Weekly Update: December 12, 2013
Weekly Update: December 12, 2013
What To Watch
December continues to be a tough month for equities, with the S&P 500 down over half a percent since last week. Granted, it’s been a very slow and steady decline, but broad market up days have been few and far between.
The primary concern for investors is Fed tapering. With economic news coming in better than expected – nearly across the board – it’s becoming increasingly likely the Fed will taper bond purchases sooner rather than later. While it’s unlikely, a December taper appears to be back on the table.
Meanwhile, the economy is getting better. The big jobs report from last Friday showed a gain of over 200,000 private jobs and a drop of unemployment from 7.3% to 7.0%. Moreover, retail sales for November increased by 0.7% – another sign consumers could be coming out of their shells.
While today’s jobless claims were far higher than expected, holiday season claims numbers are notoriously volatile. We can safely discount this week’s initial claims. But, we should certainly keep an eye on what happens next week.
Let’s take a closer look at our open positions.
Portfolio Recap
Position #1: Citrix Systems (CTXS) December $65 Calls
Price Paid: $1.39
Current Price: $0.10
Time Until Expiration: 8 days
This past down week in the markets took its toll on CTXS, which could not break through the 50-day moving average as hoped. We need a quick reversal in order to salvage these calls. First off, we’ll need the broad market selling to come to an end very soon.
Position #2: Dominion (D) December $65 Puts
Price Paid: $1.45
Current Price: $1.70
Time Until Expiration: 8 days
I was very close to selling D early this week, but we couldn’t quite get the closing point I was looking for. I believe we’ll test $63 again before expiration and that’s where we’ll sell out (or below).
Position #3: Millennial Media (MM) February $7.50 Calls
Price Paid: $0.65
Current Price: $0.55
Time Until Expiration: 71 days
Not a whole lot of movement in MM since last week. I don’t expect to see a sustained move higher until MM breaks the 20-day moving average resistance.
Position #4: Cree (CREE) January $60 Calls
Price Paid: $1.52
Current Price: $0.95
Time Until Expiration: 36 days
CREE has sold off along with the broad market. More importantly, there’s no stock specific reason why the share price has retreated. As such, I expect the shares to rebound soon, along with the general market. There’s plenty of reason to believe this is going to be a nice trade for us.
Position #5: General Cable (BGC) February $30 Calls
Price Paid: $1.25
Current Price: $1.05
Time Until Expiration: 71 days
BGC sold off with the market, but should be hitting support about this level. I expect a rebound with the overall market.
I did receive a question about the class action lawsuit the company’s involved in. Basically, it’s a non-event. The big selloff in the stock occurred because of poor earnings, not because of the lawsuit, which I believe we can safely ignore. Bottom line, my trade thesis is based on the stock becoming undervalued after the big drop and will rebound to its moving averages by February expiration.
Category: OTW Weekly Updates
