12:30pm (EST)

Abercrombie & Fitch (ANF, $31.68, up $0.32)

September 32 puts (ANFUJ, $2.05, down $0.20)

Entry Price: $1.25 (8/14/09)
Exit Target: $2.75 (closed half at $2.75 on 8/19)
Return: 120%
Stop: $2.00

Action: Abercrombie has bounced back a little today and I suggested closing out the play yesterday after the calls hit a high of $2.90. Monday night, here were my thoughts:

“Abercrombie was a train wreck all day and we did well by buying the puts during Friday’s run-up in the shares. Our exit target is $2.50 but we may get more juice out of this lemon if ANF dips below $30. Notice our stop was raised to protect profits” (END)

Well, there was one more squeeze left in that lemon but that is it. If you left half of the position open, the stop of $2.00 was hit earlier this morning so this trade is now officially CLOSED.

Bank of America (BAC, $17.17, up $0.42)

January 20 calls (BYOAT, $1.30, up $0.10)

Entry Price: $1.18 (8/12/09)
Exit Target: $2.20
Return: 10%
Stop: $1.10-$1.15

Action: BofA is back over $17 again after hearing our footsteps. We raised the stop Monday night to $1.15 and the stock has rebounded nicely since. The gains aren’t as great as some of the closer month options. For instance, the August 17 calls (BYOHQ, $0.27, up $0.12) are up 75% today but they EXPIRE on Friday. At current levels they are only worth 17 cents so you can see how much premium is built into these options with only one day left. I went further out to protect us from a market decline and if we don’t get one we can still enjoy the gains.

Citigroup (C, $4.34, up $0.21)

January 7.50 calls (CAQ, $0.17, up $0.03)

Entry Price: $0.14 (8/12/09)
Exit Target: 50 cents
Return: 21%
Stop: None

January (2011) 10 calls (VRNAB, $0.44, up $0.02)

Entry Price: $0.40 (8/12/09)
Exit Target: 80 cents
Return: 10%
Stop: None

Action: Citigroup is getting a lot of Wall Street love this morning as it is showing a 5% pop. I wish I would have gotten you in the August 4 calls (CHW, $0.34, up $0.19) this morning but I just sat here and watched them because we already have two open positions. They are up 125% but again, these are one of them cheap-in-the-money call plays that you could have played during expiration week and they opened this morning at 15 cents. I don’t think you gamble with them at current levels but these are the types of trades that I was talking about…read on.

Home Depot (HD, $26.63, down $0.12)

August 26 puts (JGLTM, $0.06, down $0.01)

Entry Price: $0.54 (8/17/09)
Exit Target: $1.00

Return: -89%
Stop: None

August 25 puts (HDTE, $0.01, flat)

Entry Price: $0.26 (8/17/09)
Exit Target: 50 cents
Return: -96%
Stop: None

Action: These options expire tomorrow and it’s highly unlikely they make it back to positive territory. However, you still have to watch them in case they do end up in-the-money. The premiums weren’t that much so when you see a loss of 99% it isn’t as bad as it looks. I showed the Citigroup August 4’s call options in the aforementioned trade so that you would understand that I believe it is okay to play cheap out-of-the-money options. I usually only do a few trades during these weeks and Home Depot was the only one for August. We had a great July when we cashed in our several of these types of trades but the market was just too choppy for Home Depot.

Imax (IMAX, $9.18, up $0.05)

September 7.50 calls (IMQIU, $1.70, flat)

Entry Price: $1.90 (8/4/09)
Exit Target: $3.00
Return: -11%
Stop: $1.00

March 2010 12.50 calls (IMQCV, $0.45, flat)

Entry Price: $0.45 (8/10/09)
Exit Target: $1.00+
Return: 0%
Stop: None

Action: Continue to hold.

Potash (POT, $96.64, up $1.46)

September 110 calls (PYPIB, $1.40, up $0.20)

Entry Price: $1.35 (8/20/09)
Exit Target: $2.10+
Return: 4%
Stop: 65 cents

Action: This was a trade recommended this morning before the bell and the options opened at $1.35. They have traded to a low of $1.30 so most of you should be in for under $1.40. I’d like to see Potash run to $100 so we could maybe get out before the weekend so let’s see where we are at on Friday.

Wells Fargo (WFC, $27.62, up $1.01)

September 26 puts (FHUUZ, $0.75, down $0.35)

Entry Price: $1.30 (8/11/09)
Exit Target: $2.60
Return: -30%
Stop: $1

Action: The $1 stop was hit this morning so this trade is also closed. I thought Wells Fargo would be offering more stock this week or last week and although this position was profitable for a minute, it ended up succumbing to the bulls.

Note: American International Group (AIG, $33.49, up $6.85) is up 25% today and it’s hard to believe the stock has rebounded from a low of $13 since the beginning of August. Incredible. The September 35 calls (IKJII, $4.10, up $3.05) have soared nearly 300% after opening at $1.22. There is a combination of a lot of things going on with AIG right now and although I don’t trust this dog to go long, there may be a chance for a STRANGLE option trade. The September 25 puts (AIGUY, $1.65, down $1.05) have dropped 40%.

The stock is up on some CEO fluff who believes he can “maintain shareholder value”. Good grief. Give me break. He failed to mention that his company did a 20-to1 reverse stock split and right now the shorts are getting hammered. I’m going to do some more research on this one but a strangle trade is when you play both sides of the ball hoping for a big move. AIG is so volatile that it fits the bill. You can do 2-to-1 with puts to calls but it is expensive. I almost want to suggest the put options straight-up but short squeezes can be tough to predict. I do know that AIG is not worth $33 right this second but it’s a tough call. Don’t take any action just yet because I’m thinking out loud. I’ll be back with an update tonight.

Rick@MomentumOptionsTrading.com