9:20 am (EST)
This has been “cheap out-of-the-money option and earning expiration trade week” and it only happens four times a year. I like to consider these four times a year events like going to Las Vegas or Atlantic City. These options trades have been no different than playing $50 hands of three-card poker or a slot machine and they either hit or they don’t. However, since we know the stocks, and we have charts and past history we can look at, the odds are a lot beter then the “house” odds. I mentioned a slew of hot plays that were a gambler’s delight in the Weekly Wrap and all of them have had pretty good success.
Yesterday’s update right before 2PM was to stay away from JPMorgan Chase (JPM, $32.56, up $1.86) and maybe roll the dice on Google (GOOG, $379.50, up $10.59) if you are “Ed” the gambler and not “Joe” the plumber.
The JPMorgan Chase April 35 calls (JPMDB, $0.54, up $0.26) were at 43 cents and actually gained another 25% after the update. It’s funny because the last thing I said before yesterday’s opening bell was that the rally in financials was fading and it would be up to Goldman Sachs (GS, $121.19, up $6.08) to get everybody back on track.
Well guess what. Low and behold, Goldman jumps 5% yesterday! It was the one “clue” I said to watch for with the financials. This was incredible because the stock closed at $130 on Monday, dropped $15 on Tuesday to $115, and is now trading near its $125 stock offering that the company did to raise $5 billion. That is “sickishly” bullish. And I just came up with a new word for “SportsCenter”…it could also mean Goldman’s uptrend is intact.
The JPMorgan April 35’s should jump this morning and pay close attention to the Goldman Sachs April 125 calls (GSDE, $0.95, up $0.33). They hit a low of 32 cents yesterday and $125 could be the battle ground for where the stock settles. In fact, Goldman could make a run to $130 if the financial stocks rally today and Friday.
With Google, there are whispers that the company could miss earnings and there are others who feel the company could report over $5 a share and totally smash Wall Street’s expectations. Since we are gambling, I’m in the camp that Google will break $400.
I said the April 420 calls (GOPDD, $2.95, up $1.00) “could do well” at $1.45 and they freakin’ doubled after the 2pm update! Now you can clearly see what kind of returns expiration week on options can provide. Of course, it’s a doubled edged sword that cuts both ways, baby. If Google hadn’t of rebounded in the afternoon yesterday, these calls would be going the south.
The April 400 calls (GOPDT, $6.95, up $2.35) were trading at $4.40 and gained over 50%.
Google doesn’t announce until after the bell today so if the stock can continue higher, sell the calls before the closing bell. This is where a lot of inexperienced traders hold positions hoping to make even more money. I can see letting the position ride if your gains are less than 20% because these are gamble trades anyway, but remember, we are the house and why would we let a 100% return go?
Again, as I have preached all week, it is so much easier to sleep when you have made a 100% return and gotten out of a trade before a major news event. Yes, there are additional profits that might be left on the table but by taking what the market is practically giving us, we leave the table with our pockets full, not empty.
I’ll be back later this afternoon with an update and a possible trade or two for Friday.