Weekly Update: February 19, 2015

| February 19, 2015

Weekly Update:  February 19, 2015


What To Watch

It looks like we’re at something of a crossroads in the equity markets. The S&P 500 is sitting at new highs, yet volatility hasn’t dropped to the levels we’ve come to expect with record high equity levels.

Could this be the sign of a new volatility regime? With the global economy still struggling (outside of the US), and geopolitical risk still high, we may need to get used to a higher low in the VIX. There’s still enough macro level risk for investors to be at least somewhat concerned.

Geopolitically speaking, the conflict between Ukraine and Russia is still the biggest ordeal. There’s also the possibility of a Greek exit from the Euro. And, there’s the war with ISIS to consider. But perhaps more important to the financial markets are the economic conditions in Europe and China.

Regarding the US economy, the news is still very mixed. On one hand, recent economic reports have been missing expectations. On the other hand, the job market is as healthy as it’s been in many years. What’s more, the Fed once again doesn’t appear to be in a hurry to raise rates.

Our next trade will be next week, so keep an eye out as always.

Now, on to our positions.


Portfolio Recap

Position #1: Aeropostale (ARO) February 2.50 Calls

Price Paid: $0.25

Current Price: $1.25

Time Until Expiration: 1 day

Doesn’t look like ARO will quite get to our aggressive exit point, but our peak profits are all the way up to 400% on this gem. With expiration tomorrow, go ahead and close out if you haven’t yet.


Position #2: PNC Financial Services Group (PNC) February 87.50 Calls

Price Paid: $1.80

Current Price: $4.70

Time Until Expiration: 1 day

On the other hand, PNC did hit our aggressive exit point, so everyone should be out of this trade. Peak profits for this position were 178%.


Position #3: Pandora Media (P) March 17 Calls

Price Paid: $1.33

Current Price: $0.25

Time Until Expiration: 29 days

Most of you are probably out of P by now. Some aggressive traders may still hold it, but my pre-earnings warning hopefully got most people out for profits. The stock has been going sideways since earnings, but I’ll still update the position weekly until we hit an aggressive exit point or expiration arrives.


Position #4: Micron Technology (MU) February 31 Calls

Price Paid: $0.99

Current Price: $1.35

Time Until Expiration: 1 day

MU continued its turnaround path and hit our conservative exit point, just in time for expiration. With the position expiring after tomorrow, you all should be out of it by now. Peak profits on this trade were 84%.


Position #5: King Digital Entertainment (KING) February 13.54 Calls

Price Paid: $0.95

Current Price: $2.40

Time Until Expiration: 1 day

Continuing the big winner trend, KING hit both of our profit taking points so everyone should be out of this huge gainer. Peak gains on this trade were 360%.


Position #6: Red Hat (RHT) March 65 Puts

Price Paid: $2.10

Current Price: $0.60

Time Until Expiration: 29 days

RHT is the one position not performing well for us. Of course, it’s our only put and the market has been mostly up. Since I generally like to trade calls more than puts in the current market environment, I don’t mind losing out on this one position if everything else is doing well. Conservative investors should have closed this position for risk control purposes. Aggressive traders can continue holding in the event of a selloff.


Position #7: Overstock.com (OSTK) March 22.50 Calls

Price Paid: $1.35

Current Price: $1.10

Time Until Expiration: 29 days

We just made this trade on Tuesday and it’s down a little so far. No worries though, as we’re just getting started. We have a month left on this position.


Category: OTW Weekly Updates