9:05am (EST)


Trade #1

FedEx (FDX, $84.80, up $2.83)

Buy to OPEN December 90 calls (FDXLR, $1.45, up $0.58)

Action: We wanted to pull the trigger on this one yesterday but the opening was too strong for us.  The stock got a lift after Barron’s said the company is well positioned to benefit from a global economic recovery but we were looking at this one Friday when we saw the Dow Jones Transportation Index (^DJT, 4,046.50, up 85.93) about to set new highs. 

In any event we would like to get these calls for under $1.50 so set limit prices at $1.40 or better.  If you are not filled at the open, wait 20 minutes to see where they are at.  If they are higher, don’t pay over $1.75 for them.

Trade #2

Colgate-Palmolive (CL, $82.40, up $0.91)

Buy to OPEN January 85 calls (CLAQ, $1.35, up $0.20)

Action:  We think Colgate-Palmolive has the strength to reach $100 by the time these call options expire.  Use limit prices of $1.25-$1.30 which should be hit if we open lower.  If you can’t get in at these prices, do not pay more than $1.50 for the calls. 



Microsoft (MSFT, $29.54, down $0.09)

December 30 calls (MSQLF, $0.56, down $0.09) 

Entry Price:  $0.65 (11/16/09)
Exit Target: $1.30
Return: -14%
Stop Limit:  NO STOP

Action:  UBS added the stock to its Buy list and said it was the “most preferred” name in Tech at the moment.  The stock is slightly higher as we head to press.

Netflix (NFLX, $59.46, up $0.13)

December 65 calls (QNQLM, $0.95, flat)

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

2010 June 80 calls (QNQFP, $1.90, up $0.05)

Entry Price:  $1.65 (11/13/09)
Exit Target: $3.30++
Return: 15%
Stop Limit: NO STOP

Action:  Netflix broke through $60 yesterday and we feel it is only a matter of time before this number is in the rear-view mirror.   

Dendreon (DNDN, $29.15, up $0.21)

2010 January 35 calls (UQBAT, $1.15, down $0.10)

Entry Price: $2.15 (10/15/09)
Exit Target: $5.00  
Return: -47%
Stop Limit: NO STOP

Action:  Continue to hold.

Special Note:

We wanted to explain a few things about our current positions.  As you know, most of the time we carry a 50% stop but these trades are different and we are also at the top of a market range.

The type of trading we do is riskier than other option strategies because we normally have to be right about a stock AND right about the market’s direction.  Those are two very hard things to predict because no one really knows where the market is headed on any given day.  It comes down to supply and demand and what’s hot and what’s not.

Having said that, we also feel the next “breakout” could be higher but we always prepare for both sides of the trade.  We are bullish but cautious and are using select trades until we are clear on the trend.

The Dendreon trade was from October and we are waiting on a takeover or for the stock to break $30 and run. 

Microsoft was added yesterday and is a speculative play.  The premium was so cheap that if we did set a stop of 30 cents then it could be taken out if the market heads lower this week. 

And finally, the Netflix trades have no stop because we think we have a tiger by the tail with these options.  

The two trades that we are trying to get into today will have 50% stops.  We will be back with the updates at 1pm.