Weekly Update: May 8, 2014

| May 8, 2014

Weekly Update:  May 8, 2014


What To Watch

The divergence between the S&P 500 and Nasdaq mostly continued over the past week. The S&P 500 has been mostly flat, while the Nasdaq-100 is down about a percent. Meanwhile, the Internet group continues to get hammered, with most big names on the list reaching oversold territory.

With earnings season virtually over, investors will once again be focusing on domestic economic news and international headlines.

Of course, the big international news continues to be the escalating conflict between Russia and Ukraine. Fighting in the region is a cause for concern. Plus, investors will be keeping a close eye on a potential slowdown of the Chinese economy.

At home, the news is mostly good. Jobless claims dropped more than expected. And, Fed Chair Yellen reassured the markets with positive comments about the economy and low interest rates.

For the most part, this year has been tough for long-only strategies in options. Market choppiness is generally not good for straight up call and put buying. However, I think there are going to be some really good opportunities moving forward. Several growth stocks are heavily oversold, while certain safety stocks are starting to look overbought.

As always, stay tuned for new trades in the coming days.


Portfolio Recap

Position #1: Abercrombie & Fitch (ANF) May $38 Puts

Price Paid: $1.68

Price Sold: $2.48

We closed ANF this week for 47.6% gains.


Position #2: Pandora (P) May $32 Calls

Price Paid: $2.05

Current Price: $0.00

Time Until Expiration: 8 days

As I said last week, P plummeted on weaker than expected earnings. Moving on.


Position #3: Freeport-McMorRan Copper & Gold FCX) May $33 Calls

Price Paid: $1.20

Current Price: $0.90

Time Until Expiration: 8 days

FCX hasn’t moved all that much since last week. Our options have decayed a bit as we close in on expiration. As such, we’ll probably sell these out on the next decent move above $34.


Position #4: Amazon (AMZN) May 17th $375 Calls

Price Paid: $1.70

Current Price: $0.00

Time Until Expiration: 8 days

As I said before, there’s no reason for AMZN to have sold off as much as it has. It’s a victim of a general rotation out of Internet stocks. I think the stock price will recover in the near future, but not in time for options, which expire next week.


Position #5: Dunkin’ Brands (DNKN) June $47.50 Calls

Price Paid: $1.15

Current Price: $0.35

Time Until Expiration: 43 days

DNKN looks like it found a bottom and is headed back up. Now we just have to wait for the stock to return to the 200-day moving average. We still have plenty of time.


Position #6: Goldman Sachs (GS) June 21st $165 Calls

Price Paid: $1.39

Current Price: $0.90

Time Until Expiration: 43 days

GS pulled back a bit this week along with the financial sector. However, the stock has quickly recovered despite pressure on the industry. That’s a good sign for us. We have lots of time to wait as the share price heads back towards the 200-day and 50-day moving averages.


Category: OTW Weekly Updates