Option Investor

Portfolio Review

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A Market With No Direction...

Stocks closed the week in mixed fashion as investors showed their concern about the health of the economy. Worries about inflation plagued share values throughout the session after oil imports reportedly rose to the second-highest level on record, suggesting that energy costs would continue to weigh on consumer spending. The Dow Jones industrial average rose 9 points to 10,512 while the NASDAQ composite index fell 13 points to 2,063 and the broader S&P 500 index slipped 2 points to 1,198.

Despite the lackluster activity in equities, the OW Portfolio continued to perform well and all of the bullish positions are at maximum profit. The only issue on the "watch" list is Dillards (NYSE:DDS), which was a candidate for a bearish (naked call) trade. The stock finished Friday's session exactly at our "break-even" point of $25.35 and a move above the previous resistance level near $25.80 will signal our exit from the position. Readers can plan to buy the options outright with a contingent (based on the price of the stock) order or they can cap the maximum loss by a initiating a "limit" order to close the short (call) options. Keep in mind, the time value (premium) will erode quickly during the coming week thus it may be prudent exit the position only in the event of a well-defined bullish move (since the issue seems to have relatively little upside potential from its current level).

OW Staff

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