Update: February 23, 2015

February 23, 2015

 

Portfolio Update

US equities continue their march towards record highs, as relatively elevated levels of volatility aren’t keeping investors on the sidelines. While the financial markets have mostly been quiet over the last week or so, the VIX has been sitting at higher lows than in previous years.

At least part of the “new normal” for volatility is due to the higher levels of global economic and political risks we’re seeing. We have multiple areas where military action is ongoing or a running concern. And, there are several major economic regions which are underperforming, such as Europe. As long as global macroeconomic risk remains high, there’s probably going to be a higher level of volatility than we’ve experienced in other periods of this bull market.

Meanwhile, the US economy remains stalwart in the face of a struggling global economy. While the economic news has been worse than expected domestically, the big picture is still optimistic. Mostly, as long as people continue to get jobs, there’s not a whole lot to worry about. Right now, the job market looks quite strong.

And let’s not forget, the Fed is still in no hurry to raise interest rates.

Now, let’s take a look at the 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.

• Freeport McMoRan (FCX) May 18 Calls – FCX has continued the strong run higher which began soon after we opened the position. In fact, the stock climbed above our conservative profit-taking point of $20. Remember, aggressive traders can hold to $22.50. At its peak, our position has gained as much as 208%.

 

• Southern Company (SO) May 50 Puts – For those who held on to SO when it briefly climbed above our conservative risk control-point, you’ve been rewarded handsomely. The stock, which hit our conservative profit-taking point already, has also crossed below our aggressive exit level. Everyone should now be out of this trade. Peak gains for this position were 216%!

 

• Silver Wheaton (SLW) June 24 Calls – SLW has pulled back, along with the price of silver, but has yet to hit any exit points for us. As these are June calls, we still have plenty of time for the stock to turn around. SLW has held up better than silver itself due to the nature of the company’s revenues streams. That’s the primary reason we picked this equity, as opposed to say, a silver ETF. So far, it’s paid off from a risk-control standpoint.

 

Category: AOA Updates