Weekly Update: August 22, 2013

| August 22, 2013

Weekly Update:  August 22, 2013


What To Watch

With earnings season officially over and a light week for economic data, all eyes were turned toward the Fed minutes yesterday.  The result was relatively uneventful, although the market did sell off somewhat into the end of the day.

Basically, the Fed isn’t sure when they’ll taper their bond buying, but plan to do so as long as the economy continues to improve.  There’s nothing really new here.  And, it still appears October or so is the most likely period for tapering to begin.

Volatility has been higher over the past couple weeks, but still well below its historical average.  Meanwhile, the S&P 500 is down 2.5% over the past week and the Dow Industrials are down 2.8%.  What’s interesting is the Dow has been getting hammered lately relative to other major indices.

In fact, in an unusual turn of events, the Nasdaq 100 is outperforming the Dow by nearly 2% year-to-date.  And, the Russell 2000 is beating the Dow by a whopping 7% for the year.  I don’t expect this divergence to hold.  But, it’s an interesting development at this point in the year.

Let’s take a look at our positions.


Portfolio Recap

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

Price Paid: $1.09

Price Sold: $2.65

We went ahead and cashed in our FCX calls today for a very nice 143% gain.  There may be some upside left in the calls, but yesterday’s selloff convinced me not to be greedy.  After all, a 143% winner is pretty darn good!


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

Price Paid: $0.86

Current Price: $0.12

Time Until Expiration: 29 days

BRCM has been trending down, pretty much in line with market action.  We’re looking for a catalyst to give the shares a kick in the pants and get our calls back in play.  One definite positive, there’s been a lot of bullish action in BRCM call options.  As such, and with plenty of time left, I still believe we can profit off this position. Let’s stay the course for now.


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

Price Paid: $1.12

Current Price: $0.40

Time Until Expiration: 29 days

POT has had something of a rough week, down about 4.5% since our last update.  We’re right about to hit support though, so I see a limit to the short-term downside.  There’s still plenty of time for this trade to reach its potential, and we could easily be back to positive in the matter of a day or two.  For now, we’ll continue to let this trade develop.


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

Price Paid: $1.30

Current Price: $0.38

Time Until Expiration: 29 days

We haven’t yet gotten the recovery we’re looking for in CREE.  However, the shares seem to have found strong support at around the $57 level.  Now, we just need to the stock to catch a bid and start moving the right direction.  For the moment, time is still on our side.


Position #5: Exxon Mobil (XOM) October $90 Calls

Price Paid: $0.73

Current Price: $0.79

Time Until Expiration: 57 days

We just entered into this XOM trade yesterday and it’s already up small.  Clearly, with an October expiration, we have plenty of time to profit off these calls.  I don’t think we’re going to need it.  Chances are we’ll be able to exit this trade for nice gains long before October arrives.


Category: OTW Weekly Updates