12:20pm (EST) With the weekend coming up, it’s always good to plan ahead. Alcoa (AA, $9.20, down $0.02) may have “unofficially” opened earnings season this week but as Thin Lizzy would say…The Boys are back in town, again…. Goldman Sachs (GS, $142.60, down $0.61) will “unofficially” kick off earnings for the Financial stocks on Tuesday and it could set the tone for how they trade over the next few weeks. Also, next Friday is when the July options expire and it is one of my favorite weeks to play cheap out-of-the-money options. When you have earnings and options expiration all in the same week it means the cost to buy options will be very low while market volatility will likely be very high. Remember the explosive more we saw in the Amgen (AMGN, $57.59, down $0.54) this week? There are trades out there that could cost just a few hundred dollars to enter and the returns can easily top 100%, 200%, or 300%. For instance, the Goldman Sachs July 160 calls (GPYGL, $0.44, down $0.01) would only cost you about $450 to buy 10 contracts. If Goldman is at $161 by next Friday, you double your money because those 10 options contracts would be worth at least $1, or $1,000. If Goldman is at $159.99 by next Friday, you lose your entire investment. The problem is that would mean Goldman’s stock would have to jump $18 from current levels. The stock doesn’t need to make it to $160 for these options to be profitable but I wouldn’t buy them today. Put them on your Watch List for Monday. A lot of pros will tell you not to play these types of option trades because of the all-or-nothing type of trade it is. However, I think it’s fine to speculate but only if you can afford to lose or if you just banked a winning trade. Speaking of which, American International Group (AIG, $10.63, up $1.16) has rebounded and I told you yesterday to have your stops in place and that we would be getting out of the trade today. The July 18 puts (AIGSR, $7.90, down $0.40) hit a high of $8.30 and most of you were in around $4-$4.50. Close them now if you haven’t done so already. The July 15 puts (AIGSO, $4.60, down $1.15) hit a high of $6.20 this morning which also represented well over a 100% return from entry prices less than $3. The S&P 500 is down 6 points to 877. It will be interesting to see how we hold up going into the close. I’ll be back Sunday night with the playbook on who will reporting earnings next week. Rick@MomentumOptionsTrading.com]]>
