Weekly Update: October 23, 2014

| October 23, 2014


Weekly Update:  October 23, 2014


What To Watch

Well, that’s a much better week for investors, at least if you like watching the market go up. The S&P 500 climbed all the way back to the 50-day moving average and picked up roughly 6% off the lows of last week. Meanwhile, the VIX dropped from over 30 to 16.5 over the same period.

I’ve been suggesting that any spikes in volatility would most likely be short-term under the current conditions. That’s not to say we won’t see another selloff – it could happen at any time. But, we’re still not likely to see a sustained correction anytime soon.

Macro fears are slowly subsiding. Europe is still a mess, but China is looking a little better. Ebola fears are calming somewhat. And, investors seem to be shrugging off the fight against ISIS.

On the home front, the economic news is still very positive. Most of the data continue to be better than expected. And, several key companies have posted better than expected earnings.

I’ve got a trade ready to roll out tomorrow, so keep an eye on your inbox.


Portfolio Recap

Position #1: Transocean (RIG) November $37 Calls

Price Paid: $1.28

Current Price: $0.15

Time Until Expiration: 30 days

RIG is slowly but surely moving higher. The stock is currently battling resistance at the 20-day moving average. If it breaks through (without another market selloff), the next stop should be about $34 (the 50-day moving average). Assuming this scenario happens soon, our options will easily be back in play.


Position #2: Yahoo (YHOO) November $42 Calls

Price Paid: $1.51

Current Price: $1.92

Time Until Expiration: 30 days

Our YHOO calls are up about 27% so far, and have potential to go much higher. YHOO got a huge jolt from better than expected earnings. With the gap higher, the stock is just 3% below the 52-week high. Even if we just get to that level, our options will be big winners. We’ll be watching this one closely.


Position #3: Cliffs Natural Resources (CLF) December $10 Calls

Price Paid: $1.11

Current Price: $0.80

Time Until Expiration: 58 days

CLF is trying very hard to break $10, but can’t quite seem to do it just yet. The stock has made a couple runs over $9 this past week, so that’s a good start. With two months to go on these options, there’s more than enough time for the share price to finally break above resistance at $10. And, the 50-day moving average doesn’t even come into play until over $12.


Category: OTW Weekly Updates