Whereas . . yes, you've guessed it, Detroit, Michigan etc have gone down the pan because the Clinton and Obama administrations wanted to expand the rudimentary welfare system that disgraces Old Glory!

Remember, this is "Economics" and economists have correctly predicted all 7 of the last 3 recessions.  As I see it, the Rust Belt is rusting because America thinks the world owes it a living, and nobody, least of all a crappy little country where they once slaughtered 100,000 civilians in a single morning, has the right to build better cars than Ford, GM etc., and build 'em cheaper.  Oh, the poor dears.

Here's a similar argument. I don't know if it's logically sounder, or economically more factually based, but when we're into a pseudoscience like freakonomics, who cares?

Japan supports armed forces, but they do not go rampaging round the World squandering countless billions of their taxpayers' yen on wars which they cannot possibly 'win' in any conventional military sense, and will keep them engaged on "bringing freedom and democracy" to countries they know nothing at all about except they don't like them. Instead, the Japanese put their taxpayers' yen to work doing research into robotics, machine tools, computing, you name it . . while Detroit is sacrificed to the ambiton of military cretins throwing ther weight about in the guise of national security.

Tailpiece. The eMail also asked "What happened to the atomic radiation that was supposed to last for thousands of years?"  Well, the answer to that one so really, really simple that even an economist can understand it. The Japanese are still dying from it 65 years later.

The Greatest Nation on Earth . .

. . . are holding this young man in Abu Ghraib conditions.  Let's just repeat that . . THE GREATEST NATION ON EARTH . . y'know, the one that rampages round the World, killing, bullying, torturing and gereally kicking any ass it happens to take a dislike to, which at the same time whines and bleats that the other nations of the World don't practise democracy, freedom and human rights and so must be tortured, bullied and killed until they start so practising, which doesn't recognize the International Court of Human Rights in case that Court twits one of its precious citizens, which "negotiates" non-reciprocal extradition treaties with the British Government, which protects cotton pickin', banjo pluckin' redneck farmers from fluctations in market prices because it BELIEVES THE REST OF THE WORLD OWES IT A LIVING, which allows its insane investment b(w)ankers to piss its taxpayers' dollars down a bottomless toilet of risk and at the same time doesn't turn a hair when those same b(w)ankers award themselves multibillion dollar bonuses, . . is holding this young man in Abu Ghraib conditions, i.e. naked, sleeping on  the floor, in solitary confinement "for his own safety" because he joked to a prison guard that he might "strangle himself with his own underpants"

Bradley Manning

charged - well, actually, no, he's detained naked etc etc but he hasn't been actually CHARGED WITH ANYTHING - bit like the prisoners in Guantanamo camp, remember them? - he's being investigated to see if he's done anything wrong - that's how the Greatest Nation on Earth begins the process of dispensing justice - with supplying the thousands of documents constituting the bulk of the outbreak of WIKILEAKS. Bradley Manning's President, Mr. Barak Obama, just yesterday declared that Manning's holding conditions were "appropriate."  My guess is either the Hillary Clinton Mob or  the Pentagon told him to say that.

MAKES YOU PROUD YOU'RE NOT AMERICAN, DOESN'T IT?

And before you start protesting that FTSE has just got a chip on his shoulder, think about this . .  which organisation is carrying out the forthcoming census in our Sceptred Isle?  You don't know?  Of course you don't.  H.M Government doesn't want you to know in case you start bleating about the fact the LOCKHEED MARTIN CORPORATION, an American Corporation specialising in the manufacture of weaponry et al, is running the U.K census.  "So what?" I hear you cry, "someone's got to run it."  So this. The Patriot Act gives the American Government the absolute right to see any and all information on any subject held by any American corporation or organisation.  That's the measure of their psychoses and paranoia, but let that pass.  Lockheed Martin will hold our census data and so, in principle, the White House, the Pentagon and the incompetents in Langley, Virginia have access to any personal and family details which you are obliged UNDER BRITISH (not American) law to include in  your census return. This is one result of successive British governments since the end of WW2 sticking their tongues as far into White House underpants as they can possibly reach. Remember what the much vaunted "special relationship" means. It means "Listen, you Limey Brits. You fucking well do what we tell you, O.K?"

April 2011 FTSE Options

I redeemed my March FTSE Option (7 x 6350 Calls, 7 x 5400 Puts) on 8th March. (Expiry was 18th. March), trousering £1104.60 profit in the process - see Table at top of this blog.  At the same time, I opened by selling 8 x 6350 Calls and 8 x 5350 Puts in the April series.  These sales put £2181.20 into the bank, but I keep all of this only if I still hold the contracts and the FTSE 100 Index is between 5350 and 6350 at 10.30 a.m. on the day the contracts expire, 15th. April. If I redeem the contracts before then, the "buy back" costs will absorb some of the yield from the opening sale. So far this year, things are going well. The FTSE Index has been pretty well flat on its back since last October and I have had no anxious moments and have not had to rush about re-arranging things mid-contract. But storm clouds can gather in no time. I'm surprised that recent events in North Africa have not significantly moved World Indices.

