11:40am (EST)

Blame it on the jet lag…

It has been hard to get back on track after the weekend’s road trip but I’m getting there, folks…

Man, you have to love this market. I was updating the portfolio which by the way is available anytime you want to see the track record and I wanted to see when was the last time I recommended a put option trade…

It’s easy to say you “buy call options in a bull market” but sometimes that theory is so true. If you look back over the 2008 portfolio, you will see a lot of put option trades. Meaning, you “buy put options in a bear market”.

Anyway, the last put option trade I profiled was American International Group (AIG, $24.05, up $2.05) back on July 8th. For those of you who weren’t with us, the trade returned 130% after AIG did the reverse stock split. The company did a 1-for-20 when the share price was at $1 and on July 1st AIG was at $20. I explained how to play this and we rode AIG down from $13 to $9 and pocketed a double for our trouble.

AIG made a huge move yesterday, rising from $13.50 to a close of $22, a 60% gain. This morning, the stock popped to $29.39. Wow. The action is due to a huge short-squeeze and the fact that the company reports earnings on Friday. When there is chaos and confusion, there is a trade. But not right now. These options are so juiced with premium and the implied volatility is through the roof. AIG is still a dog with fleas but a good earnings report can do wonders for a dog that is itching.

Imax (IMAX, $9.84, up $0.34) finally turned a profit. We were in this trade like wool on sheep and Imax didn’t let us down. For the quarter, the company posted a profit of $2.6 million, or $0.05 a share versus a loss of $12.2 million, or $0.29, a year earlier. Revenue came in at $41 million or a 94% increase.

Talk about knocking the cover off the ball…

The Imax September 7.50 calls (IMQIU, $2.35, up $0.10) were profiled at $1.90 and have traded as high as $2.40 when the stock broke $10. The August 10 calls (IMQHB, $0.25, up $0.05) and the September 10 calls (IMQIB, $0.50, up $0.10) got a small pop but the trade was the 7.50’s.

It would be nice to see Imax close above $10 and start to build a base from here. If so, that could pave the way for a move to $12-$15 by year-end. The December 7.50 calls (IMQLU, $2.74, up $0.40) were profiled back in June 25th at $1.25 and we were forced out by Barron’s by July 6th at $1.60. The net was 28% and these call options traded lower after Barron’s ran a negative article. We still made money but now you can really see why Barron’s and I don’t agree on a lot of things…

Rick@MomentumOptionsTrading.com