The Dow is back at 8000, down 228 points, as the financial stocks are weighing heavy on the market once again. The financial stocks are averaging 20%-50% moves this week on a daily basis and as options traders, this is the stuff we live for. The sector continues to experience wild volatility which also spreads to the market. Remember what I said on Sunday night in the Weekly Newsletter…

“The market’s volatility wasn’t as great as the volatility we saw in September and October but make no doubt, it is still there. As option traders that is great news because options have a better chance of ending up “in-the-money” in a high-volatility market than they do in a more stable market. However, you still have to be careful because high volatility can lead to the overpricing of options.”

Having said that, let’s take a look at some of the option trades that we still have open.

Apple (AAPL, $88.29, up $5.46) is having a banner day, up 6%, and traded as high as $89.85 earlier in the session. The February 90 calls (QAABR, $4.30, up $1.40) opened at $5.10 and I said if Apple’s after-hours gains held from last night, then the calls should trade at $4-$5. If you haven’t sold them, do so now. The calls were profiled at $2.25 and it would be foolish not to take all of your gains off the table.

Intuitive Surgical (ISRG, $93.72, down $3.28) is at fresh 52-week lows as the stock has traded as low as $91.57 this morning. The company reports earnings after the bell and here is another chance to “manage” the trade before earnings come out. The February 90 puts (AXQNR, $6.35, up $1.65) were profiled at $4.50 and have traded as high as $6.70. If you sell 70% of your position, you take all of the risk out and could play ISRG even lower. OR, you can close the trade and make 50%.

The gold trades I mentioned were up again this morning and are falling back a little. Remember, I said this was a “three-day” marriage which quickly turned into 2 days. Barrick Gold (ABX, $36.25, down $0.36) and Goldcorp (GG, $26.99, down $0.13) are negative after trading in positive territory.

The Goldcorp February 32.50 calls (GGBZ, $0.40, down $0.30) traded as high as 75 cents this morning which was nearly a double from the 40 cent entry price. The Barrick Gold February 40 calls (ABXBH, $1.40, unchanged) could have been picked up for 90 cents and traded as high as $1.55 earlier in the session. Even at current prices, you’re up 50%. Close the trades.

I have mentioned the Dow’s trading pattern over the past few issues of the Weekly Newsletter and if you haven’t signed up for the newsletter, then send me an email. We’ll get you on the list. It’s free so what do you have to lose? With the current envoronment, you need to stay informed with what is happening with the market.

Rick Rouse