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Following Up On Previous Trade Ideas

Richard Croft
November 11, 2013
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Just getting back from holidays makes this a great time to do some follow up on past trade ideas. Most notable among them being the calendar spread on Suncor (See “Calendar Spreads Trough October” – Sept 30–2013).

The suggestion was to sell the Suncor November 38 call at 75 cents while simultaneously buying the Suncor January 38 call at $1.30 for a 65 cent debit. The November calls expire next Saturday, and with the stock trading below $37 they will most likely expire worthless.

Assuming Suncor remains in a tight trading range around $37 per share, the January calls will undoubtedly be worth more than the initial 65 cent debit. At that point you could sell the January 36 calls and take a small profit, or you could write December 38 calls to capture a second premium.

In September 16-2013 (see “Covered Calls on Gold Miners”) I talked about writing covered calls ion Goldcorp (Symbol AEM, Friday’s close $25.71) and Agnico Eagle (AEM, $30.68). The Goldcorp covered call is slightly underwater, although I suspect the shares will be above the $28 per share strike price by the January expiration. AEM, on the other hand, is in-the-money and will likely get called away in December at $28 per share.

On September 9, 2013 I re-visited Blackberry (symbol: BB, Friday’s close $6.84). I suggested buying the BB December 11 straddle for a debit of $3.00 per share. The Dec 11 straddle closed Friday at $4.20 per share. Given the controversy surrounding BB I would take profits on the initial position (return is 40% in about two months.

On August 26-2013 (See “Why I like Banks”) and September 2, 2013 (“Sweet Spot for Canadian Banks”) I offered my very bullish outlook for the Canadian banks. In the September 2, 2013 blog I talked specifically about buying six month at-the-money calls.

The following table shows the results from those trades as of the close of trading on Friday. The three left columns show the return had the shares been purchased, and the three columns to the right show the returns from buying the at-the-money calls in early September.

Symbol 23-Aug-13 8-Nov-13 Return 23-Aug-13 8-Nov-13 Return
BMO $ 66.11 $ 72.76 10.06% $ 3.20 $ 7.15 123.44%
BNS $ 58.50 $ 64.24 9.81% $ 2.25 $ 4.35 93.33%
CIBC $ 82.26 $ 89.10 8.32% $ 3.80 $ 7.40 94.74%
RY $ 64.90 $ 70.31 8.34% $ 2.65 $ 4.85 83.02%
TD $ 89.62 $ 96.61 7.80% $ 3.50 $ 6.70 91.43%
NA $ 81.59 $ 91.57 12.23% $ 4.00 $ 9.75 143.75%

Richard Croft
Richard Croft http://www.croftgroup.com/

President, CIO & Portfolio Manager

Croft Financial Group

Richard Croft has been in the securities business since 1975. Since February 1993, Mr. Croft has been licensed as an investment counselor/portfolio manager, operating under the corporate name R. N. Croft Financial Group Inc. Richard has written extensively on utilizing individual stocks, mutual funds and exchangetraded funds within a portfolio model. His work includes nine books and thousands of articles and commentaries for Canada’s largest media channels. In 1998, Richard co‐developed three FPX Indexes geared to average Canadian investors for the National Post. In 2004, he extended that concept to include three RealWorld portfolio indexes, which demonstrate the performance of the FPX portfolio indexes adjusted for real-world costs. He also developed two option writing indexes for the Montreal Exchange, and developed the FundLine methodology, which is a graphic interpretation of portfolio diversification. Richard has also developed a Manager Value Added Index for rating the performance of fund managers on a risk adjusted basis relative to a benchmark. And In 1999, he co-developed a portfolio management system for Charles Schwab Canada. As global portfolio manager who focuses on risk-adjusted performance. Richard believes that performance is not just about return, it is about how that return was achieved.

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