Blog

I didn’t like the afternoon action today as the market came off its highs.  The futures are slightly lower as I head to press and we will have to watch the action closely this week.  With earnings season winding to a close, economic reports will take on more meaning…

Bank of America (BAC, $17.35, down $0.11)

January 20 calls (BYOAT, $1.35, flat)

Entry Price: $1.18 (8/12/09) Exit Target: $2.20 Return:  14% Stop: $1.15, raise to $1.20

Action:  BofA made a run to over $18 and the call options traded as high as $1.63.  The financials stocks sold off just after mid-day and it was a disappointment they couldn’t close out on a more positive note.  Hopefully this isn’t a reversal but we raised the stop just in case.

Citigroup (C, $4.82, up $0.12)

January 7.50 calls (CAQ, $0.27, up $0.02)

Entry Price: $0.14 (8/12/09) Exit Target: 50 cents (sold half on 8/24/09 at 30 cents) Return: 114% Stop:  21 cents

January (2011) 10 calls (VRNAB, $0.57, up $0.08)

Entry Price: $0.40 (8/12/09) Exit Target: 80 cents Return: 45% Stop: 50 cents

Action:  I did mention today to close half of the trade if you hit a 100% return because the rest would be house money we played with.  As far as the 2011 10 call options there was a chance at a 50% profit but let’s just keep the stop of 50 cents in place.  That represents a return of 25% and we will honor the stop on the 7.50’s as well.  At 27 cents, these calls are still a double so make sure you close the trade if Citigroup hits our stops.

Imax (IMAX, $9.71, up $0.16)

September 7.50 calls (IMQIU, $2.20, up $0.15)

Entry Price: $1.90 (8/4/09) Exit Target: $3.00, lower to $2.60 Return: 16% Stop: $1.50, raise to $1.90

March 2010 12.50 calls (IMQCV, $0.60, up $0.15)

Entry Price: $0.45 (8/10/09) Exit Target: $1.00+ Return: 33% Stop: None

Action:  I lowered the exit target on the September calls because Imax is not a fast mover.  Yes, we did challenge $10 today but if the stock continues to struggle with that area we will manage the position for a profit.  Ideally, we would like to see a strong breakout abover $10 and hold.

Potash (POT, $96.27, up $0.23)

September 110 calls (PYPIB, $0.80, down $0.30)

Entry Price: $1.35 (8/20/09) Exit Target: $2.10+ Return: -37% Stop: 65 cents, lower to 60 cents

Action:  Nasty.  After hitting a high of $1.45 the bottom fell out after shares hit $99.  The premiums lost a lot of juice on the way back down although Potash ended the day with a small gain.  I lowered the stop to give us a little wiggle room but this one is pretty close to hitting it anyway.

Sirius XM (SIRI, $0.73, up $0.03)

December 1 calls (QXOLA, $0.15, flat)

Entry Price: $0.15 (8/21/09) Exit Target: $0.30 Return: 0% Stop: none

Action:  Take this trade for what it’s worth.  To buy a 1000 shares at current prices would cost you about $730.  To control a 1,000 shares which would be the case if you bought 10 option contracts will only cost you about $150.  This is still a risky play either way you slice it and Sirius is bleeding money.  Their balance sheet is a disaster but we are only risking a small amount of capital on this trade.  If the stock can make it to $2 which could be a cold day in hell, then these options would be worth at least a $1 apiece or $1,000 if you had 10 contracts.  See the leverage?