Weekly Update: July 9, 2015

| July 9, 2015

Weekly Update:  July 9, 2015


What To Watch

Well, we’ve certainly seen some action since our last update!  Normally a very slow period, the last couple weeks have provided several major headlines and a hefty dose of volatility.

The S&P 500 is down about 0.70% from last week and 1.4% for the month.  Moreover, the benchmark US equity index is only up about half a percent for the year.  Meanwhile, the VIX is sitting right at 20, the highest it’s been since January.  At current levels (relative to the last few years), the VIX is showing a genuine level of investor concern.

Who can blame them though?  Greece is nearing an exit from the Euro, which could lead to a big mess in an already fragile European economic recovery.  And, China’s stock market has essentially crashed as investors have lost faith in the country’s economy.  There’s enough drama between the two scenarios to justify higher volatility.

However, I don’t believe the US market is due for any kind of major correction.  As hairy as the China and Greece situations are, they shouldn’t do much to derail the resilient US economy.  In fact, US economic figures continue to look reasonably good.  The job market is definitely still the highlight, but housing looks healthier as well.

The best news is that selloffs like this can present great options buying opportunities, particularly for those who favor call buying (like me).

We’re back to our normal schedule now, and I intend to roll out another trade next week.


Portfolio Recap

Position #1: Arm Holdings (ARMH) July 50 Puts

Price Paid: $0.85

Current Price: $2.80

Time Until Expiration: 8 days

This is the reason I like to have at least one put position in our portfolio at all times (even though I believe it’s easier to make money buying calls).  During a market selloff like we had last week, certain companies get hit harder than others, and put values tend to inflate very quickly.  ARMH dropped almost all the way to our aggressive profit taking point, after easily bypassing the conservative exit level.  Highs for this position are 218% gains!


Position #2: Twitter (TWTR) July 35 Calls

Price Paid: $1.20

Current Price: $0.55

Time Until Expiration: 8 days

Despite the broad market selloff, TWTR has mostly held its ground.  The stock has been trading mostly sideways, and still has potential to be a winner.  However, with expiration next week, we need a quick jump in the shares in the next few days.


Position #3: Cameco (CCJ) August 15 Calls

Price Paid: $0.53

Current Price: $0.25

Time Until Expiration: 43 days

The stock market crash in China has really hurt commodity stocks, and CCJ is no exception.  China’s nuclear program is a big deal for CCJ, so anything that could disrupt those future sales will take its toll on the stock.  Fortunately, we have until August on these calls and we’re still not too far from profitable territory.  Conservative traders should have exited this position for risk control.


Position #4: Bank of America (BAC) August 17 Calls

Price Paid: $0.39

Current Price: $0.37

Time Until Expiration: 43 days

We just got into this BAC position, and the stock has already attempted to reverse higher.  Once the share price closes above the 200-day moving average (around $16.50), it should only be upside from there.  We should easily get a shot at profits well before August expiration.


Category: OTW Weekly Updates