October 2009 | Members


12:40pm (EST) NEW TRADE!!! First Solar (FSLR, $151.93, down $2.94) Buy to OPEN FSLR November 115 puts (QHBWC, $1.00, up $0.20) We like prices at current levels and up to $1.10 but realize this is a high risk/ high reward trade.  If the stock trades higher then these puts will likely fall to 10 cents or a nickel.  If you wanted to buy some insurance you could use the FSLR November 190 calls (HJQKR, $1.25, down $0.15).  The total cost for a strangle trade would be about $2.25 for both a call and put option.    CURRENT TRADES Buffalo Wild Wings (BWLD, $42.00, down $0.43) November 45 calls (BQUKI, $1.40, flat) Entry Price: $1.10 (10/26/09)  Exit Target: $2.00  Return: 5%  Stop: Closed @ $1.15  Action:  The call options are still getting a strong bid despite the stock being down today.  The call options have traded to a low of $1.05 so we were technically stopped out this morning.  They opened at $1.40 and we thought shares would hold up because of the upgrade for Cheesecake Factory (CAKE, $19.33, up $0.39).  No dice. I listed the stop of $1.15 because I didn’t want the position to turn into a loss in case shares dropped but we were whipsawed out of the trade.  Hey, it happens.  If by chance you are still in the trade then it’s time to make a choice.  With the current market action and the way the stock acted today, we would be inclined to take profits off the table and move to the sidelines.  We were hoping for a follow-through today and we didn’t get one which may be a clue of things to come.  If you got in at $1.10 and you can get out at $1.40 then that is still a 27% return without being exposed to earnings.  We were hoping to get a double BEFORE earnings came out but that wasn’t the case. We will be back in the morning with the full updates.  One nugget of good news in an otherwise sea of red, Abercrombie & Fitch (ANF, $35.20, down $0.94) has touched a low of $35.10.  We have starting to lean more towards put options as the market continues to look weak, tired, or both.   9:15am (EST) CURRENT TRADES Buffalo Wild Wings (BWLD, $42.43, up $1.92) November 45 calls (BQUKI, $1.40, up $0.62) Entry Price: $1.10 (10/26/09)  Exit Target: $2.00  Return: 27%  Stop: $1.15  Action:  We profiled this trade in the 1pm update yesterday and were trying to get into the position at $1.00.  After waiting for a pullback it was apparent we weren’t getting one and we said to take positions at $1.05-$1.10. The stock was already up but started getting even hotter into the close as analysts started talking out load that there is a good chance the company beats earnings.  We got in early hoping to avoid all of the hype and here is where we could be in for a surprise. When we sent the 1pm update out there wasn’t a lot of volume in these options but the action wasn’t noticeable until the last hour of trading which is when buying picked up.  That is a good sign for us because we may look to get out of the trade TODAY if we can get our double BEFORE earnings come out. We will have to watch this one carefully and we will update the trade at 1pm.  Here is why.  Look, it’s pretty easy to see the company will probably beat estimates but the option traders that get in on Tuesday will be looking for a big pop on Wednesday.  Earnings come out AFTER the bell so hopefully we see strength going into the close.  The key for this earnings trade will be what the company says about 2010.  There is a good chance they give a rosy outlook here but if they don’t the shares could fall.  This is why you often here us say “buy the rumor, sell the news”… If we can get a double or even a 75%+ better profit today then we may close the trade or at least half of it.  Look for the update at 1pm.   RadioShack (RSH, $18.15, up $2.49)  November 15 calls (RSHKC, $3.40 up $2.05) Entry Price: $1.20 (10/23/09)  Exit Target: $2.40  Return: 158%  Stop: CLOSED @ $3.10 (10/26/09) Action:  It looks like we left a little on the table but with these types of gains we see no reason to get cute.  Yes, the stock could make a run to $20 and these calls would be worth at least $5 but shares could also fall back to $15.  We have seen it happen time and time again which is why we move on to the next trade.   TiVo (TIVO, $11.63, down $0.95) November 12.50 calls (TUKKV, $0.60, down $0.40) Entry Price:  $0.55 (10/23/09) Exit Target: $1.10+  Return: 23% Stop: $0.55 (CLOSED 1/2 @ 75 cents) (10/26/09) Action:  Here was our update from yesterday: “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.  The calls opened at 75 cents and then traded to $1.05.  We were hoping for $1.10 which was our exit target so technically we were stopped out of half the position at 75 cents.  The other half of the trade will be stopped out at $0.55 if the stock doesn’t rebound today. If we are stopped out of the trade, perhaps we will look at the December 12.50 calls (TUKLV, $0.85, down $0.55) if they get cheaper.  Something is coming down the pipe with this one and by going out to December we can give the trade a little more time to develop.   Abercrombie & Fitch (ANF, $36.14, down $0.13) November 34 puts (ANFWL, $0.95, unchanged) Entry Price: $0.90 (10/20/09) Exit Target: $2.00  Return: 6% Stop:  40 cents Action:  Continue to hold.   Chesapeake Energy (CHK, $25.73, down $1.00)  November 30 calls (HKWKF, $0.20, down $0.15) Entry Price: $1.05 (10/19/09) Exit Target: $2.00  Return: -81% Stop:  None Action:  We lifted the mental stop for this one and we will try not to use them in the future because they caused a lot of confusion.  We had a stop of 50 cents but we are now married to this one for better or worse, richer or poorer… When we profiled this trade last week, something told us to hedge it but we didn’t pay attention just like a lot of people at the altar.  At the time the stock was $29 and a push to $30 seemed to be in the cards.  However, the November 28 puts (HKWWB, $2.70, up $0.60) were also probably trading for around $1.00 which would have easily offset the loss we have on the calls AND made this trade a profitable one. We got caught in the market’s current on this one and when the mental stop was used it should have been a warning sign.  We will hold this one open and we will have to hope for a rebound back to $30 when the company reports earnings on November 3rd.   Blackstone Group (BX, $15.10, down $0.72)   January 20 calls (BXAD, $0.30, down $0.05)  Entry Price: $0.65 (10/15/09) Exit Target: $1.30   Return: -54% Stop:  None Action:  The mental stop of 25 cents has also been lifted on this position as well.  We mentioned yesterday this was a roll-over trade from previous positions in March.  The profits from those three trades will easily offset the losses from this one as we are really just playing with house money.  This trade has plenty of time to rebound and will if the stock can make a run to $20 by January 15th, 2010.    Dendreon (DNDN, $27.27, down $0.42) January 35 calls (UQBAT, $1.20, down $0.20) Entry Price: $2.15 (10/15/09) Exit Target: $5.00   Return: -44% Stop:  None Action:  Continue to hold.   Imax (IMAX, $10.73, down $0.02) March 2010 12.50 calls (IMQCV, $0.65, unchanged) Entry Price: $0.45 (8/10/09) Exit Target: $1.00+ Return: 44% Stop: 50 cents Action:  Continue to hold.]]>