Weekly Update: October 10, 2013

Weekly Update:  October 10, 2013

 

What To Watch

At the time of this writing, the government shutdown is still in effect and the debt ceiling deadline is fast approaching.  However, a negotiations breakthrough seems near.  In fact, the Republicans are proposing a 6-week debt ceiling extension in order to have time to work on a more thorough agreement.

Democrats and Obama have already signaled they will agree to a short-term deal in order to prevent default.  Whether six weeks is enough time to get a new deal done remains to be seen.  But, anything that avoids a default is a step in the right direction.

I happen to believe a deal will get done.  Obama seems willing to negotiate on spending cuts as long as Obamacare is not involved.  And, Republicans appear to realize Obama won’t touch his flagship policy accomplishment.

Investors are clearly thrilled with the possibility of a six-week extension.  As I write this, the S&P 500 is up 1.25% mostly on news of the temporary deal.

In other news, Janet Yellen has officially been nominated as the next Fed Chair.  That’s great news for the market as Yellen has been very pro accommodative monetary policy.

I’ll be rolling out another trade soon – probably tomorrow.  However, I’m going to continue to be cautious with new trades because of the potential for massive volatility given the political risk at the moment.

 

Portfolio Recap

Position #1: Exxon Mobil (XOM) October $90 Calls

Price Paid: $0.73

Current Price: $0.04

Time Until Expiration: 8 days

XOM and Big Oil have been hit with a double dose of negative news.  Of course, the overall market has suffered with the political stalemate in effect.  What’s more, oil inventories came in much higher than expected.  We still could get a last week boost from a political catalyst, but we’re clearly running out of time.

 

Position #2: Zillow (Z) October $75 Puts

Price Paid: $1.45

Price Sold: $2.35

Once Z broke through support, it was just a matter of a couple days before we were able to grab nice profits.  Z has been volatile, so if you weren’t able to open the sell alert right away, make sure to close out your position while it’s still profitable.  For those who sold when the email went out, we pulled in 62.1% profits.

 

Position #3: Outerwall (OUTR) October $65 Calls

Price Paid: $1.53

Price Sold: $0.95

We were very fortunate positive news came out on OUTR when it did.  The stock got a huge boost and gave us an opportunity to close out the position.  For those who didn’t open the sell alert until later in the day, you actually were able to exit the position for a profit.  Either way, it’s just good news these options were back in play after everything that happened.

 

Position #4: ZAGG (ZAGG) November $4 Calls

Price Paid: $0.68

Current Price: $0.60

Time Until Expiration: 36 days

ZAGG is still roughly trading at last week’s levels.  I expect this stock to get a boost once a debt deal gets done.  There’s still plenty of time for the shares to test the 50-day moving average again.

 

Position #5: Barrick Gold (ABX) November $19 Calls

Price Paid: $0.97

Current Price: $0.68

Time Until Expiration: 36 days

Political risk has pushed ABX somewhat lower, but it’s still easily in striking distance of our entry level.  A debt ceiling agreement should help the shares recover.  ABX should also have limited downside given its direct ties to the price of gold.

 

Category: OTW Weekly Updates