November 2009 | Members


3:25pm (EST)

Folks, we profiled an American International Group (AIG, $28.19, down $5.11) this afternoon that is already up nearly 50%.

The December 25 puts (AIGXY, $1.48, up $1.27) were trading for 97 cents when we profiled them at 1:00pm and shortly after traded to a high of $1.10. The options then came back down to the $1.00-$1.05 about 30-45 minutes later so many of you should have gotten filled.

We said these options may be good for a day trade for today or that you could hold them open for further weakness. 

We would close half of the trade to be on the safe side and you can watch these puts into the close.  If they go higher, great, but try to get out before 4pm.



1:05pm (EST)


DryShips (DRYS, $6.09, down $0.10)

Entry Price:  $6.21 (11/30/09)
Exit Target: $7.21
Return: -2%
Stop Limit: $5.21

Action:  Dryships did open slightly higher at $6.21 so we are initiating coverage at this level.  We had also said to try to get in at $6 so you can hold out for that target or get in now.

We have set our stop at $5.21 which is lower than the $5.50-$5.75 area of support.  

TiVo (TIVO, $9.70, down $0.28)

February 12.50 calls (TUKBV, $0.72, down $0.03)

Entry Price:  $0.75 (11/30/09)
Exit Target: $1.50

Return: -4%
Stop Limit: None

Action:  Most of you should have gotten in for 75 cents as the calls traded to a low of 68 cents this morning. 

As far as AIG:


American International Group (AIG, $29.30, down $4.00)

Buy to OPEN December 25 puts (AIGXY, $0.97, up $0.76)

Folks, these options are up 360% today!  The options OPENED at 25 cents this morning and could be added as a speculative play for further weakness.  We like positions here and would use limit prices of up to $1.05.  Please realize that AIG could bounce back on a moments notice but these options have traded over 20,000 contracts so far.  If you can get in for $1.00-$1.05 then the options may be worthy of a day trade for today or you could hold them open for further weakness.




9:05am (EST)

Folks, