Update: May 12, 2014

May 12, 2014

 

Portfolio Update

The theme of the equities markets the past couple weeks has been that of divergence. That is, there’s been a divergence between large cap and small cap performance. And, there’s been a divergence between Nasdaq and S&P 500 stocks.

The S&P 500 is up over 2% for the year, even as the Dow Jones Industrial Index reaches new record highs. Meanwhile, the Nasdaq-100 Index is down roughly a percent on the year. Moreover, the Russell 2000, an excellent gauge of small cap stocks, is down over 4% year-to-date.

Basically, investors have been exiting anything considered risky, such as small caps or high growth stocks, in favor of more proven companies or dividend yielding names. At least part of the reason behind this rotation is the current state of the geopolitical climate. If events settle down from an international standpoint, that may be all it takes for investors to seek growth once again.

After all, investors are eventually going to want to see their portfolios grow at a higher than average rate. Dividends and safety stocks have plenty of benefits. But, more often than not, investors want to see big returns.

Let’s take a look at some of our positions.

 

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.

• IntercontinentalExchange (ICE) June $190 Puts – How’s that for good timing? Within days of putting on our ICE put trade, the stock plunged. Our options have been as high as 202% winners in under a week! Conservative traders should have taken profits at this point, while aggressive traders can hold the options down to $180 per share.

 

• Verizon (VZ) August $47 Calls – Another position from last week is also already a big winner. VZ basically went straight up from the day of our trade, right up until today’s minor pullback. Our calls hit a max gain of 125% so far. And, we still haven’t hit any of our exit points. Conservative and aggressive traders can still hold these options for bigger gains.

 

• Splunk (SPLK) May $67.5 Calls – While we’ve mostly done very well with our theme trades, the one theme that hasn’t played out yet is the Internet group trade. Internet names continue to get pummeled as investors seek safer companies and dividend stocks. SPLK is one of those Internet companies that investors are fleeing in droves. We’ve now hit the risk-control exit points for both conservative and aggressive traders, so this position is officially closed.

 

Category: AOA Updates