Weekly Update: January 14, 2016

| January 14, 2016

Weekly Update:  January 14, 2016

 

What To Watch

The financial markets aren’t doing much better since our update last week, but at least we’ve had some up days mixed in with the selloff.  Today for instance, the S&P is up about 2%.  The benchmark index is still down nearly 6% on the year.  However, it’s nice to be off the lows for the time being.

Meanwhile, volatility has been highly elevated.  The VIX is up 27% so far this year and at around $24, is well above historical averages.  Until we see a major drop in volatility levels, we still need to approach this market with caution.  I’ll probably start mixing in some put purchases more frequently than I normally do while volatility is this high.

On the other hand, selloffs are a great time to buy calls in undervalued stocks.  And that’s still my primary method of making money.  There are going to be several excellent trading opportunities over the next couple weeks, especially with earnings season in full swing.

Besides earnings, the biggest market moving factors continue to be China and oil.  Chinese stocks continued to get pummeled almost every day.  Oil has also reached $30 per barrel, which is crazy if you think about how it traded at $110 not that long ago (2014).  Both China and oil need to be monitored daily if you’re an active trader.

I’ll have a new trade for us tomorrow.  Now, let’s take a look at the portfolio.

 

Portfolio Recap

Position #1: Corning (GLW) January 18 Calls

Price Paid: $0.53

Current Price: $0.05

Time Until Expiration: 1 day

GLW is one of those rare positions that never hit any of our exit points, on either side.  It expires tomorrow, so if the stock spikes over $18, make sure you sell out so you’re not stuck holding the shares next week.  Otherwise, you can let it expire.

 

Position #2: Oracle (ORCL) January 38 Calls

Price Paid: $0.43

Current Price: $0.00

Time Until Expiration: 1 day

ORCL expires tomorrow.  Moving on…

 

Position #3: Cirrus Logic (CRUS) February 30 Calls

Price Paid: $1.25

Current Price: $1.00

Time Until Expiration: 36 days

Surprise!  I was pretty sure CRUS would drop off our radar based on after-hours action after last week’s announcement.  However, investors ended up liking the news by the next day!  The position has actually been as high as a 60% winner, and almost hit our first profit-taking exit point.  Aggressive traders and those who held on to the options still have plenty of time for CRUS to rally.  For those who sold out (on my advice), you got out with most of your option value intact.

 

Category: OTW Weekly Updates