Weekly Update: August 20, 2015

| August 20, 2015

Weekly Update:  August 20, 2015


What To Watch

Ouch – this wasn’t the week we were looking for.  Investors have apparently gotten tired of owning stocks over the past week.  For the first time in a while, the major equity indices have broken out of their trading ranges.  Unfortunately, the breakout was to the downside.

The S&P 500 is now down for the year.  After today’s carnage, it’s down about 1% year-to-date.  The Nasdaq 100 is still positive on the year, but it also seems to be losing traction.  The 200-day moving average will provide an interesting support level for the tech-heavy index.

So what’s going on?

On one hand, there are still all the issues with China and its fading economy.  The demand side of things looks a lot less interesting without China being a major buyer of goods.  On the other hand, there’s the precipitous drop in the price of crude oil.  Cheaper oil is generally a good thing, but oil that is too cheap starts to scare investors about the state of the economy.  It’s also bad news for many companies in the energy sector.

The various issues may make the Fed second guess the plan to raise rates in September.  It’s not a foregone conclusion at this point.  In fact, the rate hike may end up being pushed out a month or three.  What’s more, the US housing market looks solid, but the economy isn’t exactly in a rapid growth phase either.

The market drop this week has taken its toll on several of our positions.  Don’t worry, it will also give us some excellent entry points for new positions.  I plan on rolling out a new trade tomorrow.


Portfolio Recap

Position #1: Cameco (CCJ) August 15 Calls

Price Paid: $0.53

Current Price: $0.00

Time Until Expiration: 1 day

CCJ will expire worthless tomorrow.


Position #2: Bank of America (BAC) August 17 Calls

Price Paid: $0.39

Current Price: $0.04

Time Until Expiration: 1 day

Should be closed for big gains.


Position #3: Oracle (ORCL) August 41 Calls

Price Paid: $0.75

Current Price: $0.00

Time Until Expiration: 1 day

Expires worthless tomorrow.


Position #4: Mosaic (MOS) August 43 Calls

Price Paid: $0.99

Current Price: $0.05

Time Until Expiration: 1 day

Should be closed for solid gains.


Position #5: Dominion Resources (D) September 70 Puts

Price Paid: $0.77

Current Price: $0.20

Time Until Expiration: 29 days

It’s somewhat ironic that the one stock we had puts on is one of the few that’s done nothing but go up during this selloff.  Alas, lots of good news about D has come out as the company has been active in the acquisition space.  It would have been very difficult, if not impossible to predict these events.  As such, we’ve passed both of our risk-control points for this position.  The only silver lining is the up move happened quickly enough that we’re able to close the puts while they still have some premium left.


Position #6: QUALCOMM (QCOM) September 62.50 Calls

Price Paid: $1.09

Current Price: $0.59

Time Until Expiration: 29 days

There’s nothing wrong with QCOM, but the stock has gone south in step with the overall market.  Due to the broad market drop, we’ve passed our conservative risk-control point on the position.  In this case, I urge more patience than usual.  I think the stock will rebound along with the overall market very soon.


Category: OTW Weekly Updates