Weekly Update: December 20, 2012

Weekly Update:  December 20, 2012

What To Watch

The markets continue to be relatively quiet as investors gauge the chances for a resolution to the fiscal cliff.  There’s a good chance many investors are taking the rest of the year off.   After all, the market isn’t likely to pick a sustained direction until we know if we’re going over the fiscal cliff or not.

Next week and the following week could be even slower with the markets closed for Christmas and New Year’s.  However, sometimes thin markets can provide solid trading opportunities.  I certainly won’t be taking any time off!

Regarding the markets, the S&P 500 was up about 0.5% over the past week, while the Dow Industrials were nearly flat.  It’s the first week in a while that the mega-caps didn’t outperform the overall market.  However, it’s too early to tell if this is the start of a trend.

I’ve been following several potential trading opportunities, waiting for a good entry point.  It looks like we’re going to get the chance to enter into a call trade tomorrow.  Keep your eyes peeled, as you’ll almost certainly have a buy alert in your inbox tomorrow.

Portfolio Recap

Position #1:  Netflix (NFLX) December 2012 $62.50 Puts

Price Paid: $1.41

Current Price: $0.00

Time Until Expiration: 1 Day

We’ve known for a while now that these puts were done.  Let them expire tomorrow.

Position #2:  Wynn Resorts (WYNN) January 2013 $100 Puts

Price Paid: $1.12

Current Price: $0.55

Time Until Expiration: 29 Days

Despite WYNN’s stock price holding steady in recent days, our puts have nearly doubled in value since last week.  That’s a sign that volatility is increasing and investors are ramping up their WYNN put buying.

It could be worries over a specific pullback in the stock.  Or, it could be downside protection against a major market selloff.  In either case, it’s good for our position.

We still have plenty of time left on these puts.  With the volatility in WYNN clearly on the rise, we’re going to continue holding the options for significant upside potential.

Category: OTW Weekly Updates