Weekly Update: August 14, 2014
Weekly Update: August 14, 2014
What To Watch
The S&P 500 has regained much of the ground it lost earlier this month and is up about 6.5% on the year. Overall volatility has calmed somewhat, but there’s certainly a more elevated level of investor fear than we’re used to this summer. And that’s good news for us.
It’s not a coincidence that this week we had our first triple-digit winner in a while. You see, this strategy performs best in a more volatile environment. The lack of volatility, or really any big moves in general, has been tough on us for much of 2014.
I’ll occasionally get questions from subscribers about why we haven’t had a bunch of big winners like last year. And the answer is pretty simple – it’s all about volatility. Would have you been better off up to this point in the year using a covered call strategy or a put selling strategy? Absolutely. However, that’s not what we do here. This service is all about buying calls/puts in undervalued/overvalued stocks. That being said, there are certainly times when the strategy will work better than others.
Ultimately though, I know this method of trading will pay off in the long-run. Volatility always returns to the equities markets. Even better, it looks like we may just be entering a more lucrative period for our trading method. Let’s start locking in those winners!
Portfolio Recap
Position #1: Franco-Nevada (FNV) August $55 Puts
Price Paid: $1.38
Current Price: $0.05
Time Until Expiration: 1 day
FNV tanked 5% today, giving just a tiny bit of life to our puts. Our options expire tomorrow, so it’s probably too late, but at least the stock will be worth watching. Another big down day, and we’ll get a chance to sell the options.
Position #2: AGCO (AGCO) August $55 Calls
Price Paid: $0.85
Current Price: $0.00
Time Until Expiration: 1 day
AGCO never recovered from its poor guidance. These options will be off the books tomorrow.
Position #3: Altera (ALTR) September $34 Calls
Price Paid: $1.35
Current Price: $0.65
Time Until Expiration: 36 days
ALTR is looking strong this week. The shares have climbed above the 200-day moving average and are headed for the 50-day moving average, right at $34. There’s not a whole lot of resistance above the 50-day moving average, so it’s a compelling level for us. Remember, we still have over a month on these calls.
Position #4: GT Advanced Technologies (GTAT) September $14 Calls
Price Paid: $1.35
Price Sold: $2.70
We sold our GTAT calls this week for a 100% winner.
Position #5: Rocket Fuel (FUEL) September $20 Calls
Price Paid: $1.10
Current Price: $0.30
Time Until Expiration: 36 days
FUEL has slowly faded since our trade last week. The share price may be down, but this stock can and will move in a hurry. This is the type of stock that will hit $20 in one day. So, with over a month left, we have more than enough time for this trade to turn into a big winner.
Category: OTW Weekly Updates
