Update: November 10, 2014
November 10, 2014
Portfolio Update
Did October even happen? Yes, that significant bout of volatility did actually occur, although investors seem to have a short memory. The S&P 500 is back to setting record highs, and is now up almost 12% on the year. Believe it or not, the benchmark index was actually negative on the year just 3 weeks ago or so.
Nevertheless, that’s the nature of volatility. It explodes out of nowhere and then creeps away as if it was just a bad dream. The VIX, the most common investor fear gauge, is all the way back down into the 12 range after closing above 25 on October 16th.
For the most part, the resilient US economy is allowing investors to remain content. It also helps that the Fed is pledging to keep interest rates low. Last week’s jobs report for October is helping the cause. The US added over 200,000 jobs for the ninth consecutive months, but wages only grew 0.1%. That wage growth number will be key moving forward.
Last week also brought the elections and the Republicans winning control of Congress. It should do little to alter investors’ views on stocks. The GOP isn’t likely to make a splash while Obama retains veto power. Most likely, we’re looking at the status quo until 2016.
Finally, I want to extend a welcome to our many new readers. Next Monday will bring the first new trade for readers who just signed up. In the meantime, feel free to look through recent updates and trade themes to see what we’ve done in the past and what could be in store.
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.
- Diamond Offshore (DO) December 35 Calls – Just a heads up, if your DO calls looks funny, it’s because the company issued a special cash dividend of $0.75. One time dividends like this create the rare situation where options strikes actually change. Our 35 strike is now the 34.25 strike. Besides the strike price, nothing else should have changed. I imagine this isn’t impacting many of you, because you likely cashed out for over 300% gains a couple weeks ago!
- CH Robinson (CHRW) January 70 Calls – Our CHRW calls are off to an excellent start. In fact, after just a week, we’ve already bypassed the exit point for conservative traders. If you cashed out today, you’ve locked in as much as 113% gains! For the more aggressive traders, the share price was at $75 not that long ago, so it’s certainly realistic we could get back to that point before January expiration.
- iShares Russell 2000 ETF (IWM) December 104 Puts – With the market rallying strongly this month, including small caps, we’ve reached a spot where both conservative and aggressive traders should have exited the IWM puts. This is one position I don’t mine closing for a loss. Keep in mind, this trade was basically a hedge against the major volatility we were seeing. It was there just in case things got out of hand. I’m certainly glad they didn’t, or we’d have much bigger problems to contend with. Don’t forget, losing money on a hedge is usually a good thing.
Category: AOA Updates
