I called the Schwab options desk recently (877-673-7959) and they said that they do plan to offer weekly options, but not for a while.   The person I talked to said it would probably be a month or two.

For example highly rated bonds, usually not considered the riskiest of investments, are sensitive to prevailing interest rates.  AGG, a bond ETF is currently yielding around 3.7% annualized interest.  Its duration, a term that defines the average time until maturity for the bonds in the fund is around 4.    The duration metric quantifies how sensitive a bond investment is to interest rate fluctuations. In general, the price of a bond will drop by the duration amount in percent if applicable interest rates (intermediate time frame in this example) go up by one percent.   So, if interest rates go up by one percent, which is almost certain to happen, the bond fund like AGG will lose 4%.  Interest rate increases of several interest points could easily happen.   AGG’s  3.7% interest rate starts looking like an inadequate return given the risk.   Of course you could start adding things like protective puts, but those add commissions and costs that reduce your upside, and are typically very expensive if you are trying to completely limit your risk.

Some investment advisors might promote their asset allocation approach as not requiring predictions about the future, but their strategies are full of predictions (e.g., long term growth of stocks,  interest rates going down when equities go down, stocks in emerging markets growing faster than USA based stocks).

So realistically our only way to make better than CD level returns is to make good predictions about the future.   If you think interest rates are going to stay low for the next year, then AGG is not a bad investment–especially when compared to CDs and the like.  There are a quite a few things that can be predicted beyond just interest rates (e.g, short term stock direction, stock gains over 10 year periods, volatility, volatility skew,  “black swan” events, earnings reports, commodity prices, inflation rates, correlation between stocks, correlations between stocks and their sectors).

I am certainly not saying that we should forget strategies that limit/manage risk–I’m quite fond of those.     I’m just saying that managing risk is only part of the story, we also need to be right with our predictions most of the time.

So what are my predictions?   In general I tend to be pretty good at the longer term predictions,  usually not patient enough with the middle term predictions (e.g., 3 months),  not bad at the week level, and no better than a coin toss intra-day.

My 12 month predictions:

• No double dip recession
• Bull market starting back up again in the fall

My 3 month prediction:

• Sideways market.  S&P highs lows near 1020, highs near 1140

The remainder of this week:

• 20% chance upside breakout for S&P > 1120
• 50% chance sideways movement the rest of the week, closing in 1090 to 1120 range
• 30 % chance fallback into the 1070 range

I don’t think this is a bad strategy, but it does make the assumption that the future will be like the past (e.g., equities average around 10% growth per year over multi-decade periods, and that some assets classes like bonds and commodities tend to counterbalance trends in equities. For at least equities, the 2000 to 2010 time period has not been kind to this strategy—ignoring dividends the growth has been negative on the broad based markets.   Another trend is the recent synching up of commodities, and lower quality bonds with the equity markets.  This may be due to the rise of the ETF, which has made it much easier to get in, and out of things like gold, oil, and bonds.   Instead of counter balancing each other, they are increasingly moving in tandem—which increases the potential gains and risks.

Summarizing, from a risk management standpoint this approach has a fair number of issues:

1. I don’t think the past reliably predicts the future.  There are underlying assumptions about asset correlation and long term growth that look increasingly suspect
2. Although this is the probably the predominate investment strategy in the USA–because the vast majority of people just do what their broker recommends—it delivers truly gut wrenching poor performance during big bear markets.  People have their entire life savings invested in alignment with this strategy, and they see many years of gains erased in a few months.   The doomsayers come out in force, the press headlines the losses, and the conventional wisdom states that stocks are dead.   The end result is that a significant number of people capitulate near the bottom—bailing out of their investments at the worst possible time.

One of things I do like about diversified asset allocation is that its disciplined periodic rebalancing  takes profits on winners and reduces your exposure to the hot sector.  While an anathema to the momentum player, taking some of your winnings off the table periodically reduces your exposure to speculative bubbles.  The bursting of these bubbles is notoriously hard to predict, and they go south very quickly when they do.

Taken from http://www.option911.com/blog/option-education/how-option-time-premium-decays-over-the-weekend/, click to enlarge

All of this is of course modulated by any changes in the volatility of the underlying, and the market in general.

Some traders avoid options close to expiration because of these factors–and others flock to them.    As a covered call writer I am really attracted to the accelerated time decay of short term options.   I’m not taking any more risk than normal holding the underlying, and I am getting an accelerated decay in the price of the options I am short on.    I will often wait until there is only two or three weeks are remaining on the options to create the position.

Now it can be expiration week, every week for the following Stocks / ETFs (taken from this CBOE posting):

Weeklys on Exchange Traded Funds and equities. As of July 5, 2010, these included the following::

• SPY – Standard & Poor’s Depositary Receipts
• QQQQ – Nasdaq-100 Index Tracking Stock
• IWM – iShares Russell 2000 Index Fund
• GLD – Options on SPDR® Gold Shares
• XLF – Financial Select Sector SPDR
• EEM – iShares MSCI Emerging Markets Index
• C – Citigroup Inc
• BAC – Bank of America Corp
• AAPL – Apple Inc
• BP – BP PLC
• F – Ford
• GOOG – Google Inc.

Fidelity supports trading on these new weekly options, but Schwab does not appear to.   Beware of the listed greeks on these options, the software may not be using the correct time until expiration.

The volume, at least on the SPY weeklies has been substantial (20K today on the 105’s expiring 9-July), so I think the options providers have a winner.

For more information see this options clearing house post.

Schwab ETF  2010  Ex-Dividend and Pay date information

Schwab has now published their ex-dividend / pay dates for all of 2010 for their no-fee ETFs.  The published 2010 dates are:

Ex-Dividend:  23-Dec-09   22-Mar-10 21-Jun-10 20-Sep-10    20-Dec-10

Pay Dates:   30-Dec-09  26-Mar-10   25-Jun-10   24-Sep-10   27-Dec-10

Schwab International Equity ETF™ SCHF
Schwab U.S. Small-Cap ETF™ SCHA
Schwab U.S. Large-Cap Value ETF™ SCHV
Schwab U.S. Large–Cap Growth ETF™ SCHG
Schwab U.S. Large-Cap ETF™ SCHX
Schwab U.S. Broad Market ETF™ SCHB

Schwab  posted their second quarter dividend information here.   Schwab’s distribution / pay dates are very timely — only 4 days after ex-dividend with this most recent dividend.

The  SCHX’s dividend has been similar to SPY’s percentage wise — I think SPY’s September payout will be around .55 — with SCHX currently at 26.  I’m assuming SCHX’s dividend will be around $0.13 per share.

The SCHX has 750 stocks in it, but appears to closely follow the S&P 500.

If you don’t see the ETF symbol you want there are a lot more here: Dividend, Ex-Dividend, and Paydate / Distribution Date information for ETFs ]]> http://sixfigureinvesting.com/2010/06/schwab-publishes-ex-dividend-payout-dates-for-their-no-fee-etf-funds/feed/ 1