Weekly Update: August 15, 2013

| August 15, 2013

Weekly Update:  August 15, 2013


What To Watch

So how do you read a day like today?  The Dow’s off nearly 200 points and the S&P 500 is down 20.  But the news isn’t really bad.  There’s actually a whole lot of data to digest.

On one hand, jobless claims dropped to the lowest level since 2007.  That sparked fears of Fed tapering.  But on the other hand, industrial production was weaker than expected.  No tapering needed, right?

What’s more, the 10-year Treasury yield spiked nearly 2.5%.  That’s sure to raise the Fed’s collective eyebrows.  But… Walmart (WMT) and Cisco (CSCO) both came out with disappointing earnings.  So tapering would be bad right now, right?

As you can see, the data is kind of a mess today.  And there’s not an obvious reason behind the market’s downswing.  All we know is that investors apparently felt like today’s a good day to sell.

Some of our positions are getting hit today, while others continue to thrive.  Let’s take a closer look.


Portfolio Recap

Position #1: Freeport-McMoRan (FCX) September $29 Calls

Price Paid: $1.09

Current Price: $3.20

Time Until Expiration: 36 days

Our FCX calls are monster winners, up 194% as of this writing.  While it’s tempting to sell with such big gains, I still believe we could see another leg higher.  With so much time left on these calls, I’d hate to miss out on an opportunity for well over 200% gains.  As long as the stock remains above the 200-day moving average, we’re going to hang on – at least until expiration day gets closer or the stock jumps higher.


Position #2: Broadcom (BRCM) September $28 Calls

Price Paid: $0.86

Current Price: $0.27

Time Until Expiration: 36 days

BRCM shares were starting to look like they may break out before today’s selloff.  We’re still within $2 of our strike with over a month to go.  So, no reason to worry about this position at the moment.  I think reaching $28 or higher in the share price is easily within reach prior to expiration.  Let’s see what next week brings.


Position #3: Potash (POT) September $32 Calls

Price Paid: $1.12

Current Price: $1.08

Time Until Expiration: 36 days

It’s funny that our calls are currently at roughly the same price as last week – and right at our entry point.  That’s because the stock’s actually been pretty volatile over the past week.  There’s been a lot of conflicting reports over what lies ahead for the potash industry.  I’m still firmly in the camp of the selloff being overdone.  Hang on to these calls for now.


Position #4: Cree (CREE) September $65 Calls

Price Paid: $1.30

Current Price: $0.56

Time Until Expiration: 36 days

We may have jumped the gun on yesterday’s trade, as CREE appears to have a bit more downside.  It doesn’t change my thesis on the stock one bit.  We still have over a month for the stock to recover and it could easily gain ground very quickly.  At this point in time, there’s nothing to worry about.  I expect a bounce in the share price will happen soon enough.


Category: OTW Weekly Updates