Monday, June 6, 2011


As the reader might be aware of, for the past 2 years I have been almost fully invested and testing a defensive investment strategy I call DITM (deep-in-the-money) covered call, offering double-digit annualized returns, almost no losing positions, and a lot less frustration than the HFT-driven stock market.

Last week I received my monthly Schwab Research letter in which their top guru - Randy Frederick espoused my exact strategy, almost word for word: A or B rated stocks, 3% dividend sold in a Buy/Write about a week before ex-Dividend date, 5-6 months out to "capture" both the option premium and dividend (s).

That said, the current market environment is ideal for that strategy: stock prices are getting cheaper, making the dividend % higher, and call volatility (price) that is sold in a buy/write also higher.

I have a sister blog:, with an extensive track record of actual trades ("older posts), and current trades.

And now to Sentiment: Very little has changed in the Indicators, although slight increases occurred in the McClellan Oscillator (down to -29); margin debt is exceptionally high, at $321B (the high of $381B was in July of '07). Insider selling doubled to 44:1 over buying.

Nothing seems to indicate falling off a cliff - 2-year Tsy yield, VIX, inverted AAII Bull/Bear ratio.

MktSentiment Last WeekPrev. Week 5 Yr HI 5 Yr LOW
S&P 500:130013311561683
CBOE Eq. put/call: 695896-10/0846-1/03
McClellan Osc:(29)16108(123)
McClellan Sum:4584581568(1514)
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AAII Bull:
AAII Bear:
US Equity-1 week lagn/a(2.4B)
Money Market Flows(21.9B)24B

Baltic Dry Index:1489146711700663
Bullish %:
Insider Corporate Sellers:44:123:1235:12.4:1

With record numbers of dollars coming out of Money Market Funds, mostly into the crowded trade of short term bonds, anyone who has a minimal knowledge of covered call options and/or an interest in hedging stock market exposure might want to check out: for an alternative strategy that is low-risk as well as highly rewarding. For those of you wanting more details and actual trading results, a new book is available for $14.95 at Zero (IN)Tolerance

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