October 2009 | Members
Buffalo Wild Wings
(BWLD, $41.77, up $1.26)
Buy to OPEN BWLD November 45 calls (BQUKI, $1.05, up $0.28)
We are trying to get into these calls for $1.00 but we may not be able too. The goal is to get into these call options today and maybe get a run on Tuesday up into earnings. If, by now and the closing bell the calls have not come back down, try to get them for $1.05-$1.10 before the day is done.
Word of caution, the market is selling-off today and this trade could get punished if the company misses estimates or says something negative.
(RSH, $15.66, up $0.12)
November 15 calls (RSHKC, $1.35, up $0.17)
Entry Price: $1.20 (10/23/09)
Exit Target: $2.40
Action: We released this trade on Friday in the 1pm update. It was a straight up earnings trade as the company reported before the bell this morning. The stock made a high of $15.93 and in after-hours trading Friday night the stock was at $16.01, up 35 cents.
The company announced earnings this morning net income of $37 million, or $0.30 a share, down from $49 million, or $0.38, versus last year’s quarter. Wall Street was expecting 30 cents so they matched there. Sales declined about 3% to $990 million and analysts had expected sales of $961 million.
Most of the headlines say the company “missed” expectations because some are figuring Wall Street had estimates of $0.31 a share…
The good news is that the stock is up in pre-market trading to $16.42. That should translate into a higher options price and if the gains hold, these options should open at $1.40-$1.50. Close the entire trade into strength this morning. We weren’t looking for a homerun here, just a play on earnings to make a decent profit.
(TIVO, $12.58, up $1.11)
November 12.50 calls (TUKKV, $1.00, up $0.55)
Entry Price: $0.55 (10/23/09)
Exit Target: $1.10+
Action: The action in TiVo was crazy on Friday. The company is no stranger to the blog and we told you back in June to watch this one carefully. When I was doing the 1pm update on Friday, TiVo popped up again on my alert screen in my brokerage account. I had set an “alert” on my Watch List to inform me of when the stock broke its 52-week high of $11.62 which was set on June 12th. We were watching for clues from this June 3rd update (quotes are from that day):
(TIVO, $10.70, up $3.32) shares hit a 52-week high on Wednesday after a judge ruled that Dish Network (DISH, $15.56, down $1.68) and EchoStar
(SATS, $16.12, down $0.25) will have to pony up nearly $200 million for “video-recorder” patent infringements. This was a windfall for TiVo as the company has lost money for two straight quarters.
After reporting a loss of $4 million, $0.04 a share, versus a profit of $3.5 million a year-ago, TiVo could be on track for more royalties. There is another $100 million in the kitty that could come TiVo’s way from “accumulated interest” for judgments three years ago. Keep an eye on these developments.” (END)
I told you something would come from this and judging by Friday’s volume we could be getting some news in the not so distant future. On Tuesday of last week, my alert went off when the stock hit a 52-week high of $11.70. The next day shares traded lower and the average daily volume was still running a little over 1 million shares traded. Thursday was the same deal. Friday was different though. When I check my alert on Friday, volume was exploding.
By the end of the day over 11 million shares had traded and the volume on these call options reached 17,000. When the trade went out shortly before 1pm there had only been 2,000 contracts which is still a lot and the options were at 55 cents.
Whatever rumor is hitting Wall Street we hope it’s good. Open interest in these options were right around 5,000 contracts so the volume was 3x open interest. That usually leads to a bullish sign that some good news could be coming and then again it could all be hype.
As far as a buyout or takeover target, TiVo would make sense for a company wanting to make a push into a larger home entertainment market strategy. Since this is all speculation, of course, two names that makes sense to us is Microsoft and Apple buying Tivo. Microsoft and Apple could do wonders if they integrated TiVo’s DVR functionality. Cable providers are also pushing their own boxes heavily on subscribers and if this “patent infringements” continue to pay TiVo, it may be cheaper for one of the big boys to simply buy the company.
