Weekly Update: July 25, 2013

| July 25, 2013

Weekly Update:  July 25, 2013


What To Watch

Despite it being the heart of earnings season, the markets have remained tame.  In fact, the VIX is trading around 13 – a sign investors aren’t the least bit worried about a major selloff at the moment.  Meanwhile, the S&P 500 has climbed a little under a half a percent over the past week and 7% over the past month.

Economic data continues to be mostly strong.  Durable goods orders came in stronger than expected and the trend in jobless claims remains positive.  Even manufacturing – which has been lagging other areas of economic improvement – appears to be growing at a faster pace.

Regarding earnings, the news has been mixed.  A couple of big winners this week have been Apple (AAPL) and Facebook (FB).  FB in particular blew away analysts’ expectations.  On the other hand, Google (GOOG) and Caterpillar (CAT) are two mega companies who didn’t impress investors.

There are still plenty of big names left to report, starting with Amazon (AMZN) after close today.  As always, I’ll be keeping a close eye on earnings to see if there are any solid trading opportunities.

Let’s take a look at the portfolio.


Portfolio Recap

Position #1: Qualcomm (QCOM) August $65 Calls

Price Paid: $1.05

Current Price: $0.42

Time Until Expiration: 22 days

QCOM spiked on positive earnings and is closing in on our strike price.  The share price actually shot up within $0.50 of our strike before settling back down.  However, at around $63, it won’t take much of a move for our calls to start gaining value.  And, with three weeks to go until expiration, there’s still time for this trade to be a winner – especially after the strong earnings news.

We’ll take a closer look at the position towards the end of next week and decide what the next step is.


Position #2: Freeport-McMoRan (FCX) September $29 Calls

Price Paid: $1.09

Current Price: $1.15

Time Until Expiration: 57 days

FCX shot higher on positive earnings but then gave back some of the gains after Caterpillar’s (CAT) earnings miss.  I’m not too worried about CAT’s impact on FCX.  I think the stock will shake off the negative news soon enough.  After all, FCX’s news was better than expected.

As I predicted, oil propelled the company to higher income.  And, it should continue to make the company a strong, diversified play on basic materials.  There’s ample time left for this trade to become a monster winner for us.


Position #3: Broadcom (BRCM) September $28 Calls

Price Paid: $0.86

Current Price: $0.90

Time Until Expiration: 57 days

Our BRCM trade from yesterday is a post-earnings play.  Already, it seems investors are realizing the stock was oversold based on not-that-bad news.  As of this writing, the shares are up a 1% from yesterday’s close.  I expect the recovery to continue – and of course we have nearly two months on these calls (which we got for a very reasonable price).


Category: OTW Weekly Updates