What might you find there?

• Search Summary Tool: Quickly see option position opportunities in multiple option strategies
• Spread Chain Tool: Evaluate vertical option spreads with mid-point pricing
• Long Option Finder Tool: Find the best long option play based on your expectation for movement and timing
• Quick Find Tool: Quickly see covered call premium in the market right now for your stock
• Stock Repair Tool: Evaluate spread opportunities to lower the break-even on a sunken stock or leverage its recovery process
• Stock Insurance Tool: Lock in profits on your winning stock
• Strike of Pain: Examine which strike price your stock may gravitate toward at expiration

We know that getting your PowerOptions portfolio “caught up” can be a hindrance to starting one at all – but, we strongly suggest that you just jump in and start tracking new trades as you put them on. Don’t worry so much about catching up the portfolio with all of your old trades. The benefit of using the PowerOptions portfolio tools to track your real and paper trades? The Position Analysis.

Once your positions are in the portfolio, you can avail yourself to the analysis tools that will have you manage and follow-up your trades in a way that will help you reduce risk, increase returns, roll out or take money off the table.

Maybe there are a bunch of sites and tools that will help you find new options trades to make. But, are they helping you figure out what to do once you’re in the trade? PowerOptions is.

Back to updating your Portfolio with Historical trades…

Can you (if you’re feeling industrious) get old ones in there?? Yes, you can.

Just click “Historical Reports”, there you will see a button for “Add Closed Transaction”. This page allows you to enter a historical position. Note: when you enter your old position, you will need the total cash money in and cash money out, there’s no per-share or per-contract entry here.

Let us know what you like or hate about the Portfolio Tools. We think they’re awesome, but all things can be improved, we’re listening.

What else is great about the PowerOptions portfolio tools?

• Industry and Sector analysis for any single portfolio and all of your portfolios – so you can see where any portfolio may be too heavily weighted and make adjustments accordingly.
• Alerts – get notification when stock prices or option prices or about 30 other trigger events happen to your positions.
• Snapshots – see today’s activity across all of your positions.

Investors will scan charts looking for this type of crossing to trigger a buying opportunity.  They also look for confirming volume as the crossing takes place, however, this effort can be very time consuming.  Using the PowerOptions screener an investor can scan the entire market very quickly to find a first-time stock price crossing of a moving average.  The parameter scanning form in PowerOptions to capture the moving average crossing is very simple to use:

Days Stock Cross SMA20
[Over] [1] to [1] days  {test for initial crossing}

This indicator will only show the first day crossing of the moving average, which is important for the initial entry of a position.  But it can also be used more generally to indicate that the stock continues to be in an upward and bullish trend by leaving the last number blank to indicate the stock is over the moving average for any number of days.

Days Stock Cross SMA20
[Over] [1] to [blank] days  {test for remains positive}

There may even be an occasion when we would like to know that the stock price is over the moving average for some number of days before we take action.  In this case the form might be:

Days Stock Cross SMA20
[Over] [1] to [5] days  {test for crossing for each of last 5 days}

This tool can be very powerful in finding emerging opportunities (first day crossings) that are either bullish or bearish. The table below is a list of long call options that were found using the first Days Stock Cross SMA20 screen mentioned above with the additional filters of:

Options expiring in May (2 months out in time)
Options 1 strike level In-the-Money
Open Interest on options Greater than 10 contracts
Implied Volatility Greater than 0.20
Stock Price Greater than $13 per share
Sorted by % Stock Volume

There are many other filters that could have been applied to narrow the field of selection even further, but this example demonstrates how this new search criteria on PowerOptions can be used to find trading opportunities.

PowerOptions free trial users and subscribers can enter new positions into the Portfolio directly from the patented Search tools or manually with just a few clicks. Some basic features of the Portfolio tools to help you better track and manage your positions are:

• Profit and Loss Portfolio tool tracks your current positions as linked trades – meaning your covered call position will have the stock and call option linked together rather than separately.
• View Original Expected Gain vs. Liquidation Value vs. Future Expiration Value for the entire position, not just the individual leg.
• Historical Reports and Analysis view to see the total gains on rolled or continued positions.
• Allocation views to evaluate your Portfolio diversity and exposure.
• Alerts for each position to notify you when you may look to roll or adjust a position.
• Position Analysis tool to evaluate your current position, roll out opportunities and simulate trade feature to see the before and after picture when considering an adjustment.

