Update: August 31, 2015

| August 31, 2015

August 31, 2015

 

Portfolio Update

Without stating too much of the obvious, a lot has happened in the two weeks since our last update.  For all intents and purposes, we’ve had a full on correction since then.  We’ve also seen about a 50% retracement since the correction.  Talk about a volatile two weeks!

The S&P 500 dropped roughly 10% in a week’s period – technically a correction.  The plunge was based on big concerns over China’s deteriorating economy.  As a huge buyer of US goods and raw materials, a major slowdown in China could put a fair amount of pressure on the US economy.  However, after what was certainly an overreaction in stocks, the major indices have regained about half of what they lost during the selloff.

Keep in mind, the US economy is still doing quite well.  GDP, retail sales, durable goods, housing, and jobs data have all been better than expected overall.  It’s hard to be too concerned about a crash in stocks when the US is doing as well as it has been lately.

On the other hand, the scare in the stock market has got the Fed reconsidering its position on raising interest rates.  The one thing the stock selloff may have accomplished is pushing back the date the first rate hike occurs.  It will be interesting to see what the Fed says in September.

Of course, a 10% move in stocks is going to have a significant impact on our portfolio.  Several of our older positions were stopped out, as would be expected in such an environment.  On the other hand, our trades from last week mostly performed very well.

Let’s take a look at some portfolio highlights…

 

Portfolio Highlights

Just a quick note:  We won’t update every open position every update.  I try to focus on the positions that have some significant news or price movement.

  • eBay (EBAY) October 25 Calls – EBAY shares plunged during the correction, as did most tech stocks. However, we purchased our calls after the major drop, so we’ve been able to take full advantage of the partial recovery.  In fact, we hit our first profit-taking point within two days of the trade.  Highs for the position so far have been 61% gains.

 

  • American International Group (AIG) October 57.50 Calls – AIG nosedived during the market correction. And, as we expected, it also rebounded very quickly.  Like EBAY, we hit our first profit-taking point on AIG within a day or so of making the trade.  Highs on our calls reached 83% so far.

 

  • Caterpillar (CAT) September 80 Puts – Our trades from just prior to the correction did not perform very well, as you may have guessed due to the timing. However, one of those trades was the CAT put trade, which means it benefits from a down move.  Moreover, CAT plunged like the rest of the market, allowing us to earn big gains from the drop.  In fact, our gains reached as high as 264% during the peak of the correction!  Both conservative and aggressive traders should have exited the trade for a profit by now.

 

Category: AOA Updates