With the markets entering August — one of the most difficult months of the year — the Alpha Algorithm generated no new names this week with a sufficiently high number of alpha strategies for me to make a new recommendation.
So this week, I want to highlight a couple of recommendations that relate to your existing Alpha Algorithm positions.
First, on Wednesday night, Facebook announced financial results after the market closed that crushed revenue expectations, sending the stock up 4.53% in after-hours trading. This jump will give a big boost to your FB Aug. 19 $120 calls as well.
As a general rule of thumb, anytime a stock jumps this much, this quickly, I recommend you take money off of the table if you hold the options.
With your options expiring in three weeks, and August traditionally a tough month for stocks, I am recommending that you sell all of your Facebook Aug. 19 $120 call options (FB160819C00120000) to lock in your gains. Based on my back-of-the-envelope calculations, and on the prices reported for after-hours trading, your gains should exceed 59%.
Second, your position in The Sherwin-Williams Company (SHW) has fallen out of favor among the Alpha Algorithm strategies rather suddenly, dropping from seven strategies to just three of them.
So, I am recommending that you sell your position in SHW. You should just about break even on this bet.
Third, your position in McDonald’s Corp. (MCD) had a rough week, with the stock selling off sharply. However, as of this morning, the stock is still present in eight of the Alpha Algorithm strategies I track. It is also still trading far from its $113.00 stop price. As such, it still remains in the portfolio. Note that I recommended that you sell your related options in a Special Alert sent out on Monday, July 26.
Finally, you have one remaining option strategy that expires in August — the O’Reilly Automotive (ORLY) Aug. 19 $270.00 calls. I am keeping a close eye on when we can exit this position profitably, as well.
I will be back next week when I hope to provide a new Alpha Algorithm recommendation.
Sincerely,
Nicholas A. Vardy
