Update: September 12, 2016

| September 12, 2016

September 12, 2016

 

Portfolio Update

We finally had some action at the end of last week, with the major stock indexes dropping around 2% in a day. At the same time, volatility jumped over 30% – although it was very low to begin with.  Some may have thought this was the beginning of a more volatile period for stocks.

That sentiment lasted all of one weekend, as the markets gained back much of what it had lost in just one session.  Today’s action is a reminder that investors still look at any signs of selling as a buying opportunity.  And, there simply isn’t a lot of fear in the short-term right now.

Why the complacency?  Well, at least part of it is due to the lack of potential catalyst.  Once Brexit hit, the major macro event calendar slowed to a crawl.  The crowd has mostly internalized the issues with the global economy. And for the most part, the US is doing well economically.

Of course, the biggest concern (and the reason the markets sold off on Friday) is still all about interest rates.  When will the Fed hike?  How much will it hike and how often moving forward?  These are the questions that could potentially drive up volatility in the coming months.

The September FOMC meeting is the next big thing to look to for potential market-moving news.  What the Fed says (or doesn’t say) is going to be closely monitored by the investment community.  For now, we remain in wait-and-see mode.

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.

  • Intuit (INTU) October 105 Puts – We’ve already had some interesting action in INTU, which had a small gap down last week. At one point, traders must have thought the stock was going to continue plunging because our puts got bid up to $4.09 (a 272% gain) before settling back into a more normal range.  We’re not far away from our first profit-taking point, so keep an eye on INTU in the coming days.

 

  • Compass Minerals (CMP) December 75 Calls – The selloff last week took out several resource stocks, like Compass, but not before it hit a position high for us. The calls got to be worth as much as $3.40 (70% gains) before pulling back sharply during the selloff.  Don’t worry, we have until December on these options, so there’s plenty of time for CMP to rebound and test those highs again.

 

  • Broadcom Limited (AVGO) October 190 Calls – Somewhat ironically, AVGO has gone from an example of why OTM calls can be good buys to a total dog. The stock plunged from nearly $180 all the way down to $160 in about a week. So it went from our conservative profit-taking point to our conservative risk-control point about as fast as I’ve ever seen happen.  AVGO did gain back nearly $4 today, so it could be quite a ride in this name before all is said and done.  Those wanting to hold for a rebound still have until mid-October on this position.

 

Category: AOA Updates

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