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Portfolio Review

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Volatility Reigns Supreme...

The major equity averages ended another week of active trading with a bullish bias as investors responded positively to declining oil prices and favorable economic data. The Dow industrials rose 122 points to 10,192, while the technology-laden NASDAQ gained 17 points to 1,921 and the broader S&P 500 index finished up 13 points at 1,156.

Despite the upbeat outlook, analysts are hesitant to wave the "all clear" until Tuesday's Federal Reserve meeting. The FOMC is widely expected to lift the benchmark interest rate to 3%, thus the market will be focusing more on the Fed's comments about inflation and future economic growth. If there are no radical changes in the current "measured increases" stance, a widespread rebound in share values will likely occur.

While most of the stocks in the OW Portfolio have performed very well during the recent slump, one issue would certainly benefit from some upside activity. Of course, I am referring to Connetics (NASDAQ:CNCT), which has fallen over 20% since the company announced that first-quarter earnings dropped to $1 million, or 3 cents a share, from $1.9 million, or 5 cents a share, a year ago. The sharp decline has pushed the company's share value well below the sold (put) strike price in our bullish position and there is little indication of a reversal in the near-term. However, we have previously (4/28 blog) outlined a few exit/adjustment strategies, based on the expected movement in the underlying issue and we hope the drawdown from this one "bad apple" won't spoil the entire month of May for OW subscribers. In addition, we are going to search for a new portfolio position for readers who were affected by the losses in that play.

Be sure to check the Option Writers website (or your E-mail inbox) prior to Monday's session as we expect to uncover some additional candidates for conservative option traders.

OW Staff

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