It was a good day for for the market and it was a great day for us. The Dow surged 380 points, or 5.8%, and closed at 6,926. If there were another hour of trading today the Dow probably would have hit 7,000. The Nasdaq soared 90 points, or 7%, and finished at 1,358 while the S&P 500 traded higher by 43 points, or 6.3%, and settled at 719.
Financial stocks were blistering today after reports that the SEC will reinstate the uptick rule as early as next month. That and the fact that Citigroup (C, $1.45, up $0.40) said it was having a good quarter.
Well, I would hope so.
If you are borrowing money from the government at 0% and making loans, I would hope Citigroup would be doing well this quarter. Anyway, the financal rally was huge today and I was looking at them yesterday thinking…you know…these stocks are getting ridiciously cheap. Specifically, I was looking at the JPMorgan (JPM, $19.50, up $3.60) March 20 calls (JSACD, $1.25, up $0.85) when they were at 75 cents and the April 25 calls (JSADE, $1.00, up $0.60) when they were at 80 cents.
I wanted to pull the trigger put we have too many open positions and I didn’t want to overload you. However, the rally was on once Bernanke spoke before the bell about the banks and the trades we are following did really well.
Here is a quick rundown:
Exxon Mobil (XOM, $67.39, up $2.82)
April 70 calls (XOMDN, $2.25, up $0.58)
Entry Price: $1.25 (3/5/09)
Exit Target: $2.00
Return: 80%
Our exit target was “technically” hit but I don’t blame you if the position is still open. I mentioned the rally Exxon made after a similiar trading pattern back in October. A $2.00 stop gets us a 60% return if Exxon fails from here.
IBM (IBM, $87.25, up $3.77)
April 95 calls (IBMDS, $1.40, up $0.45)
Entry Price: $1.20 (3/6/09)
Exit Target: $2.40
Return: 17%
Big Blue came through after lagging the market at the open but ended the day in a strong uptrend.
Potash (POT, $75.01, up $5.70)
April 100 calls (PYPDT, $1.60, up $0.50)
Entry Price: $1.70 (3/4/09)
Exit Price: $3.40
Return: -6%
It looks like we were a couple of days early with this one but the calls recovered nicely today and volume was huge. Potash was the first pick of the three stocks we were targeting for this rally and although we are slightly down from our entry price, these call options should be okay if Potash can continue its huge run.
***Full Disclosure*** I still have an open position in the ConocoPhillips (COP, $38.00, up $1.47) March 40 calls (COPCH, $0.75, up $0.21). I bought 10 contracts yesterday at 58 cents and they traded as high as 87 cents today. Had I sold at the high, I was looking at a $290 profit. But I held on. My target is 75 cents to $1.00 and I didn’t sell because of the strong rally. We will see how it goes…
Other positions:
Genentech (DNA, $91.50, down $1.13)
March 95 calls (DWNCS, $0.55, up $0.10)
Entry Price: $1.50 (1/12/09)
Exit Target: $0.55 (3/10/09)
Return: -73%
I mentioned in the Weekly Wrap that I would close this one out on Monday and after a frustrating two months…it is finally gone.
Apollo Group (APOL, $68.96, up $2.58)
April 55 puts (OAQPK, $2.35, down $0.55)
Entry Price: $2.95 (3/6/09)
Exit Price: $2.50
Return: -15%
We were stopped out of the April puts with a small loss but we made 100% on the March puts. Apollo went along for the ride on the market’s dollar today and we were stopped out at $2.50.
I also profiled Take-Two Interactive Software (TTWO, $6.85, up $0.84) Sunday night in the newsletter and the June 10 calls (TUOFB, $0.50, up $0.20) as a possible trade. The calls could have been bought on Monday for 25 cents. The stock traded higher throughout the day in anticipation of its earnings announcement and you could have been out before the closing bell with a 100% return. The company beat expectations but in after-hours trading the stock was down 45 cents.
We are now long on calls so let’s hope the rally continues. Otherwise, set your stops to protect these profits.
Rick Rouse
Rick@OptionsMentoring.com
