Weekly Update: September 27, 2012

Weekly Update:  September 27, 2012

  

What To Watch

 The market started the day uneventfully with a slight upward move.  The S&P 500 rose 5 points and the Dow increased by 35 points. 

But then… kaboom!

All of a sudden stocks started to move substantially higher despite some negative economic reports.

 I believe it was a result of Spain’s pledge to cut its deficit and speculation that China will unveil a new stimulus plan soon.  This news propped up markets globally for the rest of the day.

Another reason for today’s large move was traders adjusting their portfolios for the quarter’s end.  They were buying stocks that have rallied over the past few months to ensure the winners will be listed in their quarterly reports to investors.

Although the above were the largest contributors for today’s market action, we can’t leave without mentioning some economic data. 

Initial Jobless Claims fell by 26,000.  Treasuries moved lower.  The dollar fell.  And both gold and oil were up.  This combination typically means stocks are up more times than not.

  

Portfolio Recap

Position #1:  MCD October 2012 $95 Calls

Price Paid: $0.46 or better

Price Sold: $0.62

We had these call options less than a week and saw a 35% gain.  That’s a great run in such a short period of a time.  When MCD started to pull back, that was my cue to lock in our nice profits.  Congratulations to everyone on a great first trade!

  

Position #2:  DRYS November 2012 $2.50 Calls

Price Paid: $0.16 or better

Current Price: $0.18

Time Until Expiration: 51 Days

DRYS is a trade we rolled out today.  And congratulations… it’s up a cool 12.5% in a day. 

As you know, DRYS is the world’s largest dry bulk shipper of commodities.  And with today’s announcement of a possible stimulus plan coming in China, this company would certainly benefit.  DRYS will more than likely be the main shipper of iron ore and steel as China continues infrastructure development.

So, we’re going to wait a little bit and see how this plays out.  We have 51 days until expiration, and we only paid $0.16 a piece for these options.

 

Category: OTW Weekly Updates