Weekly Update: January 10, 2013

Weekly Update:  January 10, 2013

 

What To Watch

After an explosive start to the year, things have settled down considerably.  The major indices are flat for the week and global economic news has been relatively mild.

Soon enough, the debt ceiling debate will take center stage.  But, until then, investors will turn their focus to corporate earnings.  Just this week, earnings season kicked off with the obligatory media attention on Alcoa (AA).  Though to be fair, most of the key earnings news won’t happen for another week or so.

Earnings expectations are on the optimistic side this season, so the market is expecting good results for the most part.  If we get some better than expected reports, we could see a sustained rally in stocks.

Most likely, I’ll focus on earnings for our next few trades.  Although, that could change depending on market conditions.  There’s definitely going to be a trade coming out tomorrow, so check your email regularly and be ready to pull the trigger.

 

Portfolio Recap

Position #1:  Wynn Resorts (WYNN) January 2013 $100 Puts

Price Paid: $1.12

Current Price: $0.03

Time Until Expiration: 8 Days

As I said last week, WYNN was basically a hedge for us in case the fiscal cliff debate/resolution resulted in a major market selloff.  That didn’t happen so these puts are worthless.

But that’s okay – for all intents and purposes, we’ve sacrificed these options in order to make money on other opportunities.

 

Position #2:  Freeport McMoRan (FCX) February 2013 $34 Calls

Price Paid: $1.41

Current Price: $2.03

Time Until Expiration: 36 Days

While the fiscal cliff resolution hurt our WYNN puts, it’s done wonders for our FCX calls.  As of this writing, the options are up 44%.  And with 36 days to go to expiration, they could have significantly more upside.

In fact, if the stock breaks above the 50-day moving average (just over $36 per share), the price could shoot straight up.  As such, we’re going to hang on to these winning calls for the time being for the opportunity for even bigger profits.

 

Category: OTW Weekly Updates