Centrica plc Contracts

I have rolled my Centrica 320p Calls (expiry March 18th) forward to the September series 340p Calls. This  rearrangement cost a net £163.00p.  The share price at the time I struck the deals was 328.6p. i.e. above the strike price of the 320p Calls. If the share price had stayed at that level, I would have lost the shares on assignment at 8p below their market value, i.e I would have received £400 LESS than the shares were worth in the market. So . . . the £163.00 SAVED me £400 on the shares, ADDED £1000 to the value of the shares should I be assigned at the 340p level, and ENSURED that I keep the two dividends declared between now and September - provided that the share price does not go much above the 340p level. The 5 x 340p September Calls are covered by 5000 shares.

Auntie Beeb . . .

. . . is at it again!  Today's BBC Terror Campaign aims at eating red meat.  Last week not eating enough of something . . . I forget what, does it matter . .  probably rice pudding, would kill us for sure.  Having failed to get that one off the ground the BBC is trying to ferment panic in the streets by telling us not to eat more than 70 gms of red meat per day.  Have these prats NO IDEA HOW BLOODY SILLY they are making themselves look?  But they never give up. Day by dreary day their lamentably dreary Newsroom front men and women shriek and wail about what we should and should not be doing. Drink more red wine!  Don't drink too much alcohol!  Take a handful of aspirin every day!  Don't get addicted to pain killers etc. etc. etbluddicetera.  But they never, ever, ever advise us to avoid the most dangerous thing anyone can do up to the age of about 50. DON'T GET INTO A MOTOR VEHICLE.  If you are under your half century, a serious RTA is your most likely cause of death.  Of course, on the other hand, most people - particularly idiot males . .  would rather die than go without the daily dose of vrooom vroooom. I blame Jeremy Clarkson.  Goodbye. I have financial matters to attend to.

The Things They Do In Your Name!

The government has abandoned its plans to privatise England's public forest estate

In a statement to the Commons on 17 February 2011, Environment Secretary Caroline Spelman, who oversaw the controversial proposals, announced the u-turn, saying: "I am sorry, we got this one wrong."

She said she took "full responsibility" for the climb-down, which was required after it became clear "the public and many MPs are not happy with the proposals".

"If there is one clear message it is that people cherish their forests and woodlands and the benefits that they bring," she told the House.

The government's plan to sell off or lease 258,000 hectares of England's public forests, managed by the Forestry Commission, was intended to give the private sector, community and charitable groups greater involvement in woodlands by encouraging a "mixed model" of ownership.

Let us translate this.

1. The Tories wanted to sell our forests to their Friends in the City.

2. Why?

3. Because there are all sorts of tax advantages in owning woodland, and presumably so that their Friends in the City could charge the hoi-polloi an arm and a leg to go into the woods to picnic with our Teddy Bears or pick mushrooms or whatever.

4. Our Prime Minister (that's the fellow with a face like a china doll that has spent too long in a dishwashing machine, what's-'is-name . .  CAMERON!) hoped we wouldn't notice what he was getting up to in our name.

5. We did notice. 

6. We didn't like it. We told him so.

7. With one eye on the next election and the other on recent events in Tahrir Square, he thought "The buggers will remember this!" Sooooo . . 

8.  . . he sent poor Ms.Spelman into the House to withdraw the measures and take the flak.

9. The hilarious aspect was Her Majesty's Opposition shouting . .

TIMBER!

February 2011 FTSE 100 INDEX Option Contracts

I redeemed my FTSE Contracts for February this morning when the Index stood at about 6040. My net profit for February is shown in the table at the top of this blog (£1314.60p)  At the same time, I opened "short" (i.e. by SELLING)  7 x Put Contracts at 5400, and 7 x Call Contracts at 6350 in the March series. Prices are pretty low at the moment because market volatility has been low recently.  My potential profit on the March contracts, assuming they expire valueless on 18th. March is £1479.80, but I expect I will redeem them before they expire, and open contracts for April.

BBC TV News . .

. . . just now is telling us about an unfortunate householder who lost the whole of his pension "pot"(*) of £200,000 because he had been given "bad financial advice". He is now doing a manual job for the minimum wage. £200K in a pension "pot"(*) suggests he was a 'professional' . . . er . .  professionally, in which case presumably, though not definitely, he could READ. (I  qualify my "presumably." After all, football players are described as "professional" although I doubt most of them can read above the level of Red Top headlines. My evidence?  Most of them can't grunt their own names intelligibly.) 

I crave your indulgence while I say it again.  IF YOU CAN READ YOU DO NOT NEED A FINANCIAL ADVISER.  You don't actually need a pension fund. i.e. a bottomless pit of promises that you pour money into every month in the hope that it will still be there when you die or reach retirement age, assuming that happy day ever arrives now that the pensionable age is growing up faster than you are.

But if you insist on (oops . . maybe your conditions of employment require that you HAVE to pay into a pension fund, well hard luck!) . . . setting up a pension pot (*) under the guidance of a Financial Adviser, make sure that he or she knows:-

1. where the FTSE Indices of shares will be when you reach pensionable age.

