October 2009 | Members


1:00pm (EST) NEW TRADE!!!  Abercrombie & Fitch (ANF, $36.84, down $0.84) Buy to Open ANF November 34 puts (ANFWL, $0.90, up $0.10) I like these put options at current prices and use limit orders of 90 cents to get in.  If you don’t get filled at 90 cents, try 95 cents but DO NOT pay over $1.00 for them. ANF was on the verge of breaking down weeks ago and we made a 27% return last time out.  Since we closed the trade, the stock has run up to resistance which is currently at $37.50.  There could be some more short covering coming and there is the chance the stock could push $40 for some unknown reason but that would be where we get out if the stock reverses course and continues higher. We are looking for a break below $35 and a run back down to $30.  With the market looking tired today, we need to add some put insurance to our portfolio.   9:10am (EST) Chesapeake Energy (CHK, $28.97, up $0.30)  November 30 calls (HKWKF, $1.05, up $0.05) Entry Price: $1.05 (10/19/09) Exit Target: $2.00  Return: 0% Stop:  50 cents Action:  Some on Wall Street have shares of Chesapeake Energy trading to $35 over the next year and another analyst recently raised their price target from $33 to $36.  Chesapeake is a big player in shale and controls the big Marcellus region you will start to hear a lot about. Blackstone Group (BX, $15.87, down $0.37)  January 20 calls (BXAD, $0.50, down $0.10) Entry Price: $0.65 (10/15/09) Exit Target: $1.30   Return: -23% Stop:  None, place one at 25 cents OR (see notes) Action:  From left field…Blackstone is having trouble raising money for one of its new funds and has raised only half of the $20 billion the company was hoping for.   We originally liked this trade based on Blackstone’s leverage in the current M&A (mergers and acquisitions) environment but news like this could quickly bust the trade.  We are in a “perfect storm” for M&A to continue and the call options do not expire until January. The stock was back over $16 on after-hours trading last night and we will have to watch how BX trades from here.  There was no stop for the position but we are going to now put one in at 25 cents.  Normally we do 50% stops but we went further out on the options chain so we will give this one a little extra time to rebound.   If the stock falls below $15 or the stop is hit, whichever comes first, close the trade.  Dendreon (DNDN, $29.21, down $0.31) January 35 calls (UQBAT, $1.90, down $0.35) Entry Price: $2.15 (10/15/09) Exit Target: $5.00   Return: -9% Stop:  None Action:  Speaking of M&A activity, Dendreon makes my top 5 list.  The stock trade over $30 twice last week but we want to see a CLOSE above $30.  This is also a longer-term option and because of the nature of biotech, there is no stop for this trade.  Even without a buyout offer, if the shares can trade $40 within the first three weeks of 2010, this trade is a double as the call options would be worth at least $5.     Pepsico (PEP, $62.05, down $0.24) November 62.50 calls (PEPKZ, $1.00, down $0.15)  Entry Price: $1.15 (10/5/09)  Exit Target: $2.30 Return: -13%   Stop:  $1.00, CLOSED Action:  If you will notice, these calls are right at our stop of $1.00 and I wanted to LOWER our stop from $1.00 down to 75 cents, yesterday, but didn’t.  I honestly didn’t think it would get hit and I knew some “time premium” would be lost over the weekend but I thought $1.00 would hold.  The calls traded to a low of 95 cents so this trade is now “officially” closed.  I still think Pepsico has room to run but as a trader, you have to honor your stops and discipline.  When setting stops and exit targets you want to do as you say and say as you do.  Well, we run an honest business here at MomentumOptionsTrading.com so we will record this trade as a loss but I have a feeling the stock is going to hit $65 once Pepsico closes its recent purchase on two if its bottlers. If you are still in the trade or want to stay in the trade, lower stops to 75 cents.  At current levels, your breakeven point is $63.50 for the stock by November 20th.  I would take that bet again.  Imax (IMAX, $10.97, up $0.12) March 2010 12.50 calls (IMQCV, $0.75, unchanged) Entry Price: $0.45 (8/10/09) Exit Target: $1.00+ Return: 67% Stop: None, place one at 50 cents   Action:  Imax kissed $11 again and not much was mentioned about the HUGE debut for the movie Where the Wild Things Are.  The film generated over $3 million from 145 Imax theatres over the weekend.  The movie generated 10% of the film’s overall box office of $33 million, with an Imax per screen average of $21,500.  It was the biggest fall opening weekend ever for Imax.   One of our reader’s emailed us and said “Cramer” said to sell the stock.  Geez.  I went head-to-head with Cramer on Dendreon back in March when the stock was at $5 and he was wrong then. Look, I don’t watch the dude, but I hear he has been bashing this stock when Imax was at $6.  He was bashing Dendreon at $5.  We are not looking for Imax to trade to $30, just $15.  We have not had a stop on this position since we initiated coverage back in August but place one at 50 cents. If Imax falls out of bed, at least we are covered and we are out with a small gain.  I don’t think that will be the case but Barron’s and a recent analyst downgrade have also been thrown out there.  We are going against the grain and so far it has worked but we still have to protect our profits.    Rick Rouse Chief Options Strategist Rick@MomentumOptionsTrading.com]]>