Weekly Update: September 19, 2013

| September 19, 2013

Weekly Update:  September 19, 2013


What To Watch

The big news this week is the Fed’s surprise restraint from tapering its bond purchases.  The market expected the so-called tapering to start this week – and reacted positively when the FOMC left bond buying untouched for the time being.

Hopefully, this will allow the market to settle down somewhat, because the choppy conditions have not been kind to our portfolio.  That leads me to this comment from subscriber Dennis A., who writes:

“I can get losing advice free from any number of newsletters.”

Fair point Dennis.  I’m the first to admit my picks haven’t been working out lately.  This particular strategy works best when the market is trending one direction or the other over a long period of time.  But, that hasn’t been the case the past month or so, and it’s hurting our ability to generate returns.

Keep in mind, these trades tends to perform well in phases.  And, the good phases should more than make up for the rougher periods.  Typically, our winners are a lot bigger than our losers.

I expect this rough patch to be at or near the end.  I’m going to get things kick-started by rolling out a new trade tomorrow now that the Fed decision is past us.  Plus, there’s still plenty of time for our October positions to be in play.

Keep the faith.  We will be on the right side of this thing soon enough.


Portfolio Recap

Position #1: Broadcom (BRCM) September $28 Calls

Price Paid: $0.86

Current Price: $0.03

Time Until Expiration: 1 day

Are you serious BRCM?  After waiting weeks for the stock to jump higher, it finally did so – a couple days before expiration.  The big move was sparked by an analyst upgrade.  This is an extremely frustrating trade because we were so close to getting it right.  Alas, close doesn’t count in options.  Unless the stock gaps higher in the morning, this trade will expire worthless.


Position #2: Cree (CREE) September $65 Calls

Price Paid: $1.30

Current Price: $0.00

Time Until Expiration: 1 day

CREE is moving higher just in time for expiration.  Looks like I was right about CREE being oversold – too bad it took the entire length of our trade in order for my prediction to come true.  Keep in mind, with options you have to be right about direction and timing.  I got the direction right, but not the timing.  We may look at this stock for a future trade, as I still believe upside opportunity exists.


Position #3: Exxon Mobil (XOM) October $90 Calls

Price Paid: $0.73

Current Price: $0.97

Time Until Expiration: 29 days

XOM is a ray of sunshine in our otherwise gloomy portfolio.  The position is up roughly 35% as of this writing.  Given the choppy nature of the market lately, we may end up taking our profits from this trade in the near future.  We’ll see what next week brings.


Position #4: Zillow (Z) October $75 Puts

Price Paid: $1.45

Current Price: $0.35

Time Until Expiration: 29 days

Z has been trending higher, but it hasn’t broken out to the upside.  There’s still plenty of reasons to believe the stock could drop back down to its various support lines.  More importantly, this is the one position we own serving as a hedge should a significant market selloff occur.  Don’t forget, the debt ceiling/government shutdown debate is right around the corner.


Position #5: Outerwall (OUTR) October $65 Calls

Price Paid: $1.53

Current Price: $0.05

Time Until Expiration: 29 days

Of course, I didn’t see this coming (to be fair, most of the market didn’t expect it either).  OUTR management substantially slashed outlook – and the stock plummeted.  Unless something dramatic happens, this trade is done.  It’s frustrating, but sometimes these surprises occur.  Cleary, if anyone knew this was coming, the stock wouldn’t have tanked 20% on the news.  Basically, we just need to write this one off and move on.


Category: OTW Weekly Updates