“The Happy Noodler”
October 31, 2006
” The Investor" model portfolio has been set up with the following positions.
Following is an explanation of how the portfolio was set up that will not be explained in letters in the future.
We bought 300 shares of FXI at a price of 85.12 per share for a total of $25543.
We sold 3 Dec call contracts of FXI strike price $87 for $180. per contract. These call contracts are an option for someone to buy 100 shares of our FXI stock for $87. per/share on or before the 3rd Friday of December. Most of the time these options are not exercised or the stock actually purchased before the expiration date. If the stock is below the strike price of $87 dollars on the 3rd Friday of December they will expire worthless and their $180 per contract just stays in our account. If the stock price is at or above $87 we will have made $1.80 per/share on our options and $1.88 per share on the stock for a total of $3.68 per/share or 4.3% before commissions. If the option is in the money, above $87 per share, we will buy our options back or roll them forward to the next month a day or two before the expiration date, so that we can keep our stock. The stock price could fall to $83.32 and we would still break even, anything above that amount and we would make some money.
We bought 300 shares of ICF stock for 96.2 per/share for a total of 28860. We sold 3 November call contracts of ICF for $105 per contract for a total of $304.
We bought $10,000 worth of PREMX at the close with a NAV of $13.77 per/share or 726.2164 shares with instructions for our capital gains to be reinvested and our dividends to be paid into our account.
We bought 400 shares of NEM for $43.63 per/share for a total of $17459.We sold 4 November call contracts of NEM with a strike price of $45 per/share for $100 per contract for a total of $389.
We bought 400 shares of BHP at $41.96 per/share for a total of $16,791. We sold 4 Nov call contracts of BHP with a strike price of $40 for $270 per contract for a total of $1068. Please note this contract is in the money to start with.
Security Shares Origin Price Cost Current Price Current value Gain or
FXI 300 85.12 25543.00 84.25 25275.00 <268.00>
ICF 300 96.20 28860.00 97.75 29325.00 465.00
BHP 400 41.96 16791.00 42.25 16900.00 109.00
NEM 400 43.63 17459.00 44.50 17800.00 341.00
PREMX 726.2164 13.77 10000.00 13.89 10087.14 87.14
Please note the following positions are call options contracts that we sold for our starting position. These are referred to as covered call positions because the options are covered by the stock we own. Their cost shows up as a negative because we sold them we didn’t purchase them and their value does also. But their sale results in money in our account just as any other sale would. But if they near expiration and the stock price is above the strike price we will buy them back. If they expire out of the money they are worthless and disappear from our account and we keep the money we sold them for obviously.
.IKILI 3 1.80 -529.00 1.20 -360.00 169.00
.ICKKS 3 1.05 -304.00 1.40 -420.00 <116.00>
.BHPKH 4 2.70 -1068.00 2.70 -1068.00 < 12.00>
.NEMKI 4 1.00 -389.00 1.15 -460.00 <71.00>
Total purchases 98653.00
Total sales 2290.00
Cash position 3667.00
Portfolio Gain or
Portfolio Value $100,704.14
We received our first indicator that we are possibly at a market top, this in itself is not a sell indicator but if we receive a sell indicator on top of that we will roll some of our options down to lower strike prices to better hedge the down side. We have been expecting the market to top out sometime around the election. That is one reason I wanted to start the model portfolio now because it is easy to have good results when you ride the wave up, harder to significantly beat the market in down turns and then out perform it on the way back up, but that is the goal of this portfolio and the others when I get them set up.
Last week I went through 5 days or chemotherapy. I felt worse as the week went on and was really sick the weekend. It also resulted in throat and mouth sores that make it hard to eat. But thank the lord I am doing better now and my appetite is improving. I think I have stopped loosing weight from the treatment and am now am able to eat enough to hold my own and soon begin regaining weight.
Below is a picture of Alex myself, and a 16 inch crappie I caught about a month ago. Josh and I went fishing and caught 40 crappie this was the biggest.