DGI Adventure – 01-08-2016 Week in Review

Somebody spiked Mr. Market’s coffee again. The common
consensus has fingered China as the culprit. Give it some time and we’ll see a
few articles suggest that the Fed had a hand in it as well.

I lost a lot of imaginary cost basis bucks this week. I
didn’t purchase any stocks, but I’ve been tempted. I have that feeling in my
gut that the market is going to rebound next week and I’m going to have missed
out on a great buying opportunity, which hopefully means that Mr. Market will
take some more peyote and keep freaking out for a while. This is fun.

Mind the 

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Today was kind of a bummer if you own shares of The GAP,
Inc. (GPS).

I own 54 shares, so I guess that means today was kind of a
bummer for me. The stock screens all say that it’s down $3.83/share or 14.32%.
That would be from yesterday’s closing price of $26.74, which I think is kind
of a funny way to describe it because it opened this morning at $24.99. How can
a company lose $700M in market cap when the market isn’t even open?

The company is $1.5B less valuable now than it was yesterday. I find that hard to believe but
maybe. They did report disappointing same store sales year over year for
December. Even the golden child, Old Navy, was down.

The stock just went ex-dividend on Monday ¼/16, so there’s
loads of time to decide if it’s time to average down or not. I might like to
check the dividend cushion after the next quarter’s financial statement before
pulling the trigger on more shares. I’m curious to see what kind of an effect
the top line sales decline has on cash flow.

Nice to Have Options

On Wednesday, I
sold a covered call option
 on 100 shares of ABX. Then on Thursday, the ABX
share price was up over 10%. 

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ABX chart 30min intervals 01/05/16 – 01/08/16 – from Google
Finance

Thursday would have been a much better day than Wednesday to
sell covered call options on gold mining companies.

In the previous post I had mentioned that I had a limit
order to sell six AUY160219C00002500 contracts.
That executed right away on Thursday morning.

In hindsight I could have either sold the ABX option for twice as
much or gotten the same amount for one more strike up at $10/share if I’d have
just waited one day. Since I sold the $2.50 strike AUY options on 600 shares for
$0.07/share, I netted $30.55 after trade commissions for a 17.3% annualized
gain (assuming the shares are at risk for 43 days).

I should probably leave limit orders only open for the day rather
than good till cancelled. I could have gotten closer to $0.09/share for the AUY
calls on Thursday, which would have been a 24% annualized gain.

Oh well. Thursday appears to have been the near-term peak and the
underlying share prices retreated comfortably away from their strike
prices. I’m feeling good about both of those sales even if I was a little early
to pull the trigger.

I
loaded some cash in the brokerage account on Thursday just in case the Chinese
flipped their circuit breakers again and all hell broke loose today. But it
wasn’t that wet and wild. I’ll have to do some thinking over the weekend, and
strategize for next week. Hopefully the fun doesn’t stop.

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