Weekly Update: March 20, 2014

| March 20, 2014

Weekly Update:  March 20, 2014


What To Watch

In case you missed it, I launched a special one-time trade opportunity last Tuesday, which included three different options to trade.  If you didn’t receive the email for any reason, go to the website to view the trades.  Two of the positions haven’t moved much since the trade alert went out and one (FB) now offers an even better entry point.  In other words, feel free to still make these trades if you missed them the first time.

Overall, the market situation is much like it has been.  Domestic economic news is mostly good and international news mostly involves risk.  Market volatility is still fairly low, but it bears watching as various situations unfold overseas, especially what’s going on in Crimea.

I just wanted to take a minute to answer a question about why we might trade an option that’s in the money.  Basically, an ITM option will move more closely with the movement of the underlying (higher delta), but they tend to be too expensive for this service (where I like to keep options prices low).

However, if I can find a situation where ITM options are cheap enough, I’ll definitely recommend them.  The more in-the-money an option is, the higher probability it will be a winner.

Now let’s take a look at our positions.


Portfolio Recap

Position #1: Intel (INTC) March $26 Calls

Price Paid: $1.03

Current Price: $0.00

Time Until Expiration: 1 day

Well, INTC finally broke higher – just too late for us.  If this would have happened a week ago, we might have still had a chance to cash out. Alas, too little, too late.


Position #2: McKesson (MCK) March $165 Puts

Price Paid: $1.6

Current Price: $0.00

Time Until Expiration: 1 day

The silver lining with MCK is that is provided us downside protection in the event of a major selloff.  Since that didn’t happen, this position is going to expire worthless tomorrow.


Position #3: Verizon (VZ) April $47 Calls

Price Paid: $1.08

Current Price: $0.70

Time Until Expiration: 29 days

As expected, VZ has bounced off of support and is moving higher.  It’s back above $47, which is good news.  As I mentioned last time, we’re looking at roughly $48 – the 200-day moving average – as our exit point for now.


Position #4: Green Mountain Coffee Roasters (GMCR) April $90 Puts

Price Paid: $0.95

Current Price: $0.23

Time Until Expiration: 29 days

GMCR announced a new deal with Starbucks (SBUX) which sent the shares temporarily higher.  I haven’t changed any of my convictions on the stock.  I still believe the shares are due for a major pullback.  We still have about a month for that to happen.


Position #5: Facebook (FB) April $72.50 Calls

Price Paid: $1.68

Current Price: $0.97

Time Until Expiration: 29 days

FB has pulled back a little since our purchase, but it has strong support just below it.  I don’t see any selloff in FB as more than just a very temporary situation.  I believe $75 per share is in the near future for this dominant social media company.


Position #6: Travelzoo (TZOO) April $22.50 Calls

Price Paid: $1.65

Current Price: $1.60

Time Until Expiration: 29 days

TZOO hasn’t moved that much since our purchase.  I believe the stock is due for a move up to the 200-day moving average (around $25) in the coming weeks.  If that happens as expected, these calls will do very well for us.


Position #7: Abercrombie & Fitch (ANF) May $38 Puts

Price Paid: $1.68

Current Price: $1.56

Time Until Expiration: 57 days

ANF has also not done much since our purchase earlier this week.  For this bearish position, I’m looking at around $36 as a probable short-term destination for the stock price.  Keep in mind, with these puts, we have almost two months left until expiration.


Category: OTW Weekly Updates