Weekly Update: January 7, 2016

| January 7, 2016

Weekly Update:  January 7, 2016


What To Watch

Carnage may be too strong a word to describe the stock market conditions so far in 2016.  But, it’s not too far from the truth.  The S&P 500 is already down 5% this year, and the financial markets are acting like it’s 2008.  It certainly hasn’t been a good start to long-biased portfolios like ours.  However, I’ll obviously adjust my normal strategy if it looks like the dark times are going to continue.

Once again, I tend to feel this selling is overdone.  Yes, China is a mess.  It’s China’s stock market meltdown which is driving this negative action.  However, I think investors don’t really realize how small a percentage of our GDP sales to China really are.  Yes, it makes a difference… but not as much as many think.

Of course, the ill-advised Fed rate hike and North Korea blowing up a nuke aren’t helping matters.  Surely, there are reasons for concern on a macro level.  Nevertheless, I’m in the wait-and-see mode before I decide to become fully bearish.

We’ll definitely look to add puts to our portfolio in the weeks ahead.  However, my main focus is still going to be on finding undervalued stocks in the short-term.  As always, the details will change as the facts unfold.

Let’s take a look at the portfolio.


Portfolio Recap

Position #1: Yelp (YELP) January 29 Puts

Price Paid: $1.35

Current Price: $3.85

Time Until Expiration: 8 days

It’s a good thing we had a put in our portfolio, because it’s the one silver lining in an otherwise miserable start to the year.  We’d already hit our first exit point, but for aggressive traders, your patience paid off.  Our peak gain in this position is 184%.  We are fully stopped out of YELP after today.


Position #2: Corning (GLW) January 18 Calls

Price Paid: $0.53

Current Price: $0.11

Time Until Expiration: 8 days

Well, GLW is our one call position that hasn’t hit an exit point.  However, with just 8 days to go, there isn’t much value left in these options.  Hopefully, some of you took profits when we were near $19 in December.  I don’t’ expect much more out of the calls heading into expiration next week.


Position #3: Oracle (ORCL) January 38 Calls

Price Paid: $0.43

Current Price: $0.05

Time Until Expiration: 8 days

ORCL didn’t see any life over the holiday break and has now fallen below our first exit point due to the broad market selloff.  There isn’t much chance for these calls to be winners with just over a week until expiration.


Position #4: Cirrus Logic (CRUS) February 30 Calls

Price Paid: $1.25

Current Price: $1.25

Time Until Expiration: 43 days

I obviously jumped the gun on CRUS.  Not only did the market plunge today, but CRUS released disappointing preliminary revenues after close.  The stock will probably open in the $24-$25 range tomorrow.  As of right now, our calls are holding their value due to the added volatility, but I imagine they’ll open much cheaper tomorrow.  Go ahead and sell out tomorrow since we’ve hit our first exit point and will probably hit the second one as well.  Let’s try to salvage some value from these options and we’ll put the money towards a better opportunity.


Category: OTW Weekly Updates