November 2009 | Members


1:00pm (EST) NEW TRADE!!! Apollo Group (APOL, $56.57, down $0.22) Buy to Open APOL December 50 puts (OAQXJ, $1.45, up $0.10) We will use the profits from the November puts to get a little aggressive.  If you are just joining us this week, please research the last few days to get a play-by-play on how I feel about the company.  We got a nice return on the November put options so we can afford to be little aggressive with this one.   CURRENT TRADES    Imax (IMAX, $10.82, up $0.26) November 10 calls (IMQKB, $1.05, up $0.15) Entry Price:  $0.80 (11/3/09) Exit Target: $2.00 Return: 31% Stop Limit: None Action:  Imax is not a “big” mover and we are playing with the November options.  It would have been nice to see the stock make a push to $12 but we want to move on to the next trade.  Imax didn’t say anything exciting when they reported earnings and the fact that they are trying to increase their borrowing capacity for a $75 million line of credit has lowered our enthusiasm.    Barrick Gold (ABX, $40.20, down $0.08) November 40 calls (ABXKH, $1.65, down $0.20) Entry Price:  $1.20 (11/3/09) Exit Target: $2.00 Return: 38% Stop Limit:  $1.20  Action:  The calls have hit a high of $1.85 today which is under our $2.00 target but lets close the trade as we also are dealing with November options.     Apollo Group (APOL, $56.57, down $0.22) November 55 puts (OAQWK, $1.50, up $0.15) Entry Price:  $1.00 (10/28/09) Exit Target: $2.00 Return: 50% Stop Limit: $1.50 Action:  Mission accomplished.  The stop limit of $1.50 has been achieved so we will not overstay our welcome.  However, I still think Apollo heads lower so we want to roll this position over into some December put options.  These options have 43 days before they expire.   9:15am (EST) Special Notice On Stops: Folks, I got so much love/hate mail yesterday that my head was spinning from reading all of them, especially at the opening bell Wednesday morning.  First off, please know that my name and are the most important part of my integrity.  I keep things simple and honest.  And I try my hardest to explain all of my trades in detail every day, every update.  If I am wrong, I will tell you I’m wrong.  If I blow up a trade and it losses 100%, I will raise my hand.  I will take one for the team and stand up and say, “I blew it”. As you know, we have a lot of new subscribers and we are trying to help all of you but sometimes things in the market happen to where there is confusion and chaos.  We had that yesterday with our Garmin (GRMN, $26.84, down $4.57) trade. As you know the stock OPENED at $32.96, up from Tuesday’s close of $31.41 and hit a high of $33.23.  The puts we profiled last Thursday did not have a stop originally and we placed one on the position Monday.  Here was my quote at 9am: “Stop: None, set one at 50 cents Action:  Shares of Garmin touched a low of $29.63 on Friday and we are targeting the $27-$28 area over the short-term.  You will notice from the chart below that this level should act as support from August.  If that doesn’t hold then it clears the way for a drop to $25.” Tuesday, I said to “Action: Continue to hold.” Yesterday morning, I said this: “Action:  The puts traded to a low of 66 cents and we were a little disappointed that the stock gained 3% in a crummy market.  However, our stop was not hit but the position is now slightly negative.  Also notice that the stop WAS only 33% off from the entry price but has been lowered.” We were not in any danger of getting stopped out but we want to give the trade a little room.  We were using the 50 cent stop because the options were over a $1.00 but the bulls were trying to hold the shares above $30.  These are December options and we have 45 days before they expire so we have plenty of time to see if this level holds.  This is why we lowered the stop a little and it is set a little below a 50% loss exit.” (END) When the market opened yesterday, I did my usual checks and at 9:33am (EST) the stock was $31.16 and I showed a BID off 55 cents for the put options that are profiled.  I started getting a few emails and some of you said you were stopped out at 25-30 cents.  I got other emails from subscribers asking if they should stay in or get in and I said “yes, we should be fine”.  Many of you wrote me back later in the day and said you were already out for a double.  Great.  But I feel terrible for those of you stopped out. Look, here is MY deal with stops.  They are “mental” for me because I watch the market all day long.  That is my job.  So, I don’t ENTER orders in my brokerage until they are hit OR if I am PROTECTING profits OR if I think the trade has changed. Some option traders don’t have that luxury.  But, I understand that which is why I do my BEST with entries and exits.  I do it all in REAL time and I spend hours a day studying charts and market action.  Sunday is all day research day, doing the Weekly Wrap and finding even more possible trades. Also, I use STOP LIMITS.  