EOT Position Update – December 19, 2012

December 19, 2012

Market Snapshot

Another week with more of the same…

You guessed it.  Investors are focused on the fiscal cliff.

As the negotiations between President Obama and House Speaker Boehner go back and forth, the markets seem to ebb and flow with every comment.

Judging by the S&P 500’s strong performance this week, investors are optimistic a deal to avoid the fiscal cliff will be reached.  But keep in mind, those gains could quickly be erased if it appears the negotiations reach a sticking point.

Obviously, this negotiation can’t end too soon.  The uncertainty it creates is not only troubling for investors but businesses as well.

Outside of retailers that are geared up for holiday shopping and businesses related to housing, most companies are taking a wait and see approach.  The lack of business activity will certainly have a negative impact on 4th quarter GDP.

As we look out beyond the fiscal cliff into 2013, there are encouraging signs the economy will continue to improve.  But until politicians get their act together, investors are choosing to ignore them.

Let’s move onto the updates…

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

   DIS April 2013 $50 Calls
DIS has made a strong move higher over the last few days.  The upswing in the share price sent our call options up to $2.70 per contract at one point today.  I’m expecting the bullish momentum to continue throughout the remainder of 2012 and into 2013. Continue holding… Resistance is at $52.50 and $55.00.  Support is at $47.00 and $46.00.

  CAB January 2013 $50 Calls
CAB is a sporting goods retailer that sells guns.  In fact, 41% of CAB’s 2011 sales came from firearm sales.  As you know, politicians are seeking stricter gun laws in the wake of the horrible tragedy in Newtown last week.  The reality is the sale of assault rifles will likely be banned sometime in 2013.  And there’s no telling how much of an impact it will have on CAB.  At this point, the selloff has sent CAB plunging below both of our support levels.  If you haven’t already, sell these options to conserve capital on any bounce in the stock price.

  PHM April 2013 $19 Calls
PHM has shot up from around $17.00 to $18.50 so far this week.  The homebuilder is getting a boost from a report that builder confidence hit a six-year high in November. It’s the eighth consecutive month builder confidence has risen.  This is a clear indication new home construction is on the upswing and should propel PHM higher in the weeks ahead.  Continue holding… Resistance is at $25.00 and $30.00.  Support is at $15.00 and $13.50.

Category: EOT Update