Weekly Update: January 24, 2013

| January 24, 2013

Weekly Update:  January 24, 2013


What To Watch

It’s been yet another solid week in the stock market driven by positive economic data and strong earnings.  As of this writing, the S&P 500 is up over 1.5% over the past week, while the Dow Industrials are closing in on a 2% week.

Market bulls were happy to see across the board strong earnings from names like IBM (IBM), Google (GOOG), and even Netflix (NFLX).  The diversity and magnitude of the good earnings reports have so far made up for the one negative report grabbing the headlines.

That’s Apple (AAPL) of course.  While the company did report record earnings, its outlook disappointed many of the company’s shareholders.  Those waiting to hear what Apple’s next big product will be have to wait a bit longer.  As such, the stock cratered on the news and is providing some drag to an otherwise optimistic market.

Economic news for the week was also encouraging.  Jobless claims once again dropped more than expected.  Plus, manufacturing data was better than anticipated.  All in all, it’s been a good week for stocks.

Earnings season is still in full swing, with another big week coming.  Next week’s earnings will be headlined by Amazon.com (AMZN), reporting after close on Tuesday.

As always, I’ll be watching for trading opportunities.


Portfolio Recap

Position #1:  Freeport McMoRan (FCX) February 2013 $34 Calls

Price Paid: $1.41

Current Price: $1.24

Time Until Expiration: 22 Days

FCX did exactly as we hoped and beat revenue and earnings expectations.  Our options became profitable for about a day after the announcement, but not enough so to warrant selling.  Meanwhile, we have plenty of time left for this trade to become a solid winner.

As I predicted, copper sales were better than expected, rising 18%.  It helped drive Freeport’s overall revenues up 8% year over year, and profits up 16%.

With the all around good news for the company, I still believe there’s plenty of upside to be had in the stock.  Let’s hang on to our options for now.


Position #2:  Intel (INTC) February 2013 $22 Calls

Price Paid: $0.53

Current Price: $0.06

Time Until Expiration: 22 Days

I know I told you we would likely sell out of these options last Friday, but the one, unlikely scenario happened where I felt holding our calls was the better choice.  Basically, our options dropped too far in value to justify selling them out with over three weeks left until expiration.

You see, INTC earning’s were very disappointing.  And, the stock took a beating right away after the announcement.  But, it’s not as if the earnings were all that bad from a pure numbers perspective.

Revenue was just slightly down versus expectations and earnings per share actually came in higher.  As I suspected, PC sales didn’t hurt INTC as much as many predicted.  However, the data center group didn’t grow nearly as much as was expected, and that’s what hurt the stock the most.  Not to mention, the company’s transition from PC chips to mobile device chips and other products has been challenging.

I believe INTC is oversold, and there’s still a chance we can make something of our calls.  After all, we’re only $1 out of the money.  Let’s hold our options for a chance at a rebound.


Position #3:  Amazon.com (AMZN) February 2013 $300 Calls

Price Paid: $1.29

Price Sold: $2.74

As you know, we sold out of our AMZN calls today and were able to capture 112% gains in less than a day.

Now, there’s a chance the stock could gap higher on positive earnings next Tuesday.  However, given we didn’t take gains on either FCX or INTC when they were up, I decided it was important to lock down a big winner while we had the opportunity.

Not that I’ve given up hope on either of our open positions – particularly FCX.  But, it’s usually a good idea to take 100% gains off the table when you can.  Congratulations on another big winner!


Category: OTW Weekly Updates