This is an order that combines the features of a “stop” with that of a “limit” order.  A stop-limit order will be executed at a specified price (or better) after a given stop price has been reached. Once the stop price is reached, the stop-limit order becomes a limit order to buy (or sell) at the limit price or better.  We will use these from now on.  Stop Limits are not a cure-all but I think this will help explain the trades a lot better. Nothing about the Garmin trade worried me, not even the earnings, because I keep saying the company was headed below $30….Quote, “Shares of Garmin touched a low of $29.63 on Friday and we are targeting the $27-$28 area over the short-term”… That was MY instinct and I can’t teach that.  And when I did check the options they were at 55 cents 3 minutes into the open.  I did not look at the quote for what the open was which is why I did the 11:30am update.  The puts were at $1.20 and ended the day at $1.55.  So they were still profitable even after the 1pm update. However, we are going to record this trade as a loss.  I know I had mentioned in our Special Update yesterday we were showing a gain but because of the circumstances I need to assume everybody does not have the luxury that we do and the put options technically did trade below the stop. Folks, as your mentor, I will do a better job with each trade and I should have yanked the stop or said use a stop-limit order or a “mental” stop based on my own strong beliefs. But I don’t want to confuse anyone.  The last thing we want is to lose anyone as a subscriber because they thought we weren’t accurate in our picks.   Also, please keep in my mind we have no plans to auto trade our picks.  Many of you have been asking and this is one of the reasons why we don’t want to go this route.  Sometimes the markets are just too volatile.  Reason number two is that I don’t want to be famous, or on TV and we don’t want a million subscribers.  We are limiting the number of subscribers we take to 1,000 and once the Trading Manual is done that is it.  There will be a waiting list to get a subscription after that. Our goal is to teach traders the option market and to stay under Wall Street’s radar.  I don’t want our trades “crowded” and I don’t want to get to the point to where we can’t satisfy your needs.  That is it.  Thank all of you for the love/ hate mail yesterday…I deserve it.   CURRENT TRADES   Imax (IMAX, $10.56, down $0.21) November 10 calls (IMQKB, $0.90, down $0.30) Entry Price:  $0.80 (11/3/09) Exit Target: $2.00 Return: 13% Stop Limit: None Action:  We were hoping for a 10% move to the upside with Imax and it looks like we have an “ask” of over $11 in pre-market bidding.  We may not get to the $2.00 target we have but we should come out of the position with a profit.   Barrick Gold (ABX, $40.28, up $1.11) November 40 calls (ABXKH, $1.85, up $0.30) Entry Price:  $1.20 (11/3/09) Exit Target: $2.00 Return: 54% Stop Limit:  $1.20  Action:  The calls hit a hit of $2.15 yesterday and there was still some huge interest in these calls.  Our exit target is $2.00 but I’m being greedy and pushing for $2.40.  This may be asking a bit much since they were at 40 cents just a few days ago AND the November options expire in two weeks.  Technically, these calls are only in-the-money by 28 cents so we will exit the trade this morning, today or tomorrow. If the calls open higher this morning, raise the stop to $1.60 and if they trade over $2.00 set stops there and ride the wave higher.  If they trade $2.05 and come right back down, exit the trade at $2.00.  If they trade to $2.25 or higher, raise your stop along the way but try to be out today.  Friday will be a big day with the unemployment report so it is best we reduce our exposure.   Garmin (GRMN, $26.84, down $4.57) December 25 puts (GQRXE, $1.55, up $0.83) Entry Price:  $0.75 (10/29/09) Exit Price: $1.50 Return: -67% Stop Limit:  CLOSED at 25 cents (11/4/09) Action:  The exit target was $1.50 and our target for the stock was $27-$28.  Bingo.  We will take another look at Garmin but since the stop and exit targets were hit we are dropping coverage.  Hopefully the stock will run back up to $31-$32.  If so, this is where we may look to get back into the trade.    Apollo Group (APOL, $56.80, down $0.49) November 55 puts (OAQWK, $1.35, down $0.25) Entry Price:  $1.00 (10/28/09) Exit Target: $2.00 Return: 35% Stop Limit: $1.25, raise to $1.50 Action:  The Bid is $1.55, the Ask is $1.60 but the option quote above is what the last trade went on.  Either way, we want to be out of this position TODAY.  If you have a stop of $1.25 already set, make sure you raise it to a stop limit of $1.50.  Now, if the puts open lower than $1.50, wait 15 or 20 minutes to see where they are at.  If they are still over $1.25 you can see how they trade until or 1pm update or exit the position for a 25% profit.]]>