The Position Analysis tool is a very powerful tool to help investors quickly evaluate the new % return and potential outcome of a roll out opportunity or adjustment. We have recently enhanced this tool to include a ‘What if Calculation’ feature so investors can evaluate the potential gain or loss on their current position if the stock was trading at a certain price on a certain date prior to expiration.

As an example, we recently purchased Spirit Airlines and wrote a covered call. The profit/loss graph is shown below with the “What-if Calculations” information box highlighted:

The current covered call position for Spirit Airlines (SAVE) is:

Own 100 shares SAVE @ $22.31

Sold APR 25 call @ $ 1.15

Spirit Airlines has advanced sharply over the last month and is currently trading above $26.00 per share. Using the ‘Stock Chart’ link next to the Profit and Loss chart we can analyze the current trend of the stock. The Bollinger Bands and RSI both indicate that Spirit is probably over extended as can be seen in the graph below (for a detailed explanation of Bollinger Bands for stock evaluation view our article here).

The stock price is 104% of the Bollinger Band range and has an RSI of 97 out of 100 maximum range. At today’s close the position has a profit of $368. It would be nice if Spirit would continue to advance at the current rate, but what if Spirit drops in price to $24 in the next few weeks?

Clicking the “What-if Calculations” link takes us to the Profit/Loss chart that will allow us to insert a price of $24 per share on a target date of 4/3/2013 to evaluate the theoretical gain or loss on the SAVE position. Originally we had a $368 gain on the position for a 17.3% profit. But if the stock price of Spirit Airlines were to fall to $24 by 4/3/2013 the position would only be worth $244.25, a loss of -$123.75 from the present price if liquidated today. Since this is a covered call position the upside is limited, but the downside is not. There are several alternatives that can be explored with this “What if” page.

If we are concerned about a reversal on SAVE we can now evaluate rolling the call down in price to help generate more premium, or protect the position with the purchase of a PUT option and limit any lose due to a decline.

On the other end, if we expected the stock to continue the current upward trend, we could evaluate rolling the call up in strike price to allow more room for stock appreciation.

Of course, if we have met our goals there is the alternative to liquidate the current position and be happy with the 17% return.

Different price points and dates can be inserted and calculated to examine other what if events. A graph and table of results are shown for each event once you have entered in your Expected stock price and target date.

Both of the first two alternatives involve the use of substitute or additional options. These option positions can be explored from this “What If” page. At the top of the page investors can select alternative options to sell or buy against the current position to evaluate the new potential return of at risk amount.

This is just one feature in the Portfolio tools that will help you evaluate your current positions and quickly compare the current return vs. future expiration value vs. the outcomes of any number of roll out opportunities or adjustments.

If you would like to see more on how the PowerOptions Portfolio tools can help you track and manage your positions check out our archived webinar, PowerOptions Portfolio Tools located in the PowerOptions Tools Archive section of our archived webinars.

In addition to developing option trading technology, PowerOptions has also been actively patenting its option investment related technology.  PowerOptions’ latest issued patent may be viewed at this link.

As illustrated in the patent, providing option trading tools requires fast servers, large databases, high bandwidth Internet connections and complicated software for processing, searching and presenting potential option trades.

Information related to option trades can be presented in an infinite number of ways and PowerOptions strives to present option related information in a number of easy-to-understand formats which are accurate and reliable.  It is easy to present raw option data, but much more difficult to present option related information which is easy to understand – which is where PowerOptions excels.

Finding good option trades is only half of the battle, the other half of the battle is management of trades.  With option trading, it is very important to know the status of a trade and as Kenny Rogers sings – know when to “hold’em” and when to “fold’em”.  With option trading, another line related to “knowing when to roll’em” could be added to Rogers famous gambling song.  PowerOptions provides tools for managing option trades after selection.  With PowerOptions tools, investors can know when to “hold’em, fold’em or roll’em”.

PowerOptions tools enable option investors to instantaneously know their current profit or loss and also know their potential profit or loss based one whether a stock increases or decreases in price. PowerOptions tools enable investors to not only know the profit/loss for a single position, but also for a portfolio of positions, including past positions.

If you are new to option investing, PowerOptions is a great place to learn to trade options, as you can paper trade before putting real money on the table.  And, if you are an experienced option trader, PowerOptions can support you with your existing option strategies and teach you new option strategies.  So, if you’re a new option trader or a seasoned option trader, you should sign up for PowerOptions right now, so you can start finding those “needles in the haystack”.

