Thrift Savings Plan

The option trade executed at $4.90 this afternoon. I picked up 5 Oct 20 calls as Intel broke the support of $24.84. The stock actually closed at $24.55 while my option closed at $4.80. You can never call the bottom!

On Thursday morning after my post, I thought for sure I had missed the boat as Intel and the entire market surged. The Dow actually broke above the 14,000 level (a new high). Thank the investing gods that Google missed earnings expectations! That fact, along with another miss by Caterpillar, was enough to sink the market on Friday.

I enjoy these types of dips as they provide investors a great buying opportunity into quality companies.

My exit strategy is in place. I entered a GTC, All or None, sell order with a limit of $5.90. That will give me a $500 profit before taxes and commissions. I have until October for Intel to advance.

Once again, we wait….

After Intel reported net income up 44% after the close on July 17, I thought that was going to be great news for Intel and bad news for AMD. However, I was stunned to learn that “the Street” was highly disappointed in Intel’s profit margin performance! The experts believe a costly price war with AMD is affecting the margin. Needless to say, the stock began to sink in after-hours trading. I thought this will make a great short-term options play! However, since the option market was closed I would have to wait until the morning.

That same night around 8:30 PM, the Wall Street Journal reported that Bear Stearns declared their two hedge funds, backed by sub-prime mortgages, virtually worthless! While the vast majority of US stocks that trade isn’t involved with sub-prime mortgages, I knew a psychological over reaction was about to play out Wednesday morning. My gut told me the experts may point to this incident as another Long Term Capital Management story.

So today, the market was down as expected. Intel, too, hit the skids. However, I only wish it had hit the skids a little harder. In my “Mad Money” account I placed an order to buy some Intel Oct 20 calls at a limit of $4.90. The calls only got down to $5.05. My initial order is an All or None, GTC (Good ’til Canceled). If in the future Intel dips and triggers my buy, I may place another order for more.

According to a Market Edge Research report, Intel exhibits a technical support level at $24.84 per share. I hope Intel tests that support level in the coming days. While I don’t have any sophisticated options pricing tools, I can only assume that the calls will trade at or below $4.90 if the stock gets that low.

Let’s see how this plays out.

On May 5, 2007 I increased my international exposure by changing my allocation from 15% to 20% in the International Fund. It appears that move is paying off. On that day, the per share price was $24.58. At the end of the quarter on June 29th, the per share price was $24.66. That’s nothing to write home about. However, when you look at the closing price on the day of this post, July 16th, the per share price is $25.47! That’s a 3.62% return. So it appears I’m on the right track with this call. Time will tell.

Let’s recap the quarter and how our allocation performed. As you recall from previous posts, the allocation now stands at: 5% F Fund, 25% C Fund, 50% S Fund and 20% I Fund (that’s Fixed Income, Common Stock, Small Cap and International, respectively for the non-government crowd).

The returns for each fund are as follows: F Fund -0.5%, C Fund 6.0%, S Fund 5.0% and I Fund 6.4%. When we adjust for our allocation percentages above, the portfolio returned a total of 5.25% for the second quarter.

It looks like the portfolio is doing well so far. I’ll take a closer look at the half way point to see how it’s doing overall. Based on recent market activity, it looks nothing like a dull market this summer. With the sub-prime implosion, the Dow racing to new highs, and earnings season in full swing, we may see more market volatility than usual. One report I heard this morning on Bloomberg radio indicated a significant increase in the number of puts purchased on the S&P 500. That means a number of money managers are betting the market will fall in the near term. We’ll see!

Remember TSPers: At the very minimum you should be contributing enough to receive the agency match! If you don’t, you’re leaving free money on the table!!

The 2007 second quarter statements for TSP participants are now posted for viewing. Grab your statement and review it. I’ll be entering data into Quicken this week. After that, I’ll post my comments and reviews on the quarterly performance. I’ll focus on our recent change to increase the international exposure. Here’s where you can hold my feet to the fire. While it’s only been three months (actually less since the change was implemented around May 7th), we’ll see how we’re doing!