Weekly Update: February 27, 2014

| February 27, 2014

Weekly Update:  February 27, 2014

 

What To Watch

As US equities flirt with record highs, investors are trying to figure out what may be the next big market catalyst.  The S&P 500 is up 1% from this time last week and has now regained all the ground it lost during the 5% correction.

Domestic news has been fairly mild – which is in contrast to the extreme geopolitical events occurring internationally.  Over the last few weeks, there’s been a government overthrown in Ukraine and major protests (and violence in some cases) in Venezuela, Thailand, and Turkey.

Nevertheless, it’s business as usual in the US, with stocks continuing to gain ground.  Investors are shrugging off the emerging markets crisis and even poor economic data for the most part.  Volatility remains low while investor confidence is holding.  Perhaps it’s the solid earnings season just past, or maybe it’s the end of the winter weather finally in sight.

Granted, if emerging markets continue to be volatile, it could catch up to the US markets at some point.  China is the key factor here.  If China suffers a major economic setback, it could deal a blow to the US economy.  For now, there’s relatively little concern.

Just a reminder, I only use regular monthly options in this service.  My options picks will always expire on the third Friday of the expiration month.  If there are multiple expirations in a given month, it will always be the standard monthly expiration that we trade.

 

Portfolio Recap

Position #1: Intel (INTC) March $26 Calls

Price Paid: $1.03

Current Price: $0.05

Time Until Expiration: 22 days

INTC looks to be consolidating between the 20-day and 50-day moving average.  That setup suggests a big move could be coming in the near future.  My guess is that move will be higher.  If so, are options will be back in play soon.  That’s good, because we have just over three weeks left until expiration.

 

Position #2: McKesson (MCK) March $165 Puts

Price Paid: $1.6

Current Price: $0.75

Time Until Expiration: 22 days

As I predicted, MCK turned south after bumping up against major resistance.  The share price just broke through the 20-day moving average, with the next stop around $170 per share.  If the stock reaches $170 within a week or so, our options will gain significant value and we may be able to capture profits right away.

 

Position #3: Verizon (VZ) April $47 Calls

Price Paid: $1.08

Current Price: $1.60

Time Until Expiration: 50 days

It’s hard to complain about our most recent trade.  The VZ calls are already 48% winners… in just two days.  Telecom is getting a nice boost this week and could be the next sector in play.  Even though we have 50 days left on this trade, we may take profits very early if the stock continues this recent climb.

 

Category: OTW Weekly Updates