For example, suppose an investor wanted to know how well the Covered Call strategy would have performed over the last year using the constraints shown below:

• stocks included in the S&P500
• stock price near lower Bollinger band
• stock price in an uptrend (100 day moving average > 200 day moving average)
• days to expiration < 45
• % If Unchanged > 2%
• Position At-The-Money
• Position selected on Monday following option expiration

A Covered Call position may be entered by selling a call option against an existing or purchased stock.  The position can be considered analogous to leasing a house with an option to buy.

Using PowerOptions’ patented back-testing tool with the constraints listed above for the covered call strategy over the last year, the following results were found:

 

As can be seen, the strategy returned 12.7% over the last year which did not beat the 14.3% of the S&P 500 index, but was fairly close.  And, with a little more tweaking, maybe the strategy can be fine tuned to beat the S&P 500 index, such as removing stocks with an upcoming earnings release or only including stocks with a high % dividend yield, etc.

A really powerful feature of PowerOptions’ back testing tool is the capability to test 22 other strategies in addition to the Covered Call strategy.  The list of available strategies includes:

• Covered Call
• Naked Put
• Calendar Call
• Bull Put Credit
• Long Call
• Bear Call Credit
• Naked Call
• Iron Condor
• Long Put
• Collar
• Covered Combination
• Bull Call Debit
• Calendar Put
• Long Straddle
• Short Strangle
• Iron Butterfly
• Bear Put Debit
• Covered Put
• Long Strangle
• Short Straddle
• Married Call
• Married Put
• Short Collar

An investor seeking to back-test any of the 23 strategies shown above can use PowerOptions back-testing tool to perform the task.  So don’t delay, sign up for PowerOptions today and find out how your favorite option strategy would have performed over time, and maybe find out how to improve your favorite strategy, or even find an altogether different strategy which is better.­

1. Stock and options selection:  Use the PowerOptions stock & option screening tool to select the stocks and options with the highest probability of success.  Create and save a screening profile with parameters of proven value to find stocks with strong fundamental and technical attributes.   Start with our default parameters and enhance them to meet your strongest requirements for stocks you expect to be winners.
2. Tools to investigate prospects:  Once you have a screened list of possible candidates, investigate them further.  The “more info” key will enable you to examine the stock graphically, view recent news items, verify earnings and dividend data, and examine option chains.  PowerOptions is basically a portal site to the information needed to make wise and informed investment decisions.  When your selections are further narrowed, there are profit/loss graphs available to evaluate risk/ rewards for the positions chosen.
3. Portfolio management after a selection is made:  In steps 1 and 2 a decision was make to enter a position.  But that is only the beginning of the investment journey.  Money isn’t made until the position is exited for a profit.  Management of the position is essential to long term success.  Management consists of several essential steps:
   • Tracking – PowerOptions tracks your positions not just the individual securities.  A purchased stock and a written call against that stock are monitored as a Covered Call position.  Both the stock and the option are evaluated as one total position.  Liquidation of the position and roll out possibilities to improve profitability can be continually evaluated.
   • Setting alerts – it is important to monitor the position for exit to limit loss or to look for opportunities to improve the position with a roll or other techniques.  Alert notices can be set by price, % change, new highs/lows, moving averages and many other parameters to make it easier to maintain and follow your positions.
   • Documenting results – it is important to document your goals, thinking, and actions to help provide data for improving investment results.  Each position has an event/notes field for recording changes and news events associated with that investment.  These notes can then be used to review the investment process for improvement.  Each investment should provide experience to improve results in the future.
   • Liquidating the position – the decision to liquidate must be continually monitored.  Sometimes it is to prevent further loses, but hopefully it is to collect a profit or modify the position to reduce risk or increase profitability.  These alternatives can be easily examined with the use of a position analysis available in the portfolio program.

Conclusion

Following these three fundamental steps can be the key to improved investment results.  If you need help in implementing any of the steps, our support staff is here to help.  Just call us at our toll free number or set up a coaching session from the home tab.

Why Invest Bullish in Bearish Market?
At this point, an investor might ask, “why would you want to do bullish investments in a bearish market?” Two things, first the market can change very quickly from bullish to bearish, so a bullish position entered in an initially bullish market could end up in a bearish market and second, the general trend of the market is bullish, so in the long run bullish investments will fair more favorably than bearish investments.

