Rise Back From Yearly Lows!

A good week as our options portfolio increased 4%. We are still at a loss YTD, but are confident we will have another market beating year. The biggest gain for the week was our call option on SanDisk which benefited from the 12% increase in share price. We are now up 76% on our SDNK call position, but expect more since expiration is not until October. We are holding a number of long call positions with expirations that range from June through January. These positions all took big hits with the May market turbulence. However, we think the market will settle down over the summer and these positions will return to profitability. Our short position against the VIX position has now also expired, and that had been by far the biggest drag on this portfolio. Amerigroup (AGP, Healthcare Facilities) stock is currently on our buy list. Options are also available for trade on AGP, and we are currently evaluating a Dec call spread with exercise prices of $35 and $40. We would buy the $35 and sell the $40 for a net debit. The option is already in the money and we would have six months to realize additional price appreciation. Healthcare has been an underperformer the past six months, and we expect that to change providing additional lift to Amerigroup. We may also sell the $25 put for additional premium to offset our net debit entry cost. Selling the put does have risk, but we are prepared to own the stock at $25 which in our mind represents exceptional value. We will wait for the market to settle a bit before setting up these trades next week. The month of May has been our worst options trading month ever. As we have said before, trading options can be very rewarding, but investors need to understand the trading risk and volatility that can occur over short periods. We remain very optimistic that our portfolio will bounce back sharply and finish the year much higher than the market averages. When measured over the longer term, this continues to be our best performing portfolio.