October 2009 | Members

 

1:00pm (EST) NEW TRADE!!! Intel (INTC, $19.81, up $0.18)  BUY to OPEN October 20 calls (NQJD, $0.53, up $0.07) This is an earnings trade with a call option that expires in less than 10 days.  It carries a high degree of risk because it will basically be an all-or-nothing trade.  When you play a company’s earnings report you are expecting a big move (10% or more) in the price of the stock. I thought about going out to the November call options but Intel will report earnings next Tuesday and the October options expire that Friday (October 15th).  The point is I think Intel is going to report another super quarter and I wanted to take advantage of the move above $20…if we get one. Last time Intel reported earnings the stock made a move from $16.83 to over $18.  It wasn’t quite a 10% move but it was enough to make some great money if you had bought some cheap call options before the announcement. At current prices, 10 contracts will cost you about $530.  If the stock can make it to $21 when the company announces earnings on Tuesday then these call options will be $1 in-the-money.  That means the 10 call option contracts you bought are now worth $1,000.  If Intel misses earnings and the stock falls back to $17-$18 then you will likely lose your entire investment or a very good portion of it. If the stock trades $20.53 by NEXT Friday, we break even.  There is NO STOP for the position and these calls could get cheaper, especially if the shares stay flat heading into the weekend or drift lower from here. If you wanted to do 5 call option contracts, it would cost you about $265 to make $500 based on the same outcome.   9:05am (EST) CURRENT TRADES Pepsico (PEP, $60.87, up $0.02) Nov 62.50 calls (PEPKZ, $1.10, down $0.15)  Entry Price: $1.15 (10/5/09)  Exit Target: $2.40 Return: -4%   Stop:  55 cents Action:  Barclays Capital raised its earnings estimates and price target for Pepsico yesterday but it did little to help move the stock.  Barclays believes Pepsico will earn $1.03 for the quarter, up from $1.00, and its new target for the stock is $73.  NOTE:  The company will report earnings on Thursday before the bell.  Abercrombie & Fitch (ANF, $31.56, up $0.96) November 30 puts (ANFWD, $1.90, down $0.25) Entry Price: $1.50 (10/1/09)  Exit Target: $1.90 (10/6/09) Return: 27%  Stop:  CLOSED Action:  I mentioned on Monday when shares hit $30.01 and held that it wasn’t a good sign and that we needed to protect profits.  Abercrombie had a good day on Tuesday and it was enough to take us out of the position.  However, if ANF heads back to $34 we will be ready to short it again. Citigroup (C, $4.67, flat) January 7.50 calls (CAQ, $0.11, flat) Entry Price: $0.32 (8/28/09) Exit Target: $0.64 Return: -66% Stop:  None   January (2011) 10 calls (VRNAB, $0.41, up $0.01) Entry Price: $0.60 (8/28/09)  Exit Target: $1.20 Return: -32% Stop: None Action:  Continue to hold.   Imax (IMAX, $9.76, up $0.09) March 2010 12.50 calls (IMQCV, $0.45, up $0.05) Entry Price: $0.45 (8/10/09) Exit Target: $1.00+ Return: 0% Stop: None  Action:  Continue to hold.]]>