9:10am (EST)


Microsoft (MSFT, $29.63)

Buy to OPEN MSFT December 30 calls (MSQLF, $0.65)

Over 3,300 traded hands on Friday and we would like to get these at 65 cents this morning.  You can set limit prices up to 70-75 cents to buy at the open.  If the calls open higher than 75 cents, wait 15-20 minutes but don’t pay over 80 cents for these options. 

The close above $29.50 for MSFT was big and could become near-term support.  We could get a run to $32 which would make these options worth at least $2.00 or way more than a double from current levels.  The $30-$30.50 level will be tough but we could see momentum come into play this week and next.

The November 30 calls (MSQKF, $0.21, up $0.06) gained 40% on Friday as over 61,000 contracts traded hands.  These options would provide a better return but they expire THIS Friday.  The January 30 calls (MSQAF, $0.98, up $0.12) traded 8,600 contracts but neither of these options are trade recommendations.  We are simply pointing out the volume and will only be adding the December calls to the portfolio. 

The volume just confirmed our hunch that Microsoft looks ready to bust $30.


Netflix (NFLX, $58.47)

December 65 calls (QNQLM, $0.95, up $0.20)

Entry Price:  $0.80 (11/13/09)
Exit Target: $1.60+
Return: 19%
Stop Limit:  NO STOP

2010 June 80 calls (QNQFP, $1.85, up $0.35)

Entry Price:  $1.65 (11/13/09)
Exit Target: $3.30++
Return: 12%
Stop Limit: NO STOP

Action:  I wanted to expand a little more on the Netflix trade this morning.

Some of you wrote to say you couldn’t get in the June 80 calls and here is the thing.  I said you could buy them up to $1.80 when the calls were at $1.65.  Even if you pay up to $2.00 or $3.00 for these call options they will be worth at least $20 if Netflix is at $100 by next summer.  If people get in at $5 down the road the trade would still return 300% if the calls hit $20.  Hopefully, we are in early and Neflix runs to $100 quickly. 

The prices I gave on Friday were real-time as I wrote the trade up and as a trader, those are the prices that you should be paying at that time.  It doesn’t mean they are etched in stone and it is up to you to decide where you want to get in at.  Everybody should have been able to get into the December options up to 95 cents because that is where they closed at.

Apollo Group (APOL, $53.86)

December 50 puts (OAQXJ, $2.10)

Entry Price:  $1.45 (11/5/09)
Exit Target: $2.90
Return: 45%
Stop Limit:  $1.00, raise to $1.65

Action:  WATCH THE OPEN and exit the trade if $1.65 is hit.

The calls gained another 14% Friday and traded as high as $2.40.  Apollo challenged its 52-week low of $52.79 which was set last Monday after the negative Barron’s article.  An analyst out of William Blair lowered his rating on three higher-education providers, saying he doesn’t think investors will see any big increases in their share prices. 

Apollo has been a steady mover for us and noticed we have RAISED the stop to lock in a profit.  We still think the stock is headed below $50 but there is new out this morning that could affect our position.

The sector in general faces continued regulatory scrutiny from the Department of Education, Congress and the Securities and Exchange Commission.

A government report found these types of online colleges have higher loan default rates than traditional schools which are going to lead to Congressional hearings.  Specifically, the SEC is about to crack the seal on Apollo’s revenue recognition practices and it could get ugly if the company is charged.

We might not be around though… 

Dendreon (DNDN, $28.94)

2010 January 35 calls (UQBAT, $1.25)

Entry Price: $2.15 (10/15/09)
Exit Target: $5.00  
Return: -42%
Stop Limit: No Stop

Action:  Dendreon bounced back a little and we are looking for a break above $30 this week.  Continue to hold.