11:00 am (EST)

Wells Fargo (WFC, $25.88, down $1.65) is getting whacked today and we got some great entry prices on our strangle option trade. The June 30 calls (FHUFD, $0.80, down $0.55) and the June 23 puts (WFCRI, $1.68, up $0.43). We got into the calls at $1.20 and the puts were going for $1.30 shortly after the open.

The stock actually opened higher at $26.74 this morning and held steady for about 20 minutes before tumbling lower. I talk a lot about the first 20-30 minutes of the market’s open in the trading manual and it is where many novice investors lose money or start off on the wrong foot.

We were both lucky and good that Wells Fargo held flat while we opened the trade. Sometimes stocks gap higher or lower at the open and novice traders will chase or pick the wrong entry points.

We are looking to make a big return on one side of this trade which may allow us to play the other side of the trade for free while at the same time, making 20%-30%. Strangle options are beautiful when the market or a stock is in a transition phase.

Another trade already working in our favor is ExxonMobil (XOM, $70.18, up $0.91). The May 70 calls (XOMEN, $1.00, up $0.35) are up 50% from where they were profiled at yesterday. I was more high on the June 75 calls (XOMFO, $0.76, up $0.10) as they were selling for only 63 cents per contract ($63).

Oil has hit a 6-month high this morning and is pushing $60 a barrel. ExxonMobil is gaining momentum. Inventory levels are up for oil but the dollar is getting weaker. We either go to $70 or fall back to $50 a barrel…

Rick Rouse