Weekly Update: April 17, 2014

| April 17, 2014

Weekly Update:  April 17, 2014


What To Watch

Lots of action in the markets again this week, particularly with all the big earnings releases.  The Nasdaq once again was hit the hardest of the major US indices, although the end of the week certainly was better.  Overall, the Nasdaq 100 is down about 2% from last week and roughly 4.5% for the last month.  In comparison, the S&P 500 is down about a half percent over the week and slightly less for the month.

Of the big tech earnings this week, Yahoo (YHOO) had the most positive news.  Google (GOOGL) was slightly negative, while IBM (IBM) was very negative.  Next week is the key week for tech earnings, with Apple (APPL), Amazon (AMZN), Facebook (FB), and Microsoft (MSFT) all reporting.

Macro risk continues to be mixed.  The situation in Ukraine has certainly heated up, with some physical confrontations occurring.  China also continues to be a concern regarding economic growth.

In the meantime, the domestic economy is looking the strongest it’s been in quite some time.  Retail sales, industrial production, consumer prices, and jobless claims all added support to the strengthening growth story of the US economy.

Next week should bring some excitement given the earnings calendar and the overseas risk.  I’m sure we’ll have plenty of trade opportunities with everything going on.

Let’s glance at our portfolio.


Portfolio Recap

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

Price Paid: $1.08

Price Sold: $0.59

We sold VZ this morning and collected a little over half of our initial investment.  That’s not bad considering the option was nearly worthless upon opening today.  Given the poor timing of the market selloff, I’m glad we were able to salvage some value from these calls.


Position #2: Facebook (FB) April $72.50 Calls

Price Paid: $1.68

Current Price: $0.00

Time Until Expiration: 0 days

As I mentioned before, FB was among the many Internet stocks to get hit with the recent sector rotation and Nasdaq selloff.  Close the book on this one.  We’ll likely enter FB calls again in the near future.


Position #3: Travelzoo (TZOO) April $22.50 Calls

Price Paid: $1.65

Current Price: $0.00

Time Until Expiration: 0 days

TZOO got absolutely crushed in the Nasdaq selloff.  Market timing got the better of us on this one.  Moving on.


Position #4: Abercrombie & Fitch (ANF) May $38 Puts

Price Paid: $1.68

Current Price: $3.10

Time Until Expiration: 30 days

ANF continues to struggle (to our benefit).  Our puts are now 85% winners.  With these puts becoming front-month options next week, we’ll likely take our profits off the table soon.  My exit target is around $34.50 in the stock, but we may just take our winnings if the shares begin to rally over the next few trading days.


Position #5: Pandora (P) May $32 Calls

Price Paid: $2.05

Current Price: $0.85

Time Until Expiration: 30 days

Nowhere has the timing of the tech selloff hurt us more than in P.  The company had just released very good news when the selloff hit, and took everything Internet related with it.  Fortunately, the stock bounced off strong support at $25 and looks like it bottomed out, closing above $27.  We have a month for the shares to make a run at the 50-day moving average, around $34.


Position #6: Freeport-McMorRan Copper & Gold FCX) May $33 Calls

Price Paid: $1.20

Current Price: $0.97

Time Until Expiration: 30 days

FCX is hanging in there, right around our strike price.  The stock has been flat for the last several days, and could be in store for a big move.  There’s significant support just below the current level, so my guess is the shares are ready to jump higher.  Of course, much of it depends on earnings next Thursday.  Stay tuned.


Position #7: Amazon (AMZN) May $375 Calls

Price Paid: $1.70

Current Price: $1.80

Time Until Expiration: 30 days

AMZN has been volatile but ended the week about $10 higher than where we bought our calls.  Those out-of-the-money calls will gain significant value should the stock climb another $15-$20 in the next week or so.  That could easily happen given earnings are released next week.  This should be interesting.


Category: OTW Weekly Updates