Weekly Update: December 18, 2014

| December 18, 2014

Weekly Update:  December 18, 2014


What To Watch

US equity markets are experiencing some moderate volatility, after selling pressure in the energy sector has spread to some extent to other areas. However, the major indices have rebounded in the last couple days with positive vibes from the Fed meeting.

The S&P 500 is back over 11% higher on the year, after dipping to the 50-day moving average last week. The Dow Industrials and small caps (somewhat surprisingly) have also bounced since the Fed announcement. Obviously, energy stocks are still hurting, although they’ve come back a little.

The Fed meeting I’ve been talking about was the final FOMC meeting for the year. The central bank made investors quite happy by saying they’ll be patient with raising interest rates. It’s looking more and more like rates will stay at rock bottom levels in 2015.

In the meantime, the US economy is thriving. Retail sales were strong, and CPI showed no threat of inflation. With oil trading in the mid $50 level, gasoline prices should continue to drop. That means consumers will have even more money to spend on other things. That should be good news for several other industries/sectors (besides energy) moving forward.

I’m going to roll out another new trade tomorrow. Trades and updates will slow over the next two weeks with the holidays upon us. There will be at least one more trade before the end of the year, not including tomorrow’s. I’ll also send one more update before the end of the year, but it won’t be on a Thursday due to the holiday schedule.


Portfolio Recap

Position #1: Cliffs Natural Resources (CLF) December $10 Calls

Price Paid: $1.11

Current Price: $0.00

Time Until Expiration: 1 day

This position expires after tomorrow.


Position #2: Kate Spade (KATE) December 29 Calls

Price Paid: $1.50

Current Price: $1.35

Time Until Expiration: 1 day

Most of you should be out of this trade by now with expiration coming tomorrow and one exit point already being hit. The stock has regained ground in recent days and is now well in-the-money. Because the call is likely to finish in the money, be sure to sell it out if you’re still holding. Make sure to do so, otherwise you’re options will automatically be exercised and you’ll be long the stock in your account on Monday.


Position #3: Glu Mobile GLUU) January 4 Calls

Price Paid: $0.28

Current Price: $0.35

Time Until Expiration: 29 days

GLUU finally broke out of its narrow range and has made the upward move we’ve been waiting for. The stock now has a good chance of making a run at the 200-day moving average (just over $4.50). We haven’t hit an exit point yet, but the trade is a winner right now.


Position #4: Encana (ECA) April 15 Calls

Price Paid: $1.25

Current Price: $0.90

Time Until Expiration: 119 days

As I feared, we hit the final exit point for aggressive traders and have been fully stopped out of our ECA calls. It’s too bad I didn’t set our downside exit points a bit lower, because the stock has already rebounded. Given these options don’t expire until April, making money on them was still a real possibility. But alas, what happened cannot be undone. Fortunately, time value has meant our options are still holding some value. Since we’re effectively out of this position, I won’t be updating it in future updates.


Position #5: Salesforce.com (CRM) January17th 57.50 Calls

Price Paid: $1.45

Current Price: $3.05

Time Until Expiration: 29 days

Well, that’s a heck of a first week for our CRM calls. Cloud software companies got a nice boost this week and CRM shares have gapped higher. We already hit our first exit point for conservative traders, who should’ve exited the position. Our calls have already earned as much as 128%! Meanwhile, aggressive traders can hang on to the calls for further upside. Quick note, I didn’t mention in the trade alert that these are the January 17th calls. My apologies for any confusion. In the future, I’ll be sure to list the expiration date on each trade.


Category: OTW Weekly Updates