Bull-Put Credit Spread
The vehicle used for returning a positive return in short-term bullish markets is the bull-put credit spread. The bull-put credit spread is entered for a net credit by selling a first put option and purchasing a second put option further out-of-the-money. The goal of the bull-put credit spread is for the options to expire worthless and retain the initial net credit as profit. The nice thing about spread trading, is you can be close and still be successful. For spread trading, the old adage “close only counts in horseshoes and hand grenades”, could be rewritten “close only counts in horse shoes, hand grenades and spread trading”, as a spread can be profitable, even though the stock or the market moves against the position.

Down Market Wipes Out All Past Spread Trading Profits
Investors who have attempted spread trading often say, “down markets wipe out all of my past spread trading profits.” For unmanaged spread trades, this is often the case, but for managed spread trades, the success rate increases significantly. Actually, given enough time and persistence, a spread trade with a current loss should almost always be recoverable, but recovering spread trades experiencing a loss is for another article at a later date.

As an illustration for the concept of managed spread trades, an actual profitable example for the PowerOptionsApplied Optium TradeFolio^TM will be examined.

Actual Bull-Put Credit Spread Example
On 5/15/2012, a bull-put credit spread for the S&P500 index (SPX) was entered for the PowerOptionsApplied Optium TradeFolio with a potential return of 6.8% (78% annualized). The specific put option sold was the 2012 SPX Jun 1230 at $5.55 and the put option purchased was the 2012 SPX Jun 1205 at $3.95. The bull-put credit spread was entered for a net credit of $1.60 and was selected based upon option pricing located midway between the bid/ask for the options and was found using PowerOptions Mid-Point Spread Chain tool. The bid/ask spread for index options, such as the SPX, is typically very large, so an investor can significantly increase returns by using midpoint pricing (or better). In generally, spread investors should not use market orders, but instead should use net credit/debit orders and should also use midpoint (or better) pricing.

At June options expiration, if the price of the SPX was greater than the $1230 strike price of the short put option, then the the full profit of 6.8% (78% annualized) would be realized for the position.

The SPX bull-put credit spread was entered on a day when the market was down and had been down on the two prior days, as it is generally a good idea to enter a bullish index spread when the market is down and has been down for a couple of days. Entering a bullish position on a down day takes advantage of the market returning to its short-term mean following a few down days.

A chart for the SPX on the day the SPX bull-put credit spread was entered is shown below:

Management Point
A management point of $1280 was set for the position. If the price of the SPX index dropped below $1280, then the position was to be managed for an exit or a roll. The management point is set for several percentage points out-of-the-money away from the $1230 strike price for the short put option, as attempting to manage bull-put credit spreads closer to at-the-money can be problematic. A chart illustrating the management point is shown below:

On 6/1/2012, the SPX transgressed the $1280 management point and closed at $1278.04 as shown below:

Transgression of Management Point
On the day of the transgression, the conditions for exiting and rolling were analyzed. The 2012 SPX Jun 1230 Put option could be exited (purchased) for $8.35 and the 2012 SPX Jun 1205 Put option could be exited (sold) for $4.95 which represented a net debit of -$3.40 which would have resulted in a total net debit of -$1.80  (net debit of -$3.40 subtracted from $1.60 initial net credit) or a loss of –7.7%. It is generally not a good idea to exit a spread trade for a loss, so the position was analyzed for a roll.

Rolling to New Position
Using PowerOptions Mid-Point Spread Chain tool, it was determined the position could be rolled to the 2012 SPX JUL 1080/1205 bull-put credit for a net credit of $1.00, as the 2012 SPX 1205 put option could be sold for $21.30 and the 2012 SPX 1080 put option could be purchased for $16.90, representing a net credit of $4.40 for the new position. The net credit for substituting the new position for the old position, or rolling, can be calculated as the net debit for the old position subtracted from the net credit for the new position or $4.40-$3.40. The total potential return, including the new net credit of $1.00, was 11.1% (60.5% annualized). The total potential return has been increased over the initial positions’ 6.8%, however, the annualized return has been decreased from the initial positions’ 78%. The decrease in the annualized return is O.K., as it allows us to increase our total potential return and move a position away from potential trouble.

The roll to the new position was executed using a multi-leg trade for a net credit of $1.00 via the following order:

Day Order – Sell to Close $SPX 2012 Jun 1205 Put
Day Order – Buy To Close $SPX 2012 Jun 1230 Put
Day Order – Buy to Open $SPX 2012 Jul 1180 Put
Day Order – Sell To Open $SPX 2012 Jul 1205 Put
Net credit $1.00

New Management Point
A new management point for the new trade was set at $1247. If the price of the SPX dropped below $1247, then the position was to be managed for an exit or a roll. The location for the second management point is shown in the graph above.

