What a busy day it was for option traders. I threw a ton of trades at you this morning plus the ones we have going on. It was good to see the bulls show up as all three indexes managed to end the session in the green after a lackluster day of trading.
The Dow closed higher by 15 points and settled at 9,108. The Nasdaq chipped in with a 2 point gain and closed at 1,967 while the S&P 500 added 3 to finish at 982.
As far as the trades here is the list of the ones we added today:
Green Mountain Coffee Roasters (GMCR, $67.75, down $0.89)
August 80 calls (QGMHP, $1.60, down $0.20)
Entry Price: $1.40 (7/27/09)
Exit Price: $2.10+
Action: Shares of Green Mountain touched $70 then fell. It appears this will be the next level of resistance and time will tell if it is short or long-term resistance. The company reports earnings on Wednesday AFTER the bell so we have two full days to really see how this one plays out. If we get a run back to $70 the calls should hit $2.00-$2.10 which would be a great exit before earnings come out.
Buffalo Wild Wings (BWLD, $37.11, down $0.54)
August 40 calls (BQUHH, $1.25, down $0.25)
Entry Price: $1.10 (7/27/09)
Exit Price: $2.20
Action: As you can tell, I was “on the fence” with this one all day but pulled the trigger at $1.10. Buffalo rebounded a bit and beat Wall Street’s expectations after the bell. In after-hours the stock traded above $39, or nearly $2 higher, and finished at $38.20, up $1.09 by 7:59pm (EST). We will have to see if this holds up going into Tuesday’s open and if it does remember it is cool to SELL at the open. We are hoping traders jump in right off the bat so we can sell these calls at a high premium. There is serious resistance at $40 so watch this area. If the stock can get above $40 and hold then it could be setting up to make a run at it’s 52-week high of $45. If shares are rejected at $40 it’s telling us to take profits.
Cerner (CERN, $64.99, down $0.90)
August 70 calls (CQNHN, $1.35, down $0.25)
Entry Price: $1.30 (7/27/09)
Exit Price: $2.20
Action: Cerner has been getting an upgrade here and there over the past few weeks and had been setting new highs before today’s pullback. The White House has said it will promote greater use of electronic medical records and that market is estimated to be worth $8 billion. Cerner hopes to get the biggest piece of the pie as we make better use of the technology. This company also reports after the bell on Wednesday.
Microsoft (MSFT, $23.11, down $0.34)
August 23 calls (MSQHQ, $0.75, down $0.17)
Entry Price: $0.78 (7/27/09)
Exit Price: $1.60
Action: A rebound trade although it didn’t look like it today. Hopefully, we aren’t catching a falling knife which would be the case of Microsoft is headed back to $20. These calls options are technically “in-the-money” and we only need the stock to recover by 5% to make a decent return off of the trade. Remember, it is only a short-term trade and one I’d like to close by Friday.
Visa (V, $68.19, up $0.90)
August 70 calls (VEHHN, $1.80, up $0.45)
Entry Price: $1.60 (7/27/09)
Exit Price: $3.20
Action: We added this trade to the portfolio at 1:30pm (EST) after I sat around and watched the action for half of the day. Something about Visa had me wanting to recommend this trade and my hands finally spit it out when the call options were at $1.60. They opened at $1.35 so we missed a little bit if Visa is ready to lift-off. The company announces earnings on Wednesday as well.
The goal is to close some of the these trades in short order while closing out others. I normally don’t follow this many trades but this has been a great time to make take some action and added risk because of the bull run we have been on. Speaking of which, I also want to go over some of the current trades that we have already established positions in. Drumroll please…
DryShips (DRYS, $7.08, up $0.85)
August 7 calls (OOCHJ, $0.65, up $0.35)
Entry Price: $0.25 (7/21/09)
Exit Price: $0.65
September 7.50 calls (OOCIU, $0.73, up $0.33)
Entry Price: $0.35 (7/21/09)
Exit Price: $0.70
Action: DryShips had a monster day, rising nearly 14%, after reports came out saying that the bulk shippers’ earnings should fall “in-line” with Wall Street’s expectations. Our goal was to be out before earnings and it was tough closing the August calls with such big gains. If you only closed half I would understand but this is why I “layered” the trade so that we can make it a “risk-free” trade going into earnings. So many times have I seen new option traders leave these gains on the table only to see them wiped out. Yes, sometimes, the type of trades go on to be grand-slams but you have to remember the price moves options can make. If DryShips continues higher we will still enjoy gains with the September calls.
Ford (F, $7.27, up $0.49)
December 6 calls (FLI, $1.70, up $0.27)
Entry Price: $1.25 (5/18/09)
Exit Price: $2.50
December 7 calls (FLJ, $1.07, up $0.19)
Entry Price: $1.00 (5/18/09)
Exit Price: $1.50-$2.00
Stop: 50 cents
Action: These positions heated back today and I told you Sunday night they were solid. The December 6’s added nearly 20% and we are going to raise the stop from $1.00 to $1.25-$1.30. Ford got some juice as the “Cash for Clunkers” program had a positive effect on the stock today. I won’t go into the details but Ford went out on its high which is always a good sign.
As far as our other open positions, Bank of America (BAC, $13.09, up $0.58) added 5% while Cisco Systems (CSCO, $21.84, down $0.04) and IBM (IBM, $117.63, down $0.01) held their own.
I’ll be back in the morning before the bell with an outlook for Tuesday’s trading.