Weekly Update: March 21, 2013

| March 21, 2013

Weekly Update:  March 21, 2013


What To Watch

Well, this week has been interesting.  If you just looked at the results over the past week – S&P 500 nearly flat and Dow Industrials up small – you’d think it’s been a boring week.  But, that’s clearly not the case.

We’re actually seeing some volatility and whipsawing in the market.  Although, there haven’t been any sustained selloffs, stocks have pulled back a couple times this week (more than what’s been usual lately).

The culprit?  The small island country of Cyprus.

What does Cyprus have to do with the US?  Frankly, not all that much.  However, the potential bank bailout of the country serves as a reminder that Europe is far from healed.

Meanwhile, the US economy continues to show improvement.  Both the housing market and job market are improving by the week.  Even better, the Fed shows no signs of halting their bond buying program.  The central bank will continue to provide stimulus in one form or another until unemployment reaches 6.5%.

While the volatility has hurt our portfolio somewhat (we’re in all calls at the moment), we still have plenty of time left on all our positions.  And, I still believe the stock rally is in no danger of running out of steam.

Let’s look at the portfolio.


Portfolio Recap

Position #1:  Freeport-McMoRan (FCX) April 2013 $34 Calls

Price Paid: $0.72

Current Price: $0.52

Time Until Expiration: 29 Days

While FCX has pulled back a little on the Cyprus nonsense, our calls are holding on to their value for the most part.  Moreover, we’re still in easy range of our strike price.

Keep holding the FCX calls.  I fully expect this trade to be profitable.


Position #2:  F5 Networks (FFIV) April 2013 $105 Calls

Price Paid: $0.92

Current Price: $0.16

Time Until Expiration: 29 Days

FFIV is typically a lot more volatile stock than FCX, so it’s not shocking to see it taking more of a hit than FCX during the recent bout of volatility.  However, because of its volatile nature, FFIV is also quite a bit more likely to rally sharply on a reversal.

The stock is also trading well below its major moving averages.  As such, I expect an upswing in the shares in the near future.  As always, I’ll keep a close eye on it and advise as needed.


Position #3:  Amazon.com (AMZN) April 2013 $280 Calls

Price Paid: $1.10

Current Price: $0.60

Time Until Expiration: 29 Days

The Cyprus-driven volatility isn’t doing AMZN any favors. But, it’s the type of stock that can easily gain 10 or more points in a day.  That’s why despite being 25 points away from our strike, the calls have retained over 50% of their value.

With 29 days left and the stock trading under its 50-day moving average, there’s plenty of reason to have confidence in an AMZN reversal.  Let’s hang on to our calls.


Category: OTW Weekly Updates