Weekly Issue: Continuing to be Patient with XLU and GSVC Calls
As I shared last week, I have been at the InsideETF conference the last several days. It’s been a great experience talking with various ETF issuers and learning about some of the recently launched products, like the ones that center on Blockchain technology. While we here at Tematica look to dig into Blockchain as it looks to be as disruptive a technology as the internet, for now, there are few viable opportunities to invest in it. There is much being said about this next Disruptive Technology, and we will share our thoughts and views as we formulate them.
In yesterday’s weekly Tematica Investing issue, I shared my take on what’s poised to drive the continued melt up in the market as well as some of the items I’ll be watching this week. Week to week, movements in the market can wreak some havoc on investments and that goes doubly as we know for call options. Candidly, the last few days have seen downward pressure on our Utilities Select Sector SPDR ETF (XLU) and GSV Capital (GSVC) calls, but as I eye the national weather we continue to see colder temperatures hitting the country and last I looked neither Spotify nor Dropbox — two key components of GSVC — have canceled their initial public offerings. In other words, the respective investment thesis remain intact and on the short end of our calls, we have several weeks until they expire.
My message today is to be patient and let the investment thesis play out over the coming days and weeks. That goes for all three of our XLU positions as well as the GSVC calls:
- Utilities Select Sector SPDR ETF (XLU) Feb. 16, 2018 54.00 calls (XLU180216C000540000)
- Utilities Select Sector SPDR ETF (XLU) March 16, 2018 54.00 calls (XLU180316C000540000)
- GSV Capital (GSVC) Jun 2018 10.000 calls (GSVC180615C00010000)
- Utilities Select Sector SPDR ETF (XLU) March 16, 2018 51.00 calls (XLU180316C00051000)
Next week, we have a number of companies reporting on the Tematica Investing Select List, and as I described yesterday, several of them are poised to offer upside to existing 2018 EPS forecasts as they factor tax reform into their thinking. I admit, it’s very tempting to put a new call option position in place, but as we are seeing, the market is becoming a tad wobbly in recent days as investors rethink valuations and in some cases book some profits gained over the last several months. In my experience, this could lead to some swings in the market day to day even though the overall movement is likely to be higher over the next few weeks.
Given the heightened impact to option prices, I’m inclined to let our existing positions play out as I described above and hold off adding a new position this week. While some may feel the need to throw spaghetti at the wall each week and produce “a” new trade, I and the rest of Tematica would rather take our time and make the right recommendation at the right time. Over the coming days, I’ll be sifting through the company reports and use that data to pinpoint our next call option move.
