Weekly Update: November 15, 2012

| November 15, 2012

Weekly Update:  November 15, 2012


What To Watch

It’s been a rough week in the stock market as fear of the fiscal cliff has taken over as the primary concern among investors.  Not to mention, Europe is still a lingering concern and tensions are escalating in the Middle East.

Don’t forget, the market hates uncertainty.

Over the past week, the Dow Jones Industrial Average and S&P 500 are down 2.7%.  For the month, both indices are down approximately 5%.  Needless to say, it hasn’t been a great period for stock investors.

However, I’m still convinced the fiscal cliff fears are overblown.  There’s simply too much riding on it for a deal not to get done.  Despite the name calling, whining, and other nonsense, politicians will come up with a solution.  It’s in the best interest of both parties.

And don’t forget, holiday season is here.  Retail spending is going to ramp up – it always does.  With the market coming off a bad month, I think there will be significant upside opportunity.  As such, I expect our next couple trades will be of the call variety.


Portfolio Recap

Position #1:  DryShips (DRYS) November 2012 $2.50 Calls

Price Paid: $0.16

Current Price: $0.01

Time Until Expiration: 1 Day

Unfortunately, we never got the chance to get out of our DRYS position for a reasonable price.  Sandy derailed my plans to sell out of the calls for around $0.08.  By the time the market reopened, the calls were too cheap to be worth liquidating.

These things will happen from time to time.  The key is to take profits most of the time – which I believe we are doing a fine job of to date.  Go ahead and let your DRYS calls expire.


Position #2:  International Business Machines (IBM) November 2012 $205 Calls

Price Paid: $0.64

Current Price: $0.01

Time Until Expiration: 1 Day

We were never quite able to get the move we needed in IBM.  Once again, the market closure due to Sandy hurt us quite a bit.  By the time the market reopened, time value had taken a significant toll on our options.

Once again, we’ve had several more winners than losers, but we will take our lumps on occasion.  It’s just part of trading.  IBM got away from us… but don’t let it discourage you.  The rest of our portfolio has mostly been an unqualified success.

Let the IBM calls expire.


Position #3:  Netflix (NFLX) December $62.50 Puts

Price Paid: $1.41

Current Price: $0.65

Time Until Expiration: 36 Days

NFLX has held its own, despite the market downturn.  The stock is still being supported by news of the Icahn purchase.

Don’t worry, there’s plenty of time for our puts to come into play.  I firmly believe the battle between Icahn and the NFLX board of directors will put downward pressure on the stock in the near future.

More importantly, NFLX is sitting right on the 200-day moving average – a powerful resistance level.  I expect the stock to pull back from the current level in the coming days.  As such, hang on to your puts.


Category: OTW Weekly Updates