Weekly Update: December 4, 2014

| December 4, 2014

Weekly Update:  December 4, 2014


What To Watch

We’re back after a 2-week hiatus – hope everyone had an enjoyable Thanksgiving holiday. It’s December and holiday shopping is in full swing. We’ve already set records with over $2 billion spent on Cyber Monday. It should be interesting to see how the retail numbers look when all is said and done this quarter.

In the meantime, the major US indices continue to set new record highs. The S&P 500 is approaching 2,100 while the DJIA is nearing 18,000. Even the Russell 2000 has gotten into the act, up roughly 3% year to date.

The big news over the last week or so has been the plunging price of crude oil. With OPEC deciding to leave production as is, crude oil dropped to around $65 a barrel. That’s as low as oil’s been since 2009. Many analysts believe this will lead to more retail spending. But, it’s definitely hurting shale oil companies and deep sea drillers.

Economically speaking, the US remains in moderately positive shape. ISM Manufacturing came in a little less than expected, but is still showing reasonable growth. On the other hand, ISM Services handily beat expectations. Jobless claims have been rising, but are still in an encouraging range overall. Tomorrow we’ll get the big November jobs report. That will be an important data point heading into the final month of the year.

Look for a new trade tomorrow.


Portfolio Recap

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

Price Paid: $1.11

Current Price: $0.11

Time Until Expiration: 15 days

After dropping sharply in November, CLF climbed all the way back to $10 before pulling back once again. The company halted a debt refinancing plan due to adverse conditions and investors don’t like it one bit. CLF seems to dig itself in a deeper and deeper hole each week. Let’s hope it can find its way to higher ground over the next two weeks.


Position #2: Travelzoo (TZOO) December $12.50 Calls

Price Paid: $0.51

Current Price: $0.45

Time Until Expiration: 15 days

TZOO did finally take a shot at $13 but it only lasted about a day. The calls are still in the money, and we still have two weeks for this current consolidation to result in a big move higher. For now, stay tuned.


Position #3: Kate Spade (KATE) December 29 Calls

Price Paid: $1.50

Current Price: $1.70

Time Until Expiration: 15 days

We’ve had our first successful trade using the new stop-out method! KATE climbed over the conservative exit point of $31.50, so conservative traders should have exited the position. The options have been as much as 141% winners for us! Aggressive traders can hold up to $34, but keep in mind that expiration is approaching in two weeks.


Position #4: Cheniere Energy (LNG) December 70 Puts

Price Paid: $1.60

Current Price: $2.85

Time Until Expiration: 15 days

Not to be outdone by KATE, LNG decided to get into the act and plunged below both our profit-taking points. Natural gas took a major tumble at the end of November and LNG plunged all the way to $63. Oh, by the way, our puts were as much as 353% winners! Everyone should be out of this trade by now, so I won’t be updating it further.


Position #5: Glu Mobile GLUU) January 4 Calls

Price Paid: $0.28

Current Price: $0.20

Time Until Expiration: 43 days

Not too much going on in GLUU since our trade. It pulled back briefly at the beginning of the month, but has since recovered. We’re waiting for some positive industry news to help spark buying in the stock. Given the retail environment, it could come sooner than later. Don’t forget, these are January options, so we have plenty of time.


Category: OTW Weekly Updates