Weekly Update: June 26, 2014

| June 26, 2014

Weekly Update:  June 26, 2014


What To Watch

Once again, it’s been fairly slow in the financial markets. As is typical for the summer, things just tend to slow down. In fact, the S&P 500 is basically flat since last week and volatility remains very low.

Are investors getting complacent? I don’t believe so personally. As low as volatility has been (as measured by the VIX), it’s still significantly higher than realized volatility. In other words, investors are still paying a lot more for volatility than what is actually happening in the market.

There’s been a slight surge in inflation hysteria as CPI came in higher than expected. Once again, there’s really nothing to worry about. Prices fluctuate all the time, but unless wages grow along with prices, inflation can’t be sustained. The Fed isn’t concerned about inflation, so neither should we at this point.

Buying options is somewhat challenging in a premium sellers market like this one. But, we’ll keep plugging away with different trade ideas. There’s still plenty of opportunity out there. For the time being, I’m focusing on lower risk trades and cheaper options.

We’ll get in one more trade before the July 4th holiday, so keep an eye out.


Portfolio Recap

Position #1: Target (TGT) July $60 Calls

Price Paid: $0.94

Current Price: $0.17

Time Until Expiration: 22 days

TGT shares have been sticking very close to technical support lines the past week. The stock is now sitting right on the crossing of the 50-day and 20-day moving average. We still have a solid couple weeks for the price to make a move towards the 200-day moving average before the forces of time are too much to overcome.


Position #2: Medallion Financial (TAXI) July $12.50 Calls

Price Paid: $1.20

Current Price: $0.10

Time Until Expiration: 22 days

Since ride-sharing company Uber is a private company, investors have decided the next best thing is to short TAXI. Seriously. There’s a whole article out there on how shorting TAXI is one way to play the success of Uber. Really? I think the whole thing is a joke and TAXI is a good company with an excellent yield. Let’s give this trade some time to rebound.


Position #3: THL Credit (TCRD) July $12.50 Calls

Price Paid: $1.05

Current Price: $1.55

Time Until Expiration: 22 days

TCRD popped today with the shares up 4%. Our options are now 48% winners. Let’s see if the shares can break above the 200-day moving average. If that doesn’t happen, we’ll likely go ahead and take our profits on this trade.


Position #4: Pacific Coast Oil Trust (ROYT) July $12.50 Calls

Price Paid: $0.95

Current Price: $0.50

Time Until Expiration: 22 days

ROYT continues to trade in a straight line, although it’s starting to look like a breakout may be coming. With as cheap as this stock is, the next big move should be higher. Let’s wait and see what happens.


Position #5: United Parcel Service (UPS) July $100 Puts

Price Paid: $1.10

Current Price: $0.38

Time Until Expiration: 22 days

UPS has also basically traded in a straight line since last week. I expect a drop to the 50-day moving average in the near future. That should get our options back in play.


Position #6: First Majestic Silver (AG) July $10 Calls

Price Paid: $0.68

Current Price: $0.70

Time Until Expiration: 22 days

AG initially climbed after our trade and has been fighting resistance at around $10.50 since. So far, the sellers are losing, which is a good sign for us. Meanwhile, our options are up slightly. If the stock breaks above the 200-day moving average, this could end up being a nice winner for us.


Category: OTW Weekly Updates