Weekly Update: October 29, 2015

| October 29, 2015

Weekly Update:  October 29, 2015

 

What To Watch

It’s been another solid week for US stocks, with investors focused mainly on earnings and the Fed meeting.  From this time last week, we’ve seen a solid 3.5% climb in the S&P 500.  For the year, the benchmark index is now up about 3%. That’s quite the recovery for the index, which was down about 10% at a point in late August.

Stocks, as usual, tend to be resilient.  There has to be some pretty awful news in order to make stocks go down sharply… and stay there.  Investors prefer to keep buying stocks rather than rely on the less than exciting yields in fixed income right now.

What’s more, stocks are holding up despite the economy receiving tepid news from economic reports.  GDP came in lower than expected this week, supporting the idea that the US economy is seeing some weakness.  On the other hand, jobless claims are still at lows not seen since 1973.

The Fed surprised to some extent by pretty much saying they plan to raise rates in December, barring anything unusual.  The consensus for the first rate increase was previously targeted at spring of 2016.  This move doesn’t make a whole lot of sense given the emerging market environment and lack of inflation… but as always, the Fed sets the rules.

It’s been a great week for our portfolio, so let’s take a look.

 

Portfolio Recap

Position #1: King Digital Entertainment (KING) November 14 Calls

Price Paid: $1.00

Current Price: $1.40

Time Until Expiration: 22 days

KING is still hovering around that $15 mark.  I think the short-term potential top is around $16 and that’s where I’d look to take profits if you haven’t exited already.

 

Position #2: Bank of America (BAC) November 16 Calls

Price Paid: $0.68

Current Price: $1.16

Time Until Expiration: 22 days

BAC and other financials got a strong boost from the Fed news this week.  Higher rates will mean bigger profits for the banks.  Not only did BAC hit our first profit taking point of $17, but it reached a high of 113% gains so far.

 

Position #3: Citigroup (C) November 52.50 Calls

Price Paid: $1.12

Current Price: $1.85

Time Until Expiration: 22 days

C also responded well to the Fed news. It turns out that the $3 print in our calls last week was real, so our high in these calls stands.  However, the options have pretty much spiked up to those levels anyways.  We’re approaching our final exit point of $56.

 

Position #4: Twitter (TWTR) November 33 Calls

Price Paid: $1.43

Current Price: $0.34

Time Until Expiration: 22 days

TWTR had a big day prior to earnings but sold off 6% today after disappointing revenue numbers.  Before the selloff, we reached a high of 92% gains in the options.  Still plenty of time on this trade as TWTR can move in chunks.

 

Position #5: NVIDIA (NVDA) November 28 Puts

Price Paid: $1.19

Current Price: $1.54

Time Until Expiration: 22 days

NVDA slowed its climb after our trade and finally dipped down today for the largest drop in several weeks.  That’s a good sign for our puts as it looks like we may have hit a top.  The high mark so far in the first week of the trade is 29% gains.

 

Category: OTW Weekly Updates