Weekly Update: July 5, 2013

| July 5, 2013

Weekly Update:  July 5, 2013


What To Watch

Hope everyone had a happy 4th of July!  Due to the market closure for the holiday, I’m sending out this week’s update today.  And, by waiting until Friday this week, I’m able to comment on today’s non-farm payrolls release.

Basically, it looks like very good news on the employment front.  Payrolls rose by 195,000 last month – quite a bit higher than the 165,000 expected.  Plus, 70,000 more jobs were added in revisions of April and May.  All in all, it looks like hiring is slowly but surely picking up steam.

But therein lies the rub…

Investors aren’t sure how to respond to good economic news.  Does it mean the Fed is going to taper stimulus?  Will the Fed taper too soon?  How good is the economy really doing?

The uncertainty is adding some volatility to the markets.  But the general direction of the major stock indices has been up.  It will be interesting to see what July brings.

On that note, our offices will be closed for summer vacation next week.  There won’t be an update next week or any trades.  Just as general guidelines, if either QCOM or POT hit 100% gains next week, go ahead and sell.  And, if CLF somehow reaches breakeven or higher next week, close out that position.

I’ll be back the following week with a new trade and a regularly scheduled update on Thursday.


Portfolio Recap

Position #1:  Cliffs Natural Resources (CLF) July $20 Calls

Price Paid: $1.11

Current Price: $0.03

Time Until Expiration: 14 days

CLF continues to be one of the more undervalued major stocks on the market.  It’s trading below all three of its key moving averages.  And, it’s very cheap from a valuation standpoint.  Unfortunately, we’re most likely going to run out of time on our calls before we see a jump in the stock price.  I firmly believe we can make money on CLF calls, so I might just roll out a farther out call trade in CLF if this trade doesn’t work out.


Position #2: Qualcomm (QCOM) August $65 Calls

Price Paid: $1.05

Current Price: $0.47

Time Until Expiration: 42 days

QCOM is now trading below the 20-day, 50-day, and 200-day moving averages.  That situation generally doesn’t hold for long, especially for a great stock like Qualcomm.  Nothing negative has come out to change our thesis.  As such, it should just be a matter of time for the stock to rebound.  And, time is still on our side with these August options.


Position #3: Potash (POT) August $38 Calls

Price Paid: $1.03

Current Price: $1.17

Time Until Expiration: 42 days

Our most recent trade is off to a nice start.  And, looking at the chart, it looks like the stock may have bounced off the bottom of its usual range.  I believe the next stop is $40.50 or higher (the 200-day moving average).  And, we could get there pretty quick.  In a nutshell, so far so good.


Category: OTW Weekly Updates