Weekly Update: January 17, 2013

| January 17, 2013

Weekly Update:  January 17, 2013


What To Watch

The past week started quietly but is finishing on the strong side.  Positive economic news and strong earnings have pushed the S&P 500 and Dow Industrials up roughly 1% for the week.  In fact, the S&P 500 hit five-year highs today.

On the positive side, retail sales, industrial production, housing starts, and jobless claims all look encouraging.  All the positive economic news is certainly reason for investors to be optimistic about the future.

What’s more, earnings season has started out strong.  In particular, eBay (EBAY) posted very upbeat numbers.  As an online retail giant, it’s definitely good news to see EBAY beating revenues and income expectations.

On the murky side, there’s still the debt ceiling to worry about.  Congress and the President are already starting the posturing and the back and forth.  So, it would not surprise me one bit if these “negotiations” come down to the wire yet again.  Expect market volatility as the debt ceiling gets closer.

For the time being though, it’s hard to be anything but bullish about the market.  I’ll continue to look for trading opportunities related to earnings.  Stay tuned for another trade soon – likely early next week.


Portfolio Recap

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

Price Paid: $1.12

Current Price: $0.00

Time Until Expiration: 1 Day

These puts expire tomorrow.  Moving on…


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

Price Paid: $1.41

Current Price: $1.14

Time Until Expiration: 29 Days

Our FCX calls have pulled back somewhat over the last couple days.  Materials stocks haven’t really participated in the recent stock market rally.  However, I’m not worried.

We’re still in easy striking distance of nice profits.  Moreover, FCX earnings come out next week (Tuesday).  Analysts have lowered expectations for Freeport, and I believe that’s great news for us.  With China’s economy improving, I believe there’s been higher demand for copper than anticipated.  And that should have given a nice boost to FCX’s top line.

If FCX beats revenue expectations as I expect, we could see a nice rally in the shares.   Let’s continue holding our calls.


Position #3:  Intel (INTC) February 2013 $22 Calls

Price Paid: $0.53

Current Price: $0.81

Time Until Expiration: 29 Days

Not a bad first week for our INTC calls.  As of this writing, they’re up 53%.  But we’re not going to take profits just yet.

After all, the INTC trade is meant to be an earnings play – and earnings are today after close.  With the stock climbing into earnings, it’s a good sign that investors are expecting positive results.  Keep in mind, strong results could easily push these options into triple-digit gains.

Regardless, there’s a good chance we’ll close these options tomorrow, once we know the full earnings story.  Keep an eye on your email for a sell alert on INTC tomorrow.


Category: OTW Weekly Updates