1:50pm (EST)
I mentioned a slew of names and trades in the Monday Morning Playbook in the Weekly Wrap Sunday night. Most of the trades have done rather well and here is a look at what has happened so far. Remember, in the Weekly Wrap I said all of these trades were with April options and the purpose was to show you how to trade option expiration week with cheap out-of-the-money calls. But I stressed the importance of being in-and-out of these trades the day before of the day after.
Monday’s trade was the Goldman Sachs (GS, $119.54, up $4.43) April 140 calls (GSDH, $0.04, unchanged) which opened at 69 cents that morning and were at $2.32 when I did an update to sell them later in the day. I had mentioned to get into them for under $1.00 if you could and the trade was good for a 200% return. Now look at how much the calls are worth. Goldman sold-off just like we thought it would after announcing plans to raise $5 billion.
I already covered the Citigroup (C, $3.77, down $0.24) and Bank of America (BAC, $9.79, down $0.30) trades this morning.
The Intel (INTC, $15.41, down $0.60) April 17 calls (NQDS, $0.02, down $0.27) were at 16 cents on Monday morning and doubled yesterday before they announced earnings. I have mentioned numerous times in the past if you are up 50%-100% before a company announces that you can always get out and take the entire risk out of the trade. We knew Intel was going to beat earnings and its was a given that they would be as quite as a church mouse when giving guidance for the second quarter. That crushed the stock but it is holding up well today. We will be looking at Intel again…there is too much to like about the company right now.
Another financial name I tossed out there was Piper Jaffray (PJC, $31.17, up $4.09) which reported earnings today. The April 30 calls (PJCDF, $1.40, up $0.95) were at 85 cents on Monday and closed at 45 cents yesterday. If you got in Monday you have made 75%, if you got in yesterday before the closing bell you made 200%. Sell them NOW.
The only trades left to be profiled are JPMorgan Chase (JPM, $31.78, up $1.08) and Google (GOOG, 369.89, up $0.98).
The JPMorgan Chase April 35 calls (JPMDB, $0.43, up $0.15) were at 77 cents Sunday night and have lost half their value. A 10% move gets the stock over $35 from current levels and I expect JP to move at least that. I also don’t think they sell-off as bad as Goldman even if they say they are doing a stock offering to raise cash. However, the momentum has faded with the financials like I said this morning so I would stay away.
As far as Googs, well, the April 420 calls (GOPDD, $1.45, up $0.57) could do well. The April 400 calls (GOPDT, $4.40, down $0.20) are trading right where they closed at last Thursday. The May 450 calls (GOPEJ, $2.40, down $0.05) are actually trading 30 cents higher from where they were profiled at. If Google can pull a rabbit out of its hat, the stock could easily soar to $425 which would be a huge return for the April calls as they would move from $4 to $25. The May 450’s would at least double.
However, if Google fails to meet Wall Street’s expectations or even if they do and the stock sells off, the April calls will expire worthless. The May calls will still be alive but it would be hard to predict what happens to them if Google shares get slammed.
I like the upside on the April calls but it’s a bet only a gambler would make. I don’t gamble (too often) and this is only a show-and-tell session. Or better yet, a mentoring session. Basically you are risking $450 to make $2,500. Will Google be the one stock that gets the bulls back in the market this week?
Rick Rouse
Rick@OptionsMentoring.com
