Weekly Update: April 3, 2014

| April 3, 2014

Weekly Update:  April 3, 2014


What To Watch

US equities have had a pretty strong week, with the S&P 500 up 2% since our last update.  For the year, the benchmark index is up roughly 2.7%.  Many analysts believe stocks will continue their sideways motion as investors rotate into safer sectors and industries.

Economically, the US has mostly good news this week.  ISM Manufacturing showed strong improvement from the prior month.  Auto sales were up showing a positive trend in consumer spending.  And, the ADP jobs report showed a significant jump from February.

Tomorrow is the non-farm payrolls report, which will probably come in somewhere near expectations (moderate growth).  A negative surprise could roil the markets, while a positive surprise probably won’t make much difference, in my opinion.  We’ll know for sure soon enough.

Volatility has been low and the sideways action hasn’t been the easiest to trade.  However, I believe we have several strong positions on at the moment.  Tomorrow we’ll be adding a position in the basic materials space that I’m excited about.

Keep an eye out for the trade during market hours tomorrow.


Portfolio Recap

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

Price Paid: $1.08

Current Price: $1.10

Time Until Expiration: 14 days

VZ has broken through support at $48 which is good news for our calls.  We’re in an interesting situation – our calls are breakeven and we have 14 days left to expiration. However, the stock action is very bullish.  Let’s see what happens tomorrow and possibly Monday and then we may look to exit depending on market action.


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

Price Paid: $0.95

Current Price: $0.15

Time Until Expiration: 14 days

GMCR is having trouble breaking through support at the 50-day moving average.  We need that to happen in order for the stock to break below $100 by April expiration.  We need something like a $10 decline over the next week for our options to be in play.  It could happen given the volatility of this stock, so let’s wait and see.


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

Price Paid: $1.68

Current Price: $0.05

Time Until Expiration: 14 days

FB was heading the right direction until today’s 5% plunge.  Now our calls are in trouble unless we get a very quick turnaround.  Basically, social media stocks are getting killed lately as investors rotate into safer areas.  I don’t expect this trend to last, but we may run out of time on this position before we have a chance for it to recover.


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

Price Paid: $1.65

Current Price: $1.70

Time Until Expiration: 14 days

TZOO has climbed higher over the last week and our calls are firmly in the money.  Our options are small winners at the moment but I think the stock could be due for a significant breakout.  With two weeks to go, we’re going to see if we can get a better price out of these calls.


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

Price Paid: $1.68

Current Price: $1.30

Time Until Expiration: 43 days

ANF wasn’t able to break through the 50-day moving average support this go round.  However, the stock looks to be headed back down to the 200-day moving average.  We have plenty of time on these puts to let the shares test the 50-day once again.


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

Price Paid: $2.05

Current Price: $1.70

Time Until Expiration: 43 days

Talk about volatility… P has been all over the place today.  The share price almost reached $34 this morning but then plunged all the way below $30.  P can be volatile at times, but we now know it’s very capable of moving higher.  The news today (increased market share) was good, so there’s plenty of reason to believe the stock will test the highs again soon.


Category: OTW Weekly Updates