Each month during options expiration week, the Covered Calls Advisor re-calculates the current values for each of the eight factors used to determine the "Overall Market Meter" rating. The eight factors used can be categorized as:
- macroeconomic (the first two indicators in the chart below),
- momentum (next two indicators in the chart),
- value (next three indicators), and
- growth (the last indicator).
The current Market Meter Average of 3.63 (see blue line in chart above) is slightly greater than the 3.50 of last month. The 3.63 is a Slightly Bullish rating(range from 3.5 to 4.5). Seven of the eight factors used to determine the Overall Market Meter rating remained unchanged from the prior analysis last month. The only factor that changed was the Interest Rates factor, which changed from Neutral to Slightly Bullish.
As shown in the right sidebar, the covered calls investing strategy corresponding to this overall Slightly Bullish sentiment is to "on-average sell 2% out-of-the-money covered calls for the nearest expiration month." So with the October 2011 options expiration this week, newly established positions for November 2011 expiration will be established in accordance with this guideline.
Your comments or questions regarding this post (or the details related to any of the eight factors used in this model) are welcomed. Please click on the "comments" link below or email me at the address shown in the upper-right sidebar.
Regards and Godspeed,