Priceline.com (PCLN, $170.98, up $2.97)
Buy to OPEN PCLN November 200 calls (PNEKA, $1.10, up $0.05)
Set limit prices at $1.10-$1.15 to get in the trade but do not pay more than $1.25 for the calls.
The last time the company reported earnings the stock jumped from $130 to $150. We think Priceline.com is going to report strong Q3 results and a number of brokerage firms have recently raised their estimates and target prices.
This an an all-or-nothing trade as these calls will take a beating if the company misses earnings or the stock drops or even stays flat. We are going to need a HUGE move for the calls to make us a double but there is the chance we could get a 50% pop if the stock runs higher…
Apollo Group (APOL, $56.47, down $0.33)
December 50 puts (OAQXJ, $1.55, up $0.20)
Entry Price: $1.45 (11/3/09)
Exit Target: $2.00
Stop Limit: 75 cents
Action: We are thisclose from Apollo hitting a 52-week low which stands at $55.35. If the stock breaks below this level we could easily test $50 quickly. However, we also realize that some option traders are playing the Education sector higher because they think high unemployment means people are going back to school.
We always respect the other side of the trade and if the stock manages to trade above $60 we will exit the trade. For those of you that are just joining us this week, there was a huge sell-off in Apollo from $73 to $60 on October 28th. If we get above the $60 level which was the closing price that day these puts will suffer. We have a stop of 75 cents and will exit the trade if that is hit or if the stock reverses course and heads back above $60.