Weekly Update: November 7, 2013
Weekly Update: November 7, 2013
What To Watch
There’s a lot going on in the markets today – more than just the Twitter (TWTR) IPO. The S&P 500 is up a half percent from last week and is now a whopping 26% winner for the year. It’s certainly been a good year for those long US equities.
Some big economic news hit the wire today with GDP coming in at 2.8% for the third quarter. That’s much higher than the 2.0% forecasted by analysts. The gains were driven by lower imports, higher inventory investment, and increased state and local government spending.
The key there is the state and local government spending. If that trend continues, our economy could be in much better shape than we anticipated. Unfortunately, investors believe the good news could cause a Fed taper earlier than once expected. That’s why the major indices are down today.
In other news, the ECB cut its benchmark rate by a quarter point. That’s good news for stocks as it should result in higher spending in the Euro region. This move has been needed for some time, but the markets were surprised given how conservative the ECB has traditionally been.
Let’s take a closer look at our positions.
Portfolio Recap
Position #1: ZAGG (ZAGG) November $4 Calls
Price Paid: $0.68
Current Price: $0.10
Time Until Expiration: 8 days
Well, I’m extremely disappointed, to say the least. The company beat earnings forecast but lowered revenue guidance. Investors were not pleased and the stock has taken a beating the last two days. Not exactly sure how a company coming out with several new products into the holiday season is lowering revenue expectations – it pretty much defies logic. We’re going to hold onto the calls for now and hope for a rebound into next week. The stock’s reaction does seem to be overblown at this stage.
Position #2: Citrix Systems (CTXS) December $65 Calls
Price Paid: $1.39
Current Price: $0.75
Time Until Expiration: 43 days
CTXS popped 5% since last week and is starting to climb into good territory for us. If the stock can break $60 and hold, the next stop is $65 per share. With December calls, we have plenty of time left for this scenario to occur.
Position #3: Nike (NKE) November $75 Puts
Price Paid: $1.16
Current Price: $0.45
Time Until Expiration: 8 days
NKE hasn’t been able to break resistance, but it hasn’t fallen below support either. Now our options are getting eaten away by time value. We’re going to give the stock another day or two and then sell out to conserve our remaining capital.
Position #4: Symantec (SYMC) December $22 Calls
Price Paid: $0.70
Current Price: $1.15
Time Until Expiration: 43 days
Although our options are priced the same as last week, SYMC continues to move higher. Another leg up and our calls will double from the entry point. I’ll likely look at just under a $24 share price as an exit point.
Position #5: Merck (MRK) December $45 Calls
Price Paid: $1.08
Current Price: $1.45
Time Until Expiration: 43 days
We’re off to a nice start in our MRK trade. If the stock closes above $46, it will be above the 20-day moving average. From there, the next resistance level will be at $47. That’s good news for our calls, which will be quite profitable if we get to that level.
Position #6: Dominion (D) December $65 Puts
Price Paid: $1.45
Current Price: $1.45
Time Until Expiration: 43 days
D has been somewhat choppy since our entry, but the puts are sitting right at the price we paid for them. Remember, the key to this trade will be investors rotating out of utilities to less defensive stocks. I believe that will happen over the next few weeks. We’ll certainly be keeping an eye on sector rotation in the coming days.
Category: OTW Weekly Updates
