Weekly Update: April 4, 2013
Weekly Update: April 4, 2013
What To Watch
Investors are starting to show some concern with the markets. And while stocks have been resilient, there’s been a lot of choppiness this past week. The S&P 500 is down just over half a percent over the last week and the Dow Industrials are roughly flat.
What’s more, the CBOE S&P 500 Volatility Index (VIX) is creeping higher. The ‘fear gauge’ is over 14 as of this writing. Of course, 14 is extremely low from a historical perspective, and even well below the 52-week high of 27. However, just two weeks ago the VIX was under 12 – so it’s worth keeping an eye on.
Why the added volatility?
Certainly Europe is part of the problem. Economic and banking woes across the pond aren’t helping investor confidence. Cyprus itself is not a huge deal, but it does remind us that Europe has a long way to go.
More importantly, domestic economic numbers have taken a step back recently. Manufacturing has slowed and jobless claims have risen sharply. It could just be noise – or it may be something more. Regardless, it’s definitely something to track closely.
It may be time to add a put or two to the portfolio given the rise in uncertainty. Most likely, the next trade we do (I’m targeting Monday) will be focused on the downside.
Portfolio Recap
Position #1: Freeport-McMoRan (FCX) April 2013 $34 Calls
Price Paid: $0.72
Current Price: $0.12
Time Until Expiration: 15 Days
FCX has taken a turn for the worse with the recent market softness. However, the stock is at a significant support level and well below its key moving averages. There’s still time for it to recover in the next week.
If we get a big enough rally in FCX over the next few business days, I’m likely to recommend selling our calls to preserve capital.
Position #2: F5 Networks (FFIV) April 2013 $105 Calls
Price Paid: $0.92
Current Price: $0.10
Time Until Expiration: 15 Days
Despite the market volatility, FFIV has held its ground. The stock has the potential to make a sharp move towards the 50-day/200-day moving average. If that happens quickly, our calls could see a substantial increase in value. It’s definitely a good sign that support at the 20-day moving average is holding.
Position #3: Amazon.com (AMZN) April 2013 $280 Calls
Price Paid: $1.10
Current Price: $0.34
Time Until Expiration: 15 Days
AMZN didn’t break through resistance as I had hoped, and the stock has pulled back in recent days. However, it’s once again at strong support. Plus, this stock can quickly make up ground.
Let’s see what happens over the next few days. For now, hang on to the calls.
Position #4: Deere & Co (DE) May 2013 $87.50 Calls
Price Paid: $1.43
Current Price: $1.67
Time Until Expiration: 43 Days
We’re off to a nice start with our DE calls. Right out of the gate, the calls are up 17%. Even better, these are May options, so we have oodles of time for this trade to turn into a big winner. Let’s see what’s in store for this stock now that it’s reversed higher.
Category: OTW Weekly Updates
