Exide Technologies Rights Ship, Stock Falls

Like Big Brown going for the Triple Crown, Exide Technologies (XIDE, $17.44, down $0.05) busted out of the gate but ended up finishing behind the pack when it was over. The stock opened at $19.62 or nearly $2 higher than Friday’s close before ending the day lower. We knew the company was going to report better-than-expected earnings and it was a stock that was flying under the radar. So the chances of getting a pop at the open were good.

On June 2, I mentioned the stock had been hitting new highs and the June 17.50 calls (FRUFW, $0.80, down $0.60) were selling for 85 cents. Exide continued higher after that blog and you could have gotten out Friday right before earnings at $1.40. The stock only made a 60 cent move (almost 4%) from that blog to Friday’s close but the options returned 75%. The scary thing was the options hit a high of $2.10 before closing significantly lower by the end of the day.

Exide got another 10+% pop after announcing earnings. I mentioned that if the stock was at $18.75 then the June 17.50 calls would be at least $1.25 in-the-money and that scenario played out perfectly as it exceeded those expectations. The point I’m trying to make is that by planning out your trades and knowing where the stock has to be at by a certain time gives you better chances of putting on a successful trade.

Exide had its 15 minutes of fame and the stock has lost some of its luster at the moment. Another thing to remember is to keep the stock on your watch list but move on to the next trade. There may be another opportunity for an option trade on Exide down the road but for now concentrate on the horses leading the pack.

Rick Rouse
Rick@OptionsMentoring.com

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