Weekly Update: September 26, 2013
Weekly Update: September 26, 2013
What To Watch
The markets have come off a little since this time last week, with the S&P 500 down roughly 2%. However, the benchmark index is still up over 20% for the year. Overall, stocks continue to trade in a relatively calm manner with a general upward bias.
However, that could soon change with the rapidly approaching debt ceiling/government shutdown situation.
On October 17th, the US Treasury will run out of money and many non-essential government services will need to be shut down. If these closures last for more than a very brief period of time, it could severely damage the already slowly recovering economy. Plus, it could alter the country’s credit rating or cause investors to flee US Treasury securities.
Most importantly, for us, the stock market is sure to take a dive and become extremely volatile. As the deadline approaches, more and more volatility could creep up. So, keep a close eye on the VIX. Right now, investors don’t seem too concerned, but that could change in a hurry.
I’ll be making relatively conservative trades for the time being… at least until it looks like we’ll avoid a shutdown.
Portfolio Recap
Position #1: Exxon Mobil (XOM) October $90 Calls
Price Paid: $0.73
Current Price: $0.24
Time Until Expiration: 22 days
XOM sold off along with crude oil as the situation in the Middle East has calmed considerably over the last week. However, the stock is sitting at a major support line. Even if oil doesn’t move higher, the shares should rally from here back to the 200-day moving average. We’ll be looking to exit this position in the next week or so with the Middle East catalyst becoming a non-factor.
Position #2: Zillow (Z) October $75 Puts
Price Paid: $1.45
Current Price: $1.25
Time Until Expiration: 22 days
Z has pulled back to its 50-day moving average and is holding there. If it drops any further, it could be a case of look out below. Our puts have regained much of their initial value. However, I don’t want to sell here with the possibility of a government shutdown ahead. If the stock market tanks, this is our only current position which will benefit. Let’s hang on to these options as a hedge against the downside or a possible steep drop in Z shares if it should breach the current support line.
Position #3: Outerwall (OUTR) October $65 Calls
Price Paid: $1.53
Current Price: $0.05
Time Until Expiration: 22 days
I don’t expect much if any movement on these calls after the bad news from OUTR management last week. If for some reason the stock jumps high enough for these calls to gain some value back, we’ll dump them right away and consider it a gift.
Position #4: ZAGG (ZAGG) November $4 Calls
Price Paid: $0.68
Current Price: $0.80
Time Until Expiration: 50 days
ZAGG has moved up to it 50-day moving average and could be in prime position for a breakout. Our calls are already 20% winners, but that’s just scratching the surface. With the huge success of the iPhone launch this past weekend, ZAGG products should be in high demand. There are plenty of reasons to believe ZAGG has significantly more upside potential.
Category: OTW Weekly Updates
