Monday, October 24, 2011

Updating The Alpha-D For 10/24/11

I didn't need to make many portfolio changes this week.  My covered calls on FXI and GDX expired unexercised.  I renewed my covered calls on FXI to expire next month.  With GDX, I sold my calls in my IRA to expire this Friday, and in my taxable account I sold them to expire next month. 

My intent in splitting the GDX expirations was to capture a larger cash premium in my IRA with a lower strike price that is much closer to the current market price of GDX.  I needed a shorter expiration date to minimize the possibility that volatility would spike and sell away the GDX holdings.  My GDX holdings' value is below the most recent price I paid to recapture them after they were sold away (thanks to covered calls) some months ago.  Part of the challenge of a covered call strategy is maintaining the underlying stocks as a long-term investment while minimizing capital gains from selling them and avoiding capital losses from repurchasing them. 

I continue to hold several California muni bonds that will mature next year.  I am considering putting some cash into TIPS but I must complete some analysis first.  Individual TIPS may not adjust in value quickly enough to keep pace with high inflation, but a TIPS bond fund or ETF may be able to keep up.  I'll let you know which vehicle I choose (if any) once I've figure that out.