September 2009 | Members

1:20pm Trade Update

A couple of trades that we are watching carefully today:    

First Solar (FSLR, $137.08, down $3.07) got a pop and then dropped.  I had mentioned this morning if the October 165 calls (HJQJM, $1.95, down $0.65) got to $3 to sell half of the position.  However, you could see the momentum being sucked out as an analyst was talking about how “overvalued” the stock is.  The shares traded to a high of $143.50 (a nice round number and a warning sign) and the 165’s traded as high as $3.20 which was above our exit target.  If you close the other half before the weekend, you lock in profits.

Disney (DIS, $28.11, down $0.25) got as high as $28.40 but has been in the red for much of the session.  You should have closed half of the October 27.50 calls (DISJY, $1.45, down $0.10) today and placed a stop of $1.25 on the other half.

 

9:00am (EST)

Current Trades

Citigroup (C, $4.75, up $0.09)

January 7.50 calls (CAQ, $0.18, down $0.01)

Entry Price: $0.32 (8/28/09)

Exit Target: $0.60 
Return: -44%
Stop:  None  

January (2011) 10 calls (VRNAB, $0.50, down $0.07)

Entry Price: $0.60 (8/28/08) 

Exit Target: $1.20

Return: -27%
Stop: None

Action:  Continue to hold.

Dendreon (DNDN, $23.73, down $0.25)

November 45 calls (UQBKO, $0.26, down $0.01)

Entry Price: $0.30 (8/31/09) 

Exit Target: $0.60 
Return: -13%
Stop: None

Action:  Continue to hold.

Disney (DIS, $28.36, up $1.41)

October 27.50 calls (DISJY, $1.55, up $0.80)

Entry Price: $0.80 (9/10/09) 

Exit Target: $1.60 
Return: 94%
Stop: $1.25

Action:  Wow.  And you wonder why options are the best kept secret on Wall Street?  A 5% move in a stock can get you a 100% return…in less than 6 hours.  That is exactly how this one played out yesterday.

Disney opened flat and stayed at $27 for a hour or so after the opening bell which gave you plenty of time to get into these call options at 80 cents.  I wasn’t quite expecting a move of this nature by Disney but we will take it. 

Now, here is the hard part.  It’s Friday and the weekend is here.  You have a nice triple-digit profit.  The market continues to go higher.  The options still have PLENTY of time before they expire.  Here is where option traders give back a lot of money.

Look, the safest thing to do is close at least half the position and place a stop of $1.25 on the other half.  This protects you from any weekend news events and it still keeps you in the trade.  It also allows you to participate if there is more upside but also protects you if we stay flat or head lower.

First Solar (FSLR, $140.15, up $3.54)

October 165 calls (HJQJM, $2.55, up $0.60)

Entry Price: $2.00 (9/10/09)
Exit Target: $4.00
Return: 28%
Stop: None

Action:  The calls opened at $2.25 which another reason why we don’t BUY right at the open.  I wanted to get these calls at $2.00 and you should have been able to using limit orders.  The calls traded to a low of $1.91 shortly after the bell and the stock caught wind in the afternoon.  If we can get to $3.00 that would represent a 50% pop and we could possibly keep the trade open because we have a nice return.  However, you could close half of the position if the market is looking weaker heading in today’s close.

Imax (IMAX, $9.98, up $0.41)

March 2010 12.50 calls (IMQCV, $0.50, up $0.10)

Entry Price: $0.45 (8/10/09)
Exit Target: $1.00+
Return: 11%
Stop: None

Action:  Imax hit $9.99 on Thursday and we are finally back in the green for this trade.  The company announced another deal in China and continues to build solid relationships around the world.  The new deal brings the company’s total in China to 40 by 2012.  I don’t think the buck stops there though…

I feel stupid now that I was trying to get you into the December 10 calls (IMQLB, $0.90, up $0.20) for 50 cents.  These call options were at 60 cents on Tuesday and are now up 50%.  Don’t lose sleep over them if you didn’t get in.  If Imax is at $15 in six months, the March 12.50’s will be worth $2.50.   

Sirius XM (SIRI, $0.67, up $0.02)

December 1 calls (QXOLA, $0.15, up $0.05) 

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

Action:  Continue to hold.