Weekly Update: April 11, 2013

| April 11, 2013

Weekly Update:  April 11, 2013


What To Watch

Just when it looked like macroeconomic conditions were going to derail the bull market, earnings season came to the rescue!  Between issues in Europe and a downturn in domestic economic news, investors looked like they might be headed for the exits.

But then, Alcoa (AA) kicked off earnings season with a bang.  The company surprised the markets by seeing better than expected demand for raw materials.  That’s almost always a good sign for the global economy, and shows things may not be as bad as people think.  It’s a big reason why the S&P 500 has climbed over 2% since last week.

What’s more, today’s huge drop in jobless claims is a nice reversal of what had been a negative stream of jobs news.  Of course, the March jobs report from last week was basically awful.  However, the jobs report is backward looking and jobless claims tend to be forward looking.

The 42,000 drop of new unemployment filings signifies that last week’s jobs data may just be noise instead of a new trend.  In fact, the 12-month change in weekly jobless claims is now comfortably back in negative territory.

Now we get to eagerly watch as all the big earnings come pouring in.  And don’t forget, earnings season is one of the best times for our strategy to find trading opportunities.  So stay tuned!


Portfolio Recap

Position #1:  Freeport-McMoRan (FCX) April 2013 $34 Calls

Price Paid: $0.72

Price Sold: $0.49

FCX finally made the move higher I was expecting.  It just happened a little bit too late.  The stock climbed all the way back to our strike price.  But, time decay had taken its course at that point, and we weren’t able to lock in profits by then.

However, getting out with much of the premium intact is not a bad thing.  And, if we had waited any longer, we would be in far worse shape.  This was a good exercise in risk management.


Position #2:  F5 Networks (FFIV) April 2013 $105 Calls

Price Paid: $0.92

Current Price: $0.00

Time Until Expiration: 8 Days

What can I say about FFIV? I had been a fan of this company for some time.  So, I was as surprised as the rest of the market when they preannounced weak second quarter earnings.  Sometimes you get blindsided in this business.  This is one of those cases where I clearly did not see the bad news coming.  Moving on…


Position #3:  Amazon.com (AMZN) April 2013 $280 Calls

Price Paid: $1.10

Current Price: $0.69

Time Until Expiration: 8 Days

Okay!  There’s the jump in the stock we’ve been waiting for.  As of this writing, we’re within $10 of our strike.  However, we also have significant time decay to contend with.  I’m leaning towards selling out these calls tomorrow to conserve a lion’s share of our capital – depending on what the stock is doing.  If the shares jump just a bit higher in the morning tomorrow, there’s still a chance we could make money on the calls.


Position #4:  Deere & Co (DE) May 2013 $87.50 Calls

Price Paid: $1.43

Current Price: $2.20

Time Until Expiration: 36 Days

DE has already been a very solid trade for us.  We’re up 54% as of this writing.  We have over a month left on these calls, so we could ride these out if we choose.  Of course, 54% profits are nice.  My intention at the moment is to see if DE will test the 50-day moving average – which is another $1 higher from here.  However, I’m ready to pull the trigger on these quickly if the market turns.


Position #5:  OpenTable (OPEN) May 2013 $57.50 Puts

Price Paid: $1.65

Current Price: $1.90

Time Until Expiration: 36 Days

We’re off and running with our OPEN puts.  The stock immediately dropped after the trade was in the books and it’s currently a 15% winner with lots of time to go.

However, in this case, we’re definitely going to be holding on to the puts.  It’s the only downside trade in our portfolio, and if even if the market stays strong, I expect this stock to continue to fall.  The 50-day moving average is very much a possibility in the near future.  That means there’s good upside potential left in the options.  Let’s hang on for bigger gains.


Category: OTW Weekly Updates