September 2009 | Members

9:10am (EST)
 
Bank of America (BAC, $16.46, down $1.13)
 
January 20 calls (BYOAT, $1.08, down $0.34) 
 
Entry Price: $1.18 (8/12/09)
Exit Target: Closed at $1.30 (9/1/09)
Return:  10%
Stop: $1.30
 
Action:  After hitting a high of $17.86, BofA dropped with the rest of the financials.  The sell-off came shortly after the market opened on rumors of a possible bank failure.  That was all the bears needed to hear.  Although these rumors were never substantiated the guessing game started and the bears went after the big boys.
 
The call options hit a high of $1.49 yesterday and our stop of $1.30 was hit on the way back down. We still made 10% on the trade and we will have to wait and see if anything becomes of these rumors. 
 
Citigroup (C, $4.54, down $0.46)
 
January 7.50 calls (CAQ, $0.19, down $0.10)
 
Entry Price: $0.32 (8/28/09)
Exit Target: $1.00
Return: -40%
Stop:  None  
 
January (2011) 10 calls (VRNAB, $0.49, down $0.12)
 
Entry Price: $0.60 (8/28/08) 
Exit Target: $2.00
Return: -18%
Stop: None
 
Action:  Investors jumped off Citigroup like rats on a ship as the stock lost 9% Tuesday.  I mentioned yesterday that these options would probably get cheaper so don’t shoot the messenger.  I’ve also talked about the volatility picking up and if today was any indication then we could see some fireworks this month.  We knew that going in this trade which is why we went way out on these options.
 
Dendreon (DNDN, $22.96, down $0.41)
 
November 45 calls (UQBKO, $0.22, down $0.11)
 
Entry Price: $0.30 (8/31/09) 
Exit Target: $0.60 
Return: -27%
Stop: 15 cents 
 
Action:  Dendreon traded to $23.99 before falling with the rest of the market and the call options traded to a high of 37 cents.  That represented a decent 25% gain but we are looking for much more.
 
Here is the interesting part.  There was HEAVY action in the October 27 calls (UQBJA, $0.83, down $0.07) as over 5,500 contracts traded.  Folks, the open interest was only 132 contracts.  If you look at all of the action in the Dendreon option chains this stands out.  It could mean a variety of things.  The 27 strike price represents the 52-week high for the stock ($27.40) so either there are a lot of option traders betting that is the ceiling and we break through or someone has a large postion and was selling calls against the stock.
 
First Solar (FSLR, $114.98, down $6.60)
 
September 100 puts (QHBUT, $1.50, up $0.75)
 
Entry Price: $1.25 (9/1/09)
Exit Target: $1.85
Return: 20%
Stop: $0.60
 
Action:  Well, I put my money where my mouth was.  I entered a long position at $1.25 and I spelled out my plans in the original trade write-up.  I’m looking for a run to $1.85 or even $1.75 which would return $500 for every 10 put contracts you own.  So here is the game plan.
 
The stock was down another 50 cents in after-hours trading last night and touched a low of $114.  If the stock OPENS lower on this morning when the opening bell rings, close the position.  I normally don’t buy options right after the market opens because the sharks can really eat you alive and premiums can get inflated.  However, sometimes it is okay to SELL (or close) a position into strength.  In this case, we are hoping for more downside for First Solar.
 
If we can get below $114 then these options should easily hit our target.
 
Imax (IMAX, $9.07, down $0.33)
 
March 2010 12.50 calls (IMQCV, $0.35, up $0.05)
 
Entry Price: $0.45 (8/10/09)
Exit Target: $1.00+
Return: -22%
Stop: None
 
Action:  Continue to hold.
 
Sirius XM (SIRI, $0.66, down $0.01)
 
December 1 calls (QXOLA, $0.10, unchanged)
 
Entry Price: $0.15 (8/21/09)
Exit Target: $0.30
Return: -33%
Stop: None
 
Action:  It doesn’t mean to much when a stock gets its price target raised from 50 cents to $1.00 but in this case it does.  We only need to get to $1.15 to breakeven on the trade and at $1.30 we double or money.  That is the reason we don’t have a stop for this position as well.  We went all the way out to December because we need to give the new product cycle time to work.  We should know soon enough if Sirius has a good product and if it’s partnership with Apple (AAPL, $165.30, down $2.91) will save the company.