Watch these calls at the open and if you can close half of the trade for a double, do so and let the rest ride. If the options fade, you can close the entire trade for a profit but you would miss out on any further gains if the stock continues higher. You could also wait until the open and if the call options trade BELOW 75 cents, close half the trade and take profits. if the stop of 55 cents is hit, you could close the other half of the trade to protect profits in case the rumor dies.
Abercrombie & Fitch
(ANF, $36.27, down $0.66)
November 34 puts (ANFWL, $0.95, up $0.15)
Entry Price: $0.90 (10/20/09)
Exit Target: $2.00
Stop: 40 cents
Action: From Friday’s 9am morning update:
“For those of you just joining us, we are looking for Abercrombie to trade back down to $34-$35 over the near-term with a break below $35 leading to a test of $30 which was hit at the beginning of the month. The stock has rallied 25% since which we believe has provided us a great entry point as the retail teen sector continues to struggle.
If the stock does manage to penetrate its resistance level we will close the trade if shares trade $39-$40 which is where our stop of 40 cents is set for the put options. However, if Abercrombie is at $32 by November 20th then these puts are more than a double from current levels.” (END)
(CHK, $26.73, down $1.21)
November 30 calls (HKWKF, $0.35, down $0.25)
Entry Price: $1.05 (10/19/09)
Exit Target: $2.00
Stop: 50 cents (mental)
Action: We went into great detail on Friday to explain the “mental” stops we have on two of our current positions. This one and Blackstone.
We normally don’t use mental stops but the market is still searching for its next leg up or down. When this occurs we can get taken out of good trades which is why I had the mental stop on there. Normally, our trades are cut and dry…100% profits while limiting losing trades to 50%.
However, sometimes we get caught in these market currents and they can drag a trade out to sea only to have it wash back to shore turning up pearls. Chesapeake will report earnings on November 4th which is another reason we let this trade ride.
(BX, $15.82, down $0.27)
January 20 calls (BXAD, $0.35, down $0.05)
Entry Price: $0.65 (10/15/09)
Exit Target: $1.30
Stop: 25 cents (mental)
Action: These options do not expire until January 15th, 2010. This trade is also a “rollover” from previous profiled trades back in March. For new subscribers, this is why there is a “mental” stop on this trade.
From Thursday’s update:
“We think Q4 will be big for Blackstone so we are willing to hold the calls if they trade to a dime. Also remember, this trade was a “roll-over” position from an original “layered” Blackstone trade that we profiled back in March of this year.
At the time we profiled the April, May and the January 10 2010 call options. The April trade was closed when the 50% stop loss was hit. The May calls options were closed when the trade hit over a 300% return. The January 10 calls were closed out for nearly a 200% profit.
So really, subscribers who got in back then are playing with “house money”. Those of you just joining us may or may not be in on the trade so that is why we are explaining some of the stops in greater detail this morning.” (END)
Hopefully, this helps explain the two mental stops, and again, it is rare we use them.
(DNDN, $27.69, down $0.40)
January 35 calls (UQBAT, $1.40, down $0.10)
Entry Price: $2.15 (10/15/09)
Exit Target: $5.00
Action: There is NO stop on this trade because it is a speculative trade.
An analyst came out with a “Buy” rating on the stock Friday which help shares in the early going but by the end of the day, we closed lower.
Dendreon plans to file for approval of its prostrate drug, Provenge, in November but this news is already known. We are hoping for a buyout or partnership with another company by the end of the year. Our target is $40 by January and we think once the stock can gain some momentum and make a push to over $30 then we could get some more buyers.
(IMAX, $10.75 down $0.31)
March 2010 12.50 calls (IMQCV, $0.65, down $0.10)
Entry Price: $0.45 (8/10/09)
Exit Target: $1.00+
Stop: 50 cents
Action: We did not like the action in Imax on Friday. The company reports earning on November 5th and hopefully we are not stopped out before then. However, if the stock is breaking down then we will collect a small profit. We still believe Imax could surprise Wall Street with an incredible quarter so even if we are stopped out, it will be something we can look at again in a couple of weeks.]]>