October 2009 | Members


8:15am (EST) We already have an open position in Abercrombie & Fitch and I feel pretty good about leaving that one open over the weekend.  However, these possible trades are based on the current action of the futures market which are pointing towards a lower open.  If we get a bad unemployment report and the futures weaken even further then the financials could get hit the hardest.  The key will be to WAIT at least 10 MINUTES AFTER the opening bell to confirm market direction.  If we get a continued sell-off all day long like we did yesterday then we will use put options.   ALSO important!!!  If we get a surprise number and the futures make a huge turnaround then we will use call options.  We want to use high volume, liquid options and these are the ones I’m targeting: If the market opens LOWER and continues lower throughout the morning: Freeport McMoRan (FCX, $65.40) BUY to OPEN FCX November 55 put (FCXWK, $1.60) Freeport dropped $3 yesterday and it was a short at $72.  We missed that boat but these put options will do well if Freeport heads back to $60 or below over the near-term.  The stock is in danger of breaking its 50-day moving average which is right at $65 and there is support at $60.  However, if $60 fails, we could be looking at double nickels ($55). Set a LIMIT ORDER at $1.65 but do not pay more than $1.75-$1.80 for them.  If they open above that, ignore the trade.  The initial exit will be $2.50 with a stop of 80 cents. If we open HIGHER and continue higher throughout the morning: Research In Motion (RIMM, $67.16) BUY to OPEN RIMM November 75 call (RFYKT, $1.70) RIMM got a beatdown after it missed Wall Street’s estimates and has found support here at these levels.  If the market rallies on a good number or even holds steady, this stock should rebound to $70 over the near-term.  If not, it could fall to $60.  If we rally, use a LIMIT ORDER of $1.75 but do not pay over $1.85-$1.90 for the call options. If they open above that, ignore the trade.  The initial exit will be $3.00 with a stop of 90 cents. CURRENT TRADES Abercrombie & Fitch (ANF, $31.70, down $1.18) November 30 puts (ANFWD, $1.80, up $0.40) Entry Price: $1.50 (10/1/09)  Exit Target: $3.00 Return: 20%  Stop:  $0.75 Action:  The put options opened at $1.50 and held that price for a little while after the market opened.  We were hoping for a HIGHER open so that would could get the puts for the limit price of $1.40 but the stock opened lower.  I mentioned if the shares opened lower that we could probably get in for up to $1.60.  I did a detailed write-up yesterday so there is not much more to say…other than the fact the stock was down another 30 cents, to $31.40 in after-hours last night.  That’s good news and hopefully we see continued pressure heading into the opening bell. Nike (NKE, $62.50, down $2.20) October 60 calls (NKEJL, $3.10, down $1.60) Entry Price: $1.65 (9/29/09)  Exit Target: $4.50 Return: 173% (sold half at $4.50 on 9/30, half on 10/1 at $4.50) Stop:  CLOSED Action:  Yesterday I mentioned “if the stock falters and goes back to “fill in the gap” from $60 to $64, you will get stopped out automatically.”  Folks, this is the beauty of stops and this is why they help take the emotions out of trading. We were going to close the trade regardless on Thursday but Nike did exactly what we thought it would.  Of course, the stock sank with the rest of the market but it was enough to trigger the stop.  The weird thing is that the stock was up $2.20 in after-hours.  Either way, the October calls expire next Friday and we didn’t want to put the other half of the position at risk heading into today’s big event. Citigroup (C, $4.53, down $0.31) January 7.50 calls (CAQ, $0.11, down $0.02) Entry Price: $0.32 (8/28/09) Exit Target: $0.64 Return: -66% Stop:  None   January (2011) 10 calls (VRNAB, $0.40, down $0.02) Entry Price: $0.60 (8/28/09)  Exit Target: $1.20 Return: -33% Stop: None Action:  These trades were profiled before September started to avoid the volatility and they were “small” positions if you look at our track record.  The point is that we knew this going in which is why there are no stops on the position.  However, these call options could get even cheaper if the market sells off from here.  The financials will be the first to fall but we have over 4 months for the first leg of the trade to rebound AND over 16 months on the 2011 call options. Imax (IMAX, $9.26, down $0.15) March 2010 12.50 calls (IMQCV, $0.40, flat) Entry Price: $0.45 (8/10/09) Exit Target: $1.00+ Return: -11% Stop: None  Action:  Continue to hold. Sirius XM (SIRI, $0.60, down $0.04) December 1 calls (QXOLA, $0.05, flat) Entry Price: $0.15 (8/21/09) Exit Target: $0.30 Return: -67% Stop: None Action:  Geez.  This trade is all but dead as there is no “bid” for these calls, meaning if you wanted to sell them you probably would have a hard time.  The media has been brutal on the company since word spread they were dinging their customers an extra $2/ month and the fact that some talking heads are calling for a bankruptcy within the next year.  Throw in the fact that the stock could get delisted from the Nasdaq and start trading on the “pink sheets”…ugly. We still have to see how well their new products sell but we are going to remove this trade from the portfolio.  NOTE:  It will still be on our 2009 spreadsheet and we will record it as a loss but I don’t think it is worth our time to follow this one on a daily basis unless it comes back.  Maybe by Christmas we get a present but it isn’t looking good.  Rick@MomentumOptionsTrading.com]]>