Weekly Update: September 4, 2014

| September 4, 2014

Weekly Update:  September 4, 2014


What To Watch

US equities are basically flat from this time last week, but are still flirting with record highs. The S&P 500 is unchanged over the week, but up 9.5% on the year. The Dow Industrials haven’t performed quite as well this year, up 4.5% year-to-date.

Stocks are at something of a crossroads. Given the positive economic data, there’s plenty of fundamental support for this bull market. On the other hand, geopolitical threats continue to pose a risk to the global economy.

On the international front, Russia and Ukraine appear to be close to a cease-fire, which would certainly help alleviate risk from the biggest area of global concern. The US is still on the offensive versus ISIS in Iraq, with the US government increasingly favoring strong action.

On the bright side, the ECB cut rates today in Europe and have announced a stimulus plan to help spark inflation. This could be a very good thing for the beleaguered region.

In the US, the economic news remains strong. Non-farm payrolls for August are released tomorrow, and most analysts expect good news. Meanwhile, both ISM Manufacturing and ISM Services numbers were well above expectations.

Barring crazy market action, I intend to roll out a new trade tomorrow, so keep an eye on your inbox.


Portfolio Recap

Position #1: Altera (ALTR) September $34 Calls

Price Paid: $1.35

Current Price: $1.60

Time Until Expiration: 15 days

ALTR broke through $35 as I expected. Our options are now 19% winners. We’re going to hold out a little bit longer to see if we can capture one more decent up move. Otherwise, expect to close these calls out for profit soon.


Position #2: Rocket Fuel (FUEL) September $20 Calls

Price Paid: $1.10

Current Price: $0.10

Time Until Expiration: 15 days

We’re clearly running out of time on FUEL. The industry is starting to show signs of potential consolidation, which could be good for the company long-term. However, I’m not sure there’s enough time for our September calls to get back into play.


Position #3: O’Reilly Automotive (ORLY) September $150 Puts

Price Paid: $1.37

Current Price: $0.20

Time Until Expiration: 15 days

ORLY keeps fighting resistance and slowly creeping higher. The reason we haven’t closed the position is because I don’t believe the share price can hold. I still expect a sharp move downward to occur before expiration. Perhaps more importantly, as the only put in our portfolio, this trade serves as a hedge in case the market sells off unexpectedly. Stay tuned on these options.


Position #4: Splunk (SPLK) October $60 Calls

Price Paid: $1.60

Current Price: $2.50

Time Until Expiration: 43 days

What an excellent start to our SPLK trade! We got a nice jump in the stock the first trading day after our call purchase. Earnings came in better than expected and sent the share price right up to the 200-day moving average. We’re currently up 56% on the trade. However, I’m not ready to sell yet. I think SPLK is going to break the 200-day moving average and then we’ll be in for even bigger gains. Let’s hang on to the calls for now.


Category: OTW Weekly Updates