***Coal has been on quite a roll lately and you may have noticed that many of the stocks on our Watch List jumped again yesterday.
Arch Coal (ACI, $75.40, up $3.79). Profiled at $68.30. The June 70 calls (ACIFN, $5.52, up $3.17) are now up 125%. The July 70 calls (ACIGN, $8.20 up $2.60) were profiled at $5.10, they are up 60%.
Massey Energy (MEE, $90.32, up $4.64). Profiled at $69.00. The June 70 calls (MEEFN, $19.90, up $4.00). were trading at $3.30 and are up a whopping 475%! The July 70 calls (MEEGN, $21.00, up $3.90) were going for $6.00, up 250% since.
Patriot Coal (PCX, $161.39, up $8.10). This stock has moved 40 points since we added it to our Watch List. The June 125 calls (PCXFU, $36.00, up $8.50) were at $7.10, they have returned 400%. The July 125 calls (PCXGU, $38.00, up $4.50) have returned over 200% from an entry price of $12.
Peabody Energy (BTU, $83.06, up $4.09). Profiled at $75.28. The June 80 calls (BTUFP, $0.75, down $0.35) just got in-the-money and made a solid 220% gain yesterday. The July 80 calls (BTUGP, $6.50, up $2.20) gained 50%.
This sector is white-hot and will eventually cool. What makes this run so special is that there are stocks going up with the market going down. Think about that for a minute. The Dow fell below 12,000 yesterday and has lost over 600 points in a little over two weeks. Meanwhile, the aforementioned stocks gained 20 and 40 points! Sell your June options today and 1/2 your July options if you got in early…
***Remember the Barron’s article on General Motors (GM, $14.89, down $0.93)? The stock made a nice jump in the days following the story to $18 but is now coming under heavy selling pressure. I mentioned GM was not out of the woods and short sellers seem to be having their way right now. Barron’s predicted a double for the stock or a big loss in 12-18 months. Maybe they meant a big loss for the stock followed by a double off its lows. The January 2009 25 calls (VGNAE, $0.52, down $0.13) were at $1.37 and have lost half their value. Stay away from this one until things improve…
***Another scary stock that should have you shaking like a kid in a graveyard on Halloween night is Wachovia (WB, $16.88, down $0.28). On 5/29 this one was at $24. I didn’t profile any puts with the blog because I just don’t trust the Financials. One minute they are rallying, the next minute they are getting crushed. Any straight up call or put positions can be a roll of the dice with the regional banks…
***Potash (POT, $237.74, down $1.76) keeps going higher than a crowd at a Cypress Hill concert. On 6/11, I mentioned Potash wasn’t done “peaking”. The company’s CEO gave us the best clue ever that the stock was headed higher, way higher, that day. At the time he said, “we have a lot of pricing power” and “we’re nowhere near peak pricing.”
On 6/5, the June 220 calls (PJNFD, $17.80, down $2.21) were trading at $7.00. They hit a high of $21.62 yesterday. The July 240 calls (PJNGH, $12.50, down $1.40) were going for $6.17 and hit a high of $14.90. Ridiculous profits in a ridiculous market. Again, sell your June options today and 1/2 your July options…
***I have said before, sometimes the market will just give you clues on how a stock is going to react. Lehman Brothers Holdings (LEH, $24.78, down $0.36) gave us clues it was going lower. Watching Google (GOOG, $562.38, down $7.08) go up at Microsoft (MSFT, $28.46, down $0.34) and Yahoo’s (YHOO, $22.91, down $0.34) expense was an easy one to figure out. FedEx (FDX, $82.60, down $1.73) coming in below Wall Street’s numbers? Tough. InBev buying Anheuser-Busch (BUD, $61.90, up $0.70)? That was a given. The clues are there. It’s up to us to read between the lines…
Hey, do us a favor and leave us a comment on how you like the blog. Also, if you have any questions or stocks you would like covered, send them to me. Thanks!
Rick Rouse
Rick@OptionsMentoring.com
