Weekly Update: January 9, 2014

| January 9, 2014

Weekly Update:  January 9, 2014


What To Watch

US equities are off to somewhat of a slow start this year, but the news overall has been positive.  The S&P 500 is down a bit over half a percent for the year as is the Dow Jones Industrial Average.  But for the most part, the action has been limited.

Economically speaking, the news keeps getting better and better.  This week, the ADP jobs report and jobless claims came in better than expected.  That implies tomorrow’s December non-farm payrolls report is also going to beat expectations.  If that’s the case, it’s certainly good news for the economy.

On the other hand, does that mean the Fed will accelerate its pace of its stimulus reduction?  Will an increase in tapering spook the markets?  I guess we’ll know soon enough.

More importantly for the short-term, earnings season kicks off today with Alcoa (AA) reporting after the bell.  Earnings periods are almost always good for long options strategies such as this one.  As such, stay tuned for new trades.  I’m looking to roll out the next one early next week.


Portfolio Recap

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

Price Paid: $0.65

Current Price: $0.70

Time Until Expiration: 43 days

MM has pulled back from its high over $7.70 but is still in good shape for our purposes.  I don’t expect the shares to remain below the 200-day moving average for long.  And, at $7.25, we’re still very close to our call strike.  Let’s give the stock time to recover.


Position #2: Cree (CREE) January $60 Calls

Price Paid: $1.52

Price Sold: $5.05

CREE was our first trade closed in 2014… and that’s a very good way to start the year.  We locked in 232.2% profits on our calls.


Position #3: General Cable (BGC) February $30 Calls

Price Paid: $1.25

Current Price: $0.80

Time Until Expiration: 43 days

BGC is trading in a range between the 50-day moving average and support line just below $28.  The stock should have plenty of support at the current level and is set to rebound.  Meanwhile, we have plenty of time for the shares to break through resistance at $29 and move towards the 200-day average at $31.


Position #4: American Eagle (AEO) February $14 Calls

Price Paid: $0.98

Current Price: $1.65

Time Until Expiration: 43 days

AEO is flying high for us, with the calls just over 68% winners.  If the stock breaks through resistance right around $15.50, the next stop is at least another $1 higher.  Let’s hold on to this winner for now.


Position #5: First Solar (FSLR) February $60 Calls

Price Paid: $1.29

Current Price: $1.20

Time Until Expiration: 43 days

Our FSLR calls, purchased earlier this week, haven’t done much so far.  The stock has ticked up slightly from our entry point but is basically holding the line.  Don’t worry, with over 40 days to go until expiration, I guarantee we’ll see some action in this stock.


Category: OTW Weekly Updates