Weekly Update: January 30, 2014

| January 30, 2014

Weekly Update:  January 30, 2014


What To Watch

The markets have been a mess over the last week, with all sorts of issues cropping up all at once.  From this time last week, the S&P 500 is down 3.75%, while the Dow Industrials are down nearly 4%.  Tech stocks are even harder hit, down over 4.25%.

The biggest area of concern is emerging markets.  China’s potential slowdown is spooking investors, who are concerned over a global economic slowdown.  Meanwhile, the currency crisis in Turkey (and to some extent South Africa) isn’t helping matters.

Investors also didn’t get a reprieve from the Fed, with the central bank continuing to taper its bond buying program.  Another $10 billion was cut off monthly purchases of Treasuries and MBS.  Certainly, many investors were hoping the Fed would delay its stimulus reduction given the global economic environment.

Meanwhile, earnings and economics news remains mixed.  GDP came in as expected, but durable goods disappointed.  FB blew away earnings expectations, while AAPL was a letdown.  You get the picture.

For the most part, our portfolio has held up.  We have some winners and some losers, with plenty of time left on all of our positions.  I’ll most likely be looking to add some downside exposure in the next couple days.


Portfolio Recap

Position #1: Millennial Media (MM) February $7.50 Calls

Price Paid: $0.65

Current Price: $1.00

Time Until Expiration: 23 days

MM announced preliminary Q4 results above expectations as well as the CEO resigning.  Both news items were taken as big positives for the stock, so the shares soared.  We’re sitting on 54% gains right now, but I believe there’s some upside left.  Let’s watch the stock a few more days before making a decision on this one.


Position #2: General Cable (BGC) February $30 Calls

Price Paid: $1.25

Current Price: $1.05

Time Until Expiration: 23 days

BGC got hit with the broad market selling action.  Our calls have retained most of their value and should climb back into winning territory with a rebound in the overall market.  Hold for now.


Position #3: American Eagle (AEO) February $14 Calls

Price Paid: $0.98

Current Price: $0.45

Time Until Expiration: 23 days

AEO has picked up some steam and is heading in the right direction.  At this rate, our options will be back in the money next week. I’m looking at the 20-day or 50-day moving average as a potential exit point for this trade.


Position #4: First Solar (FSLR) February $60 Calls

Price Paid: $1.29

Current Price: $0.50

Time Until Expiration: 23 days

FSLR has also behaved better the last couple days. It’s back at the 20-day moving average.  The next stop is the 50-day moving average at $55.  Given the time left in these options, I’m considering $55 as a possible exit point.


Position #5: Intel (INTC) March $26 Calls

Price Paid: $1.03

Current Price: $0.20

Time Until Expiration: 51 days

Not much has happened with INTC since last week.  It could take some time for the stock to recover.  Fortunately, we have plenty of time on these calls.  As such, we’re going to wait these ones out.


Position #6: Unisys (UIS) February $32 Puts

Price Paid: $1.60

Current Price: $2.40

Time Until Expiration: 23 days

UIS is our one position that’s benefiting from the downside.  It’s a 50% winner right now, but I want to hold on to these puts for now in case the market decides to take another leg down.  There’s also strong resistance at the $32 level, so I don’t see much of a risk to holding these puts.


Category: OTW Weekly Updates