This month's updates were simple to execute but deserve long explanations. Some of my GDX holdings (in my IRA) rose through the strike price of the covered calls I had written; I bought back a portion and let the rest go away. The GDX holdings I keep in my taxable account rose significantly but did not trigger the strike price of their respective covered calls. I wrote those calls last month with a fairly high strike price.
I renewed my covered calls on GDX but with an intriguing twist. I noticed that my brokerage now enables trading in call options with weekly expirations. That is a boon for holders of extremely volatile assets like any securities derived from precious metals. I wrote calls on my remaining GDX that expire Friday, so if they don't expire I'll return to the well next Monday to fill my bucket with a little more cash. The premiums from rolling covered calls with weekly expirations should prove to be higher (net of commission) than calls with monthly expirations. BTW, I will allow the passive exercise of my GDX options to gradually pare down my gold hedge. Gold did its job by hedging my portfolio against volatility, but it seems to be responding to the Fed's erosion of the dollar more than anything else. Anything that provokes a run on the dollar from non-U.S. investors will force up real yields on Treasuries. That would be very negative for gold and I don't need to be stuck with a large gold exposure when it happens.
I also renewed my covered call positions on FXI, with no changes to the underlying securities. That one has dropped significantly but I don't mind because China is a long-term bet. Even with its inflation and environmental problems, it will soon convert from an export-driven economy to a domestic consumer economy. That's the good news.
All of my short-term Treasury holdings matured. I did not buy any more. In fact, I bought no additional fixed income securities at all this month. I'm hanging on to my California muni bonds as a deflationary hedge, but frankly any more QE from the Fed will reduce the value of their principal upon maturity next year. I'm seriously considering buying into some kind of TIPS vehicle as an inflation hedge, but my due diligence is not yet complete.
Stay tuned. The U.S. stock market is getting cheaper by the week.
I renewed my covered calls on GDX but with an intriguing twist. I noticed that my brokerage now enables trading in call options with weekly expirations. That is a boon for holders of extremely volatile assets like any securities derived from precious metals. I wrote calls on my remaining GDX that expire Friday, so if they don't expire I'll return to the well next Monday to fill my bucket with a little more cash. The premiums from rolling covered calls with weekly expirations should prove to be higher (net of commission) than calls with monthly expirations. BTW, I will allow the passive exercise of my GDX options to gradually pare down my gold hedge. Gold did its job by hedging my portfolio against volatility, but it seems to be responding to the Fed's erosion of the dollar more than anything else. Anything that provokes a run on the dollar from non-U.S. investors will force up real yields on Treasuries. That would be very negative for gold and I don't need to be stuck with a large gold exposure when it happens.
I also renewed my covered call positions on FXI, with no changes to the underlying securities. That one has dropped significantly but I don't mind because China is a long-term bet. Even with its inflation and environmental problems, it will soon convert from an export-driven economy to a domestic consumer economy. That's the good news.
All of my short-term Treasury holdings matured. I did not buy any more. In fact, I bought no additional fixed income securities at all this month. I'm hanging on to my California muni bonds as a deflationary hedge, but frankly any more QE from the Fed will reduce the value of their principal upon maturity next year. I'm seriously considering buying into some kind of TIPS vehicle as an inflation hedge, but my due diligence is not yet complete.
Stay tuned. The U.S. stock market is getting cheaper by the week.