2. that no World Wars are due to break out before you retire

3. that your government (UK in my case) will not default on its Bond repayments or interest payments or otherwise go the way of Greece, Iceland, Ireland, Portugal etc before you retire

4. that your FA is not going to invest your cash on your behalf in Enron, Lehman Brothers, GEC-Marconi, Ferranti, BCCI, Polly Peck, British Airways or similar disaster areas.

4. which Managed Funds will do best between now and when you retire

5. with 100% certainty that the funds she or he will dump your money into are going to do at least as well as the one they name in 4.

6. that the answer to 4 won't have changed when the FA gets to next week/customer.

I hope you see the ironies implied in this rant.  If you can read, you can fix your pension for yourself - at least when nemesis strikes you won't lie awake blaming someone else because your £200K has vanished.

The basic rules are very simple.  One third in Bonds(**). One third in Blue Chip shares. One third in cash. (Most Financial Advisers charge you about £100/hour for telling you that.) 

(to be continued)

(*)  pension funds are referred to as "pots" because of the alliteration. The BBC obviously employs a Poet-In-Residence.  I can think of a more fundamental reason for the term "pot" in the context.

(**) Mine are all UK Gilts. A life-long friend of mine lost £4K IN A FEW DAYS when her Financial Adviser suggested an investment in bonds issued by . . . Lehman Brothers just before the 2008 melt-down.

BBC Radio 4 News . .

. . . at 6a.m this a.m was gearing up for another Media Orchestrated Terror Campaign.  And what is it this time?  Well, it's FOOD SECURITY, innit?  The problem seems to be that the world's ballooning population (6.4 billion and rising faster than you can count) is putting pressure on:-

Agricultural land (that's WHERE we grow food)
Fresh water         (a resource necessary for growing it)
Energy                (for - you name it, food needs it)

As Molesworth sez, "Eny fule kno all this" although we collectively pretend it doesn't matter - as long as it impinges only on the poor of the world and not on the developed world - and even though many of us weigh twice as much as is good for us. But I digress. The bulletin went on to say (something like)  "various authorities have been issuing warning about the impending crisis for the last thirty or forty years."  

ONLY thirty or forty?  The Reverend Thomas Malthus first pointed to the problem  in his Essay on the Principle of Population (1798 to 1826) in which he argued that population growth must eventually be limited by famine and disease.  At the time he was up against utopians like Jean-Jacques Rousseau.  (For the more mathematically minded, Malthus pointed out that population can in principle increase in a geometric progression - whereas food supply can increase only in an arithmetic progression. When the graphs cross, we're in trouble.) Technology has done pretty well so far to fix things up, despite the insane vapourings of the anti-GM lobby.  These are amongst the World's True Weirdos. Why?  Because if they are below the age of about 150, they haven't eaten a mouthful of food in their whole lives that isn't genetically modified(*).  These maniacs are not objecting to GM. They are objecting to GM being done quickly and cheaply in laboratories, rather than slowly and expensively on plant and animal breeding stations. They are objecting to science, which they don't understand yet rely on for everything they do and are, every minute of their lives.  They will change their minds the day they find empty shelves in Tesco. Remember folks . . next time you eat any of your five- a- day, you're eating a genetically modified  hybrid.   ENJOY!  

(*) fish and game are perhaps exceptions to this, except that evolution has been genetically modifying even these species for millions of years.

I'm just now watching

 . . . an elderly economic lunatic from Ernst & Young "explaining" that although fuel, commodities and VAT increases are pushing up shop prices faster than we can follow them, underlying inflation is "below the Government's target" even though inflation has been above the Government's target every month for the last six, twelve or is it twentyfour, and that's despite the Government or is it the Treasury switching to a new measure of inflation which excludes anything that has the audacity to go up in price but does include the price of saddle-soap, repairs to your longbow and housemaids knee-pads.  You've never had it so good, folks, and do you wonder that Doctor FTSE takes no notice at all of economic news, indicators and above all of the vapourings of half-way insane pundits when he decides which FTSE options to deal in next time around.  Goodbye.

January 2011 FTSE Index Options

I redeemed my 7 x 6200 Calls in the FTSE 100 Index this morning, paying 4p per "share" or £40.00 per contract (Lots of 1000 "shares"). Followers and fans who study the dealing prices on the Euronext pages will perhaps notice that towards the expiry date, the "buy back" prices of contracts for expiry "this month" are declining much more slowly than those for contracts expiring "next month."  Thus it is potentially more profitable to redeem "this month" contracts a few days before expiry, and sell "next month" rather than waiting till "this month" contracts finally expire.  

So I have trousered an overall profit in January of £1571.60p.  My contracts for expiry in February are 7 x 6350 Calls and 7 x 5400 Puts. These deals added £1584.80p to the account balance, and this is the profit I will make if the contracts expire worthless on 18th.February - i.e. with the FTSE 100 Index anywhere between 5400 and 6350 - presently at 6028.