Despite the move higher in the domestic stock markets yesterday ( which we watched as Tematica CIO Chris Versace recovered from meniscal tear surgery and learned he’s got some arthritis in his right knee as well ) over the last five days two of the three of the major stock indices — the S&P 500 and the Dow Jones Industrial Average — moved lower between 0.5 percent and 1.18 percent, respectively.

While this was a positive for our ProShares Short S&P 500 (SH) and ProShares Short Dow30 ETF (DOG) shares, the move lower resulted in our being stopped out of our most recent addition, the Utilities Select Sector SPDR ETF (XLU) September $53 calls (XLU160916C00053000). The other addition we sought to make last week — Southern Company (SO) September $55 calls (SO160819C00055000) — opened up below our 0.12 stop loss last week, another reminder of how wide options can swing relative to the movements in the underlying shares as well as the need to assess downside risk as well as potential upside.

It’s true that over the next few weeks, many will be hitting the beaches and lakes as we enter the dog days of summer. It’s also true that students will soon be returning back to school — trust me I know this as I am already getting requests for my Fall 2016 syllabi for the graduate classes I will once again teach at New Jersey City University. What this means is parents and students will soon be opening their wallets for all sorts of supplies, shoes and apparel. We will also see quite a few notebook computers and tablets move off the shelves as education continues to embrace aspects of our Connected Society, which in our neck of the woods is referred to as the “Bring Your Own Tech” movement. Sadly for parents, all this means opening their wallets for Back to School spending, but it also means that before too long the youngsters will be out of the house for a few more hours Monday through Friday. Ah the sweet taste of freedom!

As we’ve seen over the last few years, the National Retail Federation (NRF) tends to be a tad over optimistic with its spending forecasts, but directionally it tends to hit the mark. That’s likely to be true once again with its 2016 Back to School spending forecast that calls for consumer to plunk down $75.8 billion this year. That breaks down to an average of $674 per household, up from $630 last year. The top three categories that consumer will spend on according to the NRF are:

• Clothing and accessories – $235.29 per household
• Electronics – $204.06 per household
• Footwear – 126.55 per household

Doing some quick sandbox math, this tell us consumer are likely to spend 65% of their Back to School shopping dollars on these three categories. Let’s face it, toddlers grow into grade schoolers that soon become tweens and eventually teenagers before heading off to college — the one commonality across all of these age groups is growth, and that spurs demand for clothing and footwear. We already have exposure on the Tematica Pro Select List to some of the key beneficiaries of the Back to School shopping season — Amazon (AMZN), Nike (NKE), TJX Companies (TJX), Target (TGT), Ross Stores (ROST) and VF Corp. (VFC) — in our Consumer Discretionary Select Sector SPDR Fund (XLY) shares. To capture the incremental surge in Back to School shopping, however, we are making two trading additions to our List:

• Consumer Discretionary Select Sector SPDR Fund (XLY) September 16, 2016 calls (XLY160916C00082000) that closed last night at 0.83.  We would buy the calls up to 1.00, and with an eye toward risk management we are setting a 0.50 protective stop loss. 

The one apparel and footwear company that is not owned by XLY ETF in any real size is Under Armour (UA). We recently added UA shares in Tematica Investing, using the recent post earnings weakness to do so, given the strong prospects in the second half of they year as the company attacks the international, women’s, footwear and sportswear markets. In all likelihood, UA’s moves into these markets will occur as it positions itself not just for Back to School shopping, but for year-end holiday shopping as well, especially with its new Under Armour Sportswear line of product. As such, we are taking a longer-term view as we add:

• Under Armour (UA) January 20, 2016 $45 (UA170120C00040000) calls that closed last night at 1.33. We would add the calls up to 1.75, and we are setting a protective stop loss at 0.80. 

With corporate earnings set to slow markedly after this week, we’ll continue to evaluate contender call option trades for the back half of 2016 as we strive to turn out all the campaign noise that will be filling the airwaves and web pages.