November 2009 | Members


1:30pm (EST)


FedEx (FDX, $82.05, down $1.66)

December 90 calls (FDXLR, $0.80, down $0.35)

Entry Price:  $1.40 (11/17/09)  
Exit: 70 cents (11/19/09)

Return: -50%
Stop Limit: CLOSED    

Action:  We were a day late on this trade, folks.  We mentioned on Monday how we wanted to get into this trade last Friday when the Dow Jones Transportation Index (3,937, down 91) was hitting new highs.  Barron’s came out with an article over the weekend that favored FedEx and we profiled the trade on Monday morning.

With the market breaking back below key resistance levels, we were whipsawed out of this trade.  The calls hit a low of 65 cents which took out our stop.  We aren’t happy about getting stopped out but we take the emotion out of our trades which is what you new option traders will learn.

Losing trades are part of the game and we know that.  But here is the key.  If you have one triple-digit winning trade and two 50% losing trades then you are still even.  If you have a 450% trade like our (PCLN, $204.78, down $4.89) you can have 9 losers before you are back to even.

Of course, our option trade picks average an 80% win rate so we really don’t even blink at a losing trade.  What you don’t want to do as a new trader is chase options or add to your positions.  Once you start doing that you get away from your trading plan and you become emotional.  Don’t.

Always buy 10 contracts (if you can) and stick to the plan…

Colgate-Palmolive (CL, $84.14, down $1.73)

January 85 calls (CLAQ, $2.70, down $1.20)

Entry Price: $1.35 (11/17/09) 
Exit: $2.70-$3.30 (11/19/09)

Return: 122%
Stop Limit: CLOSED

Action:  “Naturally, we didn’t expect a 200% gain in 48 hours with this one so this level will now become the NEW stop limit to lock in a 100%+ return.  Also, notice the $3.50 stop as well.  If this level is penetrated, then we will close half of the trade.”

Folks, this is what I wrote this morning and notice the “$3.50 stop” not stop limit.  Please realize options are really, really sensitive and I’m doing my best to PREDICT where things will open or close or whatever. 

The options opened at $3.30 so half of the trade should have been closed at $3.30 because it was a stop and not a stop limit.  On the way down the other half was closed at $2.70 when the calls hit a low of $2.45.

Look, some of you made more, some of you made less.  And if you haven’t closed out now and do…you are still at a 100% profit.  Again, WE didn’t send out an “Alert” or anything yesterday because we felt good going into the close.  That all change today and so did the trade.

That is why we said in our opening remarks…”We date options, we don’t marry them.”  We all should be happy because EVERYONE is walking away with at least a 100% return…

I’ve mentioned all of this today because we have been flooded with emails.  Naturally, I can’t respond to all of them today but we are reading them.  Hopefully, all of this helps.


Microsoft (MSFT, $29.94, down $0.17) 

December 30 calls (MSQLF, $0.76, down $0.11) 

Entry Price:  $0.65 (11/16/09)
Exit Target: $1.30
Return: 17%

Stop Limit:  NO STOP, place stops at 50 cents 

Action:  We don’t like the way the market is acting so we are being a little cautious.  The calls have traded to a low of 65 cents this morning and the stop is above our normal 50% stop.  If the market is headed lower, shares could suffer.

Netflix (NFLX, $60.47, down $0.66)

December 65 calls (QNQLM, $1.00, down $0.20)

Entry Price:  $0.80 (11/13/09)
Exit Target: $1.60+
Return: 25%
Stop Limit:  NO STOP

2010 June 80 calls (QNQFP, $2.10, down $0.15)

Entry Price:  $1.65 (11/13/09)
Exit Target: $3.30++
Return: 27%

Stop Limit: NO STOP

Action:  The December call options have traded to a low of 85 cents this morning which is barely above our entry price.  We are going to roll the dice on the one because Netflix is the one stock that could hold up in a down market.

If it doesn’t then we still have the June call options to back us up.  We would put a stop on these positions but Netflix is also a hot buyout candidate right now…especially with Microsoft talking smack.  Don’t think Apple didn’t put that on their bulletin board for their employees to see…

Dendreon (DNDN, $28.01, down $0.72)

2010 January 35 calls (UQBAT, $0.90, down $0.20)

Entry Price: $2.15 (10/15/09)
Exit Target: $5.00  
Return: -58%

Stop Limit: NO STOP

Action:  Another takeover target…

Rick Rouse
Chief Options Strategist

“What Are You Doing TODAY to become a millionaire TOMORROW?”