Weekly Update: November 14, 2013
Weekly Update: November 14, 2013
What To Watch
It’s been another strong week for equities. The S&P 500 is up about three-quarters of a percent from last week and is a 27% winner for the year. As I’ve said before, it’s a good year to own US stocks.
The big economic news from the last time we had an update was the unexpectedly strong October jobs report. The private payrolls number came in much higher than expected. And, it sparked the debate over whether the Fed will taper sooner rather than later.
Good economic news provides something of a conundrum to investors. A strong economy is good for everyone. However, Fed bond purchases have been a huge boon for asset prices. At the moment, we’re stuck somewhere in the middle, with investors seemingly preferring Fed stimulus over positive economic data.
For those hoping Fed tapering will be pushed off until 2014, Fed chairman nominee Janet Yellen soothed fears today while testifying in front of the Senate Banking Committee. Yellen doesn’t seem inclined on cutting back on stimulus until the job market is in stronger shape. I would guess no tapering will occur until next year.
A lot of activity in our portfolio lately, so let’s take a look.
Portfolio Recap
Position #1: ZAGG (ZAGG) November $4 Calls
Price Paid: $0.68
Price Sold: $0.20
As I said in today’s sell alert, we needed to sell out ZAGG in order to not get our calls exercised. It’s unfortunate that ZAGG lowered guidance, but being able to salvage some value from the calls (despite the steep drop in price) is the reason why it sometimes makes sense to trade in the money options.
Position #2: Citrix Systems (CTXS) December $65 Calls
Price Paid: $1.39
Current Price: $0.20
Time Until Expiration: 36 days
Successful trading is so difficult over time because there’s just so much we don’t know and can’t guess. For instance, Amazon (AMZN) just announced it’s offering a cloud computing product which rivals products from CTXS. Since AMZN is the giant of the cloud computing industry, CTXS shares dropped hard on the news. Now, at least in this case, we have over a month for the stock to recover.
Position #3: Nike (NKE) November $75 Puts
Price Paid: $1.16
Current Price: $0.00
Time Until Expiration: 1 day
I wanted to hold on to a put on a market-representative stock in case investors decided to take profits all at once this week. Fortunately, the market’s rally has continued – which is good for our portfolio overall. On the flip side, NKE shares have exploded above a key resistance line and knocked our puts out of play. Unless we have a major reversal tomorrow, these options will expire worthless.
Position #4: Symantec (SYMC) December $22 Calls
Price Paid: $0.70
Current Price: $1.50
Time Until Expiration: 36 days
SYMC is rapidly approaching our exit point, and that’s a good thing. The options are already 114% gainers as of this writing. We’ll be looking to take profits on these soon – maybe as soon as tomorrow.
Position #5: Merck (MRK) December $45 Calls
Price Paid: $1.08
Price Sold: $2.12
Well, we can’t complain about 96% gains in under a week. Some of you may have even gotten filled at a better price. Regardless, MRK was a great, quick trade for us. That’s what we like to see.
Position #6: Dominion (D) December $65 Puts
Price Paid: $1.45
Current Price: $0.75
Time Until Expiration: 36 days
D has broken out somewhat to the upside but I don’t believe this move higher will hold. I expect the stock to return back to around $65 in the near future. If the market keeps performing like this, investors will definitely rotate out of ultra-safe utilities like D. Also, this put provides some downside protection to our otherwise long-only portfolio.
Category: OTW Weekly Updates
