Potash (POT, $93.17, up $8.21) is up nearly 10% today as we are halfway through the trading session. It’s an exciting day in the market and we have used the bullishness in the market to ride this stock higher.
There was a positive story in Barron’s yesterday about the fertilizer stocks which is the real reason for today’s explosion. Barron’s seems to echo the sentiment I have been sharing with you guys for weeks and months now. The 75% sell-off in the stock from its high of $240 provided us with a great risk/ reward picture. Ten days ago I profiled some call option plays on Potash when it was falling like a tree. The stock was down to the mid to upper $60’s when the call options were profiled and I had mentioned that the stock could go even lower. It did.
Potash bottomed at $60.38 a couple of days after my blog. However, we trusted the charts and watched the market conditions and we have been rewarded.
The November 80 calls (PVZKP, $15.50, up $5.30) were trading at $4.70 and traded to a low of around $2.00 when the stock hit $60. Even if you got in at $4.70 you have now made over 200%. Of course if you got in at $2 or $3 then your return is much greater.
The 2010 January 180 calls (WPTAW, $7.90, up $1.70) were trading for $3.00 at the time of the blog and have also provided us with a nice return.
On October 30, I had this to say about our positions:
“Today, we got the best of both worlds as Potash looked strong all day. The market has shown some strength this week and it looks like we may get out of October without another bomb dropping. The short-term oulook is up especially with the election right around the corner. This is normally a bullish time for the market and this rally could continue into next week.”
Continue to enjoy the ride but raise your stops on the November 80 calls to $12.50. These calls do not expire until November 21 so we still have 17 days left before they expire. Raise the stops on the January 2010 calls to $6.50.