Profit!!!
At July options expiration on July 20, 2012, the price of the SPX settled for $1370.28 which was above the $1205 strike price of the short put option, so the position was fully profitable and returned 11.1% (60.5% annualized). A chart illustrating the location of the $1205 strike price for the second position is shown below:

You can take advantage of PowerOptionsApplied’s expertise in management of spread trades, as our positions are autotraded by select brokers. The brokers can automatically place the trades for your account per our trade recommendations. So sign up today, try it for 30 days, and within 30 days if you determine the service is not for you, then we’ll happily refund your initial subscription fee.

Apple’s ranting has apparently provoked one British judge to order the company to run advertisements saying that Samsung did not copy the iPad. Apple has been ordered to by the judge to place the advertisements on its website and in British newspapers for six months. The judge went so far to say Samsung’s product did not infringe Apple’s technology, as Samsung’s product was not “as cool.”

Apple has reason to be fearful, as Samsung appears to be widening its lead over Apple in smartphone sales with estimates of Samsung having sold 50 million smartphones in the most recent quarter versus Apple’s 30.5 million. I think Apple’s missing the big picture, by licensing its technology, the company could receive revenue on 80.5 million smartphones instead of 30.5 million.

Apple continues to innovate and gain momentum as highlighted in the company’sWorld Wide Developers Conference 2012 held on Jun 12, 2012, but anticipated announcements related to a new iPhone and TV did not materialize. A few highlights from WWDC 2012 include:

• sold out WWDC 2012 in 1 hour and 43 minutes, two years ago took eight days
• over 400 million accounts on the App Store with credit cards and one click buying
• over 650,000 applications in App Store
• 30 billion Apps have been downloaded
• over $5 billion paid to application developers
• App Store in over 120 countries with 32 more coming
• updating MacBook Air with third generation Intel Core processors also known as Ivy Bridge which can support up to 512 Gbytes of flash storage
• updating MacBook Pro with Ivy Bridge
• MacBook Pro has retina display – pixels so small cannot be seen by the human eye from normal working distance
• 66 million Mac users, 3x five years ago
• iCloud introduced in October has 125 million registered users
• sold more than 365 million iOS devices
• integrating Facebook into iOS 6
• integrating Facebook into Siri
• two thirds of mobile traffic comes from Safari via iOS

With Apple’s upcoming earnings release scheduled for July 24, 2012, an investor in Apple might consider protecting the position, at least temporarily, just in case the company’s results aren’t stellar. Apple has continued to execute and its stock price has reflected the company’s execution as shown below:

However, with Apple’s recent record of execution, any misstep by the company could result in a nasty surprise with respect to its stock price, as the expectations for the company are very high at this point. A protected covered call might be considered for Apple, as the strategy positions for a potential return, even if the stock price is stagnant, and provides for protection, in case the stock price drops significantly. A protected covered call may be entered by selling a call option against a stock and using some of the proceeds to purchase a put option for protection. The put option operates as “stock insurance”.

In a series of previous articles related to Apple, protected covered calls were considered for the company. Since the posting of the first article on April 24, 2012, an investor long in Apple stock would have realized a return of +7.6%. However, an investor using the protected covered call strategy would have realized a nice profit of +10.5%, a higher return and an investment protected via put options.

• Long Apple stock: +7.6% return
• Protected covered call: +10.5% return

Using PowerOptions tools, a number of protected covered call positions were found with a maximum potential loss less than 8% as shown below:

The 8% maximum loss value was used, as an 8% loss can typically be recovered fairly quickly using option income strategies.

The highest potential returning position looks attractive with a potential return of 2.8% (34% annualized) and a maximum potential loss of 7.3%, so even the stock drops to zero, the maximum potential loss is 7.3%. The specific call option to sell is the 2012 Aug 610 at $22.85 and the put option to purchase is the 2012 Aug 550 at $5.00.

Trade

• AAPL stock (existing or purchased)
• Sell AAPL 2012 Aug 610 Call at $22.85
• Buy AAPL 2012 Aug 550 Put at $5.00

A profit/loss graph for one contract of the Apple protected covered call is shown below:

For a stock price below the $550 strike price of the put option, the value of the protected covered call remains unchanged. If the price of the stock increases to around $670, the position can most likely be rolled in order to realize additional potential return.