November 2009 | Members


3:05pm (EST)

We DID NOT get into the HSBC Holdings (HBC, $58.46, down $3.61) trades.

The December 60 puts (HGKXL, $2.80, up $1.85) opened at $3.20 and were well above the $1.40 entry target we had set.

The December 55 puts (HGKXK, $0.72, up $0.62) opened at 60 cents and were just above our target of 50 cents.

We knew we probably didn’t have a shot at the 60’s with the $1.40 entry target but we were close to nailing the entry price on the 55’s.


KB Home (KBH, $13.62, down $0.25)

January 15 calls (KBHAC, $0.65, down $0.10)

Entry Price:  $0.75 (11/25/09)
Exit Target: CLOSED at 50 cents (11/27/09)

Return: -33%

Stop (Limit):  50 cents

Action:  The calls kissed our 50 cents stop as the stock traded to a low of $13.41.  We mentioned this area is strong support and we will wait and see if this area holds up.  If not, $11 is in the cards…

Hewlett-Packard (HPQ, $49.07, down $0.98)

December 55 calls (HPQLK, $0.04, down $0.02)

Entry Price:  $0.24 (11/23/09)
Exit Target: $0.50

Return: -83%

Stop Limit:  NO STOP

Action:  We may not be able to overcome the close below $50.  HP is not a fast moving stock to begin with and we are more than 10% away from a breakeven point.  We have written this one off and it’s not even worth selling because of the commission costs you would pay.


Microsoft (MSFT, $29.22, down $0.57) 

December 30 calls (MSQLF, $0.37, down $0.13) 

Entry Price:  $0.65 (11/16/09)
Exit Target: Closed at 30 cents (11/27/09)
Return: -23%

Stop (Limit):  30 cents 

Action:  Microsoft traded to a low of $28.75 and the calls hit a low of 20 cents.  We would still watch $30 and a solid break above this level is worth watching.

Netflix (NFLX, $57.85, down $1.37)

December 65 calls (QNQLM, $0.35, down $0.10)

Entry Price:  $0.80 (11/13/09)
Exit Target: Closed at 20 cents on (11/27/09)
Return: -75%
Stop Limit: 20 cents

2010 June 80 calls (QNQFP, $1.40, down $0.25)

Entry Price:  $1.65 (11/13/09)
Exit Target: Closed at $1.25 on (11/27/09)

Return: -24%

Stop Limit: $1.25

Action:  Netflix got hammered at the open and traded to a low of $54.71 shortly after.  Needless to say we were stopped out on both trades.

We did pretty well today by cutting our losses and taking the emotion out of our trades.  Yes, some of the positions bounced back but we feel a lot better going into the weekend with a clean slate for next week.

It is rare a risk event this big hits the market but they do happen.  As an option trader, it doesn’t matter how much you like a certain trade…just take your lumps and regroup.  We target 100% returns on our trades which gives us the luxury of having two 50% losing trades for every winner.  Our success rate is much better than that of course as we have been able to hit on 8 out 10 trades on average for 2009. 

However, there are times when the market will whipsaw us out of some great trades and you just have to go back to the drawing board and figure out what it all means.  That is what we will be doing this weekend and we will be back with an update on Sunday night.