Weekly Update: July 7, 2016

| July 7, 2016

Weekly Update:  July 7, 2016

 

What To Watch

So is this business as usual, or something else? The stock market quickly dispensed with short-term concerns over Brexit, and price levels roared back to pre-turmoil levels. Volatility also took a dive, with a general sense of complacency taking hold over the investment community.

So are we out of the woods? It seems like every time there’s some kind of selloff, the best advice has been to simply buy the dip. It’s hard to argue with the logic, given how many times it has worked in recent years. Still, we can’t ignore what’s going on in Europe and elsewhere.

Given the various dynamics in play, my best guess for what’s coming next is… more of the same. We’re talking about mostly sideways action, at least in a range. And for the time being, selloffs should be considered buying opportunities.

But let’s not forget, stocks aren’t exactly having a year to write home about. The S&P 500 is only up about 3%. Most other asset classes, especially safe-haven ones, are doing better. Bonds, real estate, and precious metals have all outperformed gold, sometimes by a significant margin. It will be interesting to see what the second half of the year brings to the financial markets.

Let’s take a look at our positions.

 

Portfolio Recap

Position #1: Apple (AAPL) July 105 Calls

Price Paid: $0.49

Time Until Expiration: 8 days

Not much left to do on AAPL, as it expires next week. A last minute rally probably isn’t in the cards, and most of you should be out of this by now anyhow.

 

Position #2: First Solar (FSLR) August 52.50 Calls

Price Paid: $1.05

Time Until Expiration: 43 days

We had a very nice run from FSLR early in the week, and then the stock got clobbered due to an unexpected downgrade. We still have plenty of time on these calls, so I’m not too worried about the position just yet. Not to mention, we have earnings coming out before August expiration. Prior to the pullback, peak gains reached 82%.

 

Position #3: Western Digital (WDC) August 40 Puts

Price Paid: $1.31

Time Until Expiration: 43 days

The reasons I like WDC long-term have come into play sooner than I expected, with the company raising guidance. We still could easily see a big pullback in the share price if the market sells off sharply, which is the primary reason we are holding these puts. We haven’t hit any exit points, so just hold tight for now.

 

Category: OTW Weekly Updates