Weekly Update: August 1, 2013

| August 1, 2013

Weekly Update:  August 1, 2013


What To Watch

Looks like there are plenty of reasons these days for the market to rally.  In fact, the S&P 500 crossed $1,700 for the first time ever today.  The bellwether index is up nearly 20% year-to-date.  That’s about as bullish as it gets.

Basically, news from all corners has been positive.

The Fed is going to keep purchasing bonds at a record pace because there haven’t been any signs of inflation and GDP growth is still tepid.  Meanwhile, in Europe, the ECB is also going to remain accommodative for the foreseeable future (although the bank believes the worst is over for the region).

However, despite sluggish GDP growth, there are definite signs the economy is improving.  Jobless claims came in at their lowest levels since 2008.  And, manufacturing is improving more than expected.  Tomorrow will bring the all-important non-farm payrolls number.  Nevertheless, I don’t expect the number to be shocking – in either direction.

In the meantime, earnings season is winding down.  Earnings have generally been better than expected, although the bar was set pretty low.  With many of the biggest companies having reported, the market’s focus will shift to macro events.  My guess is politics will start playing a role in market direction in the coming weeks.

As always, stay tuned for buy/sell alerts.


Portfolio Recap

Position #1: Qualcomm (QCOM) August $65 Calls

Price Paid: $1.05

Current Price: $0.88

Time Until Expiration: 15 days

QCOM is sitting right at our strike as of this writing.  The calls have regained most of their initial value (from our buy price) but now we’re running up against time decay.  I’m leaning towards selling these out tomorrow before the value starts to erode at a more rapid rate.  We’ll see how the stock responds to the jobs number and go from there.


Position #2: Freeport-McMoRan (FCX) September $29 Calls

Price Paid: $1.09

Current Price: $1.27

Time Until Expiration: 50 days

FCX is making a big move higher and our calls have popped nicely.  I still feel the shares will push towards the 200-day moving average (between $31 and $32) before expiration, so there’s plenty of upside left with this trade.  Let’s ride these calls to bigger profits.


Position #3: Broadcom (BRCM) September $28 Calls

Price Paid: $0.86

Current Price: $0.87

Time Until Expiration: 50 days

BRCM shares are creeping higher and our options are trading for right about what we paid for them.  Keep in mind, we’re right below our strike so it won’t take much of a push for the calls to become nice winners.  I believe this trade has significant upside potential.  Of course, we have plenty of time to see what it can do.


Position #4: Potash (POT) September $32 Calls

Price Paid: $1.12

Current Price: $0.88

Time Until Expiration: 50 days

POT sold off at the end of the day yesterday so hopefully some of you who opened the trade alert a bit later in the day got an even better price.  For the most part, our calls still have plenty of value with 50 days to go until expiration.  But, I don’t think it will take anywhere near that long for investors to realize the destruction in potash stocks is way overdone.


Category: OTW Weekly Updates