Weekly Update: October 16, 2014

| October 16, 2014

Weekly Update:  October 16, 2014


What To Watch

Hello volatility!  Well, if you’re a trader who’s looking for market action this past week, you got your wish.  US equities sold off hard, with the S&P 500 dropping over 5% for the week.  The benchmark index is now only up 2.3% for the year.  The index also plunged below the 200-day moving average.

What’s more, volatility soared, with the VIX actually closing above 30 for the first time since 2012.  Keep in mind, volatility can be good for options traders, and these big moves could be very good news for our current and upcoming trades.

In a nutshell, several factors have come together to spook investors in a big way.  There’s the depression like conditions in Europe, the spread of Ebola, the conflict with ISIS, the end of QE, the economic slowdown in China, and even some negative US economic news to boot.

However, the US economy is still showing strength overall.  Plus, current conditions may cause the Fed to rethink the end of QE, slated to terminate this month.  We’ll see if that’s still the case at the next FOMC meeting.

In the meantime, stay tuned for new trades.  As I said earlier, this could be a great period for long options traders to profit.


Portfolio Recap

Position #1: ZAGG (ZAGG) October $6 Calls

Price Paid: $0.30

Current Price: $0.05

Time Until Expiration: 1 day

ZAGG emerged from the shadows with a big move higher today.  Unfortunately, unless there’s a miracle spike in the shares tomorrow, it’s too little too late.  With expiration after tomorrow’s close, chances are this trade doesn’t work out.


Position #2: Transocean (RIG) November $37 Calls

Price Paid: $1.28

Current Price: $0.25

Time Until Expiration: 37 days

The plunge in crude oil prices obviously hurt drillers such as RIG.  However, the stock has reversed higher over the last two days and looks to be headed back up.  Let’s hope the pain is finally over.  Fortunately, we still have a good amount of time left on these options.


Position #3: Yahoo (YHOO) November $42 Calls

Price Paid: $1.51

Current Price: $0.59

Time Until Expiration: 37 days

This week’s big selloff took its toll on YHOO, which dropped to the 200-day moving average.  Fortunately, the 200-day line provided strong support, and the share price has since reversed.  With 37 days until expiration, there’s plenty of time for these calls to perform.


Position #4: Cliffs Natural Resources (CLF) December $10 Calls

Price Paid: $1.11

Current Price: $1.27

Time Until Expiration: 65 days

We’ve already gotten a nice bounce from CLF, with the stock back up to $9.50.  If the shares break through the 20-day moving average at $10, the next stop is the 50-day moving average at roughly $13.  By then, our calls will be huge winners.


Category: OTW Weekly Updates