12:45 pm (EST)

Wow.  I knew last night/ this morning when I was writing the American International Group (AIG, $48.19, up $10.50) blog, I was thinking to myself… “this thing really could hit $50.”  Folks, there are no shares to short and the only play has been long for the past few weeks.  From 3:30am this morning:

“If AIG continues to shoot to the moon then the calls will continue to go higher and they could triple again if AIG goes to $50.  They would be worth $15.”

AIG has hit $50 today and is currently up 30%.  The call options I’m talking about are the September 35 calls (IKGII, $15.00, up $9.55) which closed yesterday at $5.45.  As Biggie Smalls would say..”It Was All a Dream”…but this dream has come true.  Bam, The September 35’s are right at $15, up 175%.  Folks, they opened at $7.50 and have doubled.

Of course, the September 25 puts (AIGUY, $0.40, down $0.16) are trading lower BUT look at how much value they have despite the $10 pop in AIG. 

The real story here is this.  Remember, AIG did a 20-to-1 REVERSE stock split when the shares were at $1 so really shares are back up to $2.50.  There is buzz that this thing could go to $100.  In reality, that would get the stock back to $5 if the split wasn’t done. 

I told you there were a lot of ways to play this stock and if you are in the September 35’s, you can sell now and lock in a 200% gain from the strangle trade or you can place a stop around $12 if you want to see if AIG continues to run. 

For those who were thinking outside the box this morning when the opening bell rang…

The September 50 calls (IKGIX, $6.45, up $5.32) are up an astounding 470%.  The calls opened at $1.65.  So what does this mean?  Well, if you would have bought 10 contracts this morning for $1,650 you would be looking at a profit of $4,800. 

Now, the reason the put options haven’t dropped to zero is because options traders are selling a lot of the September 50 calls because there is no stock to short.  Continue to hold the September 25 puts and make sure to set a stop on the calls. 

Rick@MomentumOptionsTrading.com