Weekly Update: April 10, 2014

| April 10, 2014

Weekly Update:  April 10, 2014


What To Watch

Plenty of interesting action in the markets over the past week, especially today.  The flight from riskier, momentum stocks is in full swing, with Internet and biotech stocks in particular getting hammered.  In fact, the Nasdaq is down 3% today, compared to 2% for the S&P 500 and 1.5% in the Dow Industrials.

Meanwhile, gold and bonds are catching a bid as investors decided to gobble up safer investments for the moment.  The risk-off trade is happening despite bullish news from the Fed minutes release this week.  Essentially, the Fed plans to keep rates extremely low longer than most people expected.

Moreover, initial jobless claims plunged 32,000 to 300,000.  That’s the lowest level since May of 2007 and a great sign the job market is gaining steam and stabilizing.

Nevertheless, for various reasons, investors are playing it safe.  At least part of the rotation to safer assets is related to geopolitical risk.  What’s more, there’s a lot of concern over China’s economy.

Still, positive earnings results should help boost stocks (or hurt if they come out worse than expected).  This next week will bring the first week of big earnings news.  There will likely be some excellent trading opportunities based on earnings and overall market action.

As always, stay tuned.


Portfolio Recap

Position #1: Verizon (VZ) April $47 Calls

Price Paid: $1.08

Current Price: $0.73

Time Until Expiration: 7 days

I’ve been looking for a point to sell the VZ calls, and each time it climbs above $48, I’m ready to pull the trigger.  It just hasn’t stayed above $48 long enough to roll out a sell trade.  Ideally, we’d sell it with the stock closer to $48.50 or higher.  But, with 7 days left, I’m looking to sell at any point above $48.


Position #2: Green Mountain Coffee Roasters (GMCR) April $90 Puts

Price Paid: $0.95

Current Price: $0.28

Time Until Expiration: 7 days

GMCR finally broke through major support and closed below $100.  That’s big news for us because there’s no support until close to $80.  One more down day like today, and our puts will be in the money.  With 7 days left, we still have time.


Position #3: Facebook (FB) April $72.50 Calls

Price Paid: $1.68

Current Price: $0.00

Time Until Expiration: 7 days

FB has gotten crushed with the rotation out of Internet stocks.  I like the stock long-term but these calls are done.  We’ll look to roll out another bullish, more favorable FB trade very soon.


Position #4: Travelzoo (TZOO) April $22.50 Calls

Price Paid: $1.65

Current Price: $0.75

Time Until Expiration: 7 days

TZOO had been performing fine until today’s unfortunate 6% drop.  We have 7 days for the stock to recover somewhat and sell out our calls for a reasonable value.


Position #5: Abercrombie & Fitch (ANF) May $38 Puts

Price Paid: $1.68

Current Price: $2.95

Time Until Expiration: 36 days

ANF has gotten crushed the last few days and our puts are now 76% winners.  The company is having all sorts of issues and investors are jumping ship.  Since we have over a month left, let’s see what the next few days brings before deciding whether to take profits on the trade or hold for more upside.


Position #6: Pandora (P) May $32 Calls

Price Paid: $2.05

Current Price: $0.84

Time Until Expiration: 36 days

It was a bloodbath in P today due to the Internet stock selloff, as the shares dropped all the way to the 200-day moving average, down 10.5%.  Fortunately, the stock should find strong support at current levels.  With 36 days to go until expiration and given the volatility in this stock, we still have plenty of time for our calls to be in play.


Position #7: Freeport-McMorRan Copper & Gold FCX) May $33 Calls

Price Paid: $1.20

Current Price: $1.12

Time Until Expiration: 36 days

FCX had climbed up to $34 before today’s selloff.  The stock weathered the storm pretty well, only dropping about 2% on the day.  FCX should recover quickly and is set to test $34 again soon.


Category: OTW Weekly Updates