Weekly Update: October 4, 2012

| October 4, 2012

Weekly Update:  October 4, 2012


What To Watch

This week, the stock market has been all about the economy – both here and abroad.  With QE3 underway and Europe relatively stable, all eyes are turned towards economic data.

For the US, the news has been mostly good.  Both ISM manufacturing and service reports came in better than expected.  Plus, ADP employment data and jobless claims beat expectations.  However, the big news will be tomorrow’s September jobs report.

Don’t be surprised if stocks move quite a bit on the jobs news – either up or down.  Despite ADP’s strong report, there’s no telling what the federal report will say… it always seems to surprise.

On the international front, China’s economy seems to be headed in the wrong direction.  The country’s manufacturing and service sectors are slowing.  The Chinese central bank may need to step in with another rate cut to get the economy back on track.

Next week, investor attention will shift from economic news to earnings news.  Yep, it’s already time for third quarter earnings.  While fresh economic data won’t be ignored, you can bet investors will be keeping a close eye on earnings.  We’re definitely going to be making earnings-related trades, so be sure to keep an eye on your email.


Portfolio Recap

Position #1:  DRYS November 2012 $2.50 Calls

Price Paid: $0.16 or better

Current Price: $0.12

Time Until Expiration: 43 Days

DRYS pulled back slightly on weak global economic news, but it should be a short-term move.  You see, the stock is at an important technical level.

At the current price, DRYS is sitting right around the 50-day moving average – a significant support level.  If the support holds – and I expect it to – the price should be headed back up to the 200-day moving average.  That would roughly equal a 13% gain.

More importantly, it would put our options firmly back into the black.  Meanwhile, our position is trading just below our entry level.  And, with 43 days to expiration, we have plenty of time to profit from this trade.


Position #2:  S November 2012 $5.50 Calls

Price Paid: $0.30 or better

Current Price: $0.28

Time Until Expiration: 43 Days

We put on the Sprint trade today and the options are trading roughly where we bought them.

There’s already talk that Sprint is considering bidding on MetroPCS (PCS) – which would block T-Mobile from making the purchase.  It just goes to reinforce what I said this morning, there’s plenty of opportunity for Sprint to get involved in M&A activity.

I expect Sprint shares to surge past the $5.50 mark sooner rather than later.  And, that will clearly be a good thing for our options.  Hold tight for a chance at big gains.


Category: OTW Weekly Updates

About the Author ()

Marcus Haber is the co-editor of Options Trading Research and boasts well over a decade of real-life options experience. Learning from some of the biggest names in the business, Marcus has served as an Options Strategist for a number of firms and was also appointed to the Options Advsiory Board with Pershing, a branch of the Bank of New York.