Weekly Update: July 31, 2014

| July 31, 2014

Weekly Update:  July 31, 2014


What To Watch

With all the economic data and earnings reports this week, it’s somewhat ironic that fears over the global economy and tensions with Russia are causing a selloff. Actually, I think people just want to sell today. The S&P 500 is down about 2% on the day and has plunged below its 50-day moving average.

The drop in equities is the first meaningful drop since April. However, it could be very short-lived depending on how July non-farm payrolls look tomorrow.

Meanwhile, the Fed sees an improving economy but still is in no hurry to raise rates. That’s clearly a bullish sign for equities. Even better, GDP came in at a robust 4%, well above expectations.

All in all, it’s hard to be too worried about today’s selloff given all the positive economic news and abundance of strong earnings results. Like I said earlier, this could be a very short-term down move. Regardless, tomorrow’s jobs report is going to be big.

Let’s see what happens.


Portfolio Recap

Position #1: Franco-Nevada (FNV) August $55 Puts

Price Paid: $1.38

Current Price: $0.80

Time Until Expiration: 16 days

FNV has been up and down over the past week, but is making a big down move today. As of this writing, the stock’s down about 2.5%. The share price looks to be headed to the 50-day moving average, which would place our puts firmly in the black. Let’s see what the next couple trading days bring.


Position #2: AGCO (AGCO) August $55 Calls

Price Paid: $0.85

Current Price: $0.05

Time Until Expiration: 16 days

AGCO pulled back sharply on poor guidance. The stock looks to be quite undervalued at this point, but there’s not much we can hope for this close to expiration. Probably best to move on from this one.


Position #3: Altera (ALTR) September $34 Calls

Price Paid: $1.35

Current Price: $0.50

Time Until Expiration: 51 days

ALTR beat earnings, beat guidance, and raised its dividend… and the stock promptly dropped. Sometimes investor behavior makes no sense. Nevertheless, the news was highly encouraging and we have our calls until September. In other words, there’s plenty of time for this trade to work out.


Position #4: GT Advanced Technologies (GTAT) September $14 Calls

Price Paid: $1.35

Current Price: $1.50

Time Until Expiration: 51 days

GTAT immediately jump above $14 the day after we made our trade. Today, the stock has pulled back, but our calls are still in positive territory. This is a stock that could easily be trading at $15 tomorrow. And let’s not forget, we have almost two months on these options.


Category: OTW Weekly Updates