Weekly Update: August 29, 2013

| August 29, 2013

Weekly Update:  August 29, 2013


What To Watch

The theme of the past week has been volatility.  The CBOE S&P Volatility Index (VIX), otherwise known as the market’s fear gauge, is trading at nearly $17 as of this writing.  Now, that’s still comfortably under the VIX’s historical average of $20.  But, it’s a significant jump from the $12 level the index was at near the beginning of the month.

If the VIX eclipses the $20 level – and stays there – it could be a sign the market’s going to be in for a turbulent September/October.

So why the recent increase in volatility?

The primary catalyst is Syria.  It looks like the US could be close to initiating an air strike against the troubled nation.  And of course, war in any form tends to drive up market volatility.  And don’t forget, there are still a host of other political issues on the horizon, including another debt ceiling debate along with other budgetary confrontations.

With the increase in volatility, I think it’s time for us to add a put to our portfolio.  Keep an eye out tomorrow for a trade alert.


Portfolio Recap

Position #1: Broadcom (BRCM) September $28 Calls

Price Paid: $0.86

Current Price: $0.15

Time Until Expiration: 22 days

BRCM finally turned higher today and is up 1.6% as of this writing.  That’s a very good sign that the stock may have bottomed.  We’re just a couple days like this away from our options being in play.  Let’s continue holding the calls for now.


Position #2: Potash (POT) September $32 Calls

Price Paid: $1.12

Current Price: $0.32

Time Until Expiration: 22 days

POT has been pretty choppy this past week and is once again at the bottom of its recent trading range.  That means the shares are likely due for a move higher next week.  Unless the stock breaks out of this current range, we may end up selling our calls at the top of the range next week to conserve capital.


Position #3: Cree (CREE) September $65 Calls

Price Paid: $1.30

Current Price: $0.27

Time Until Expiration: 22 days

CREE got hit by the overall market selloff mid-week, but has recovered right back to its narrow trading range around the $57 level.  However, we’re still looking for a breakout over the $60 line.  If that happens, our calls will gain value in a hurry.  Let’s see what next week brings.


Position #4: Exxon Mobil (XOM) October $90 Calls

Price Paid: $0.73

Current Price: $1.00

Time Until Expiration: 50 days

Our XOM position got a huge boost this week but has come back to earth a little today.  Big Oil got a jolt over the Syria situation – which sent crude prices higher.  XOM jumped all the way to the 200-day moving average (just under $89) before pulling back today.  Nevertheless, our calls are already 37% winners and there’s clearly plenty of upside left.


Category: OTW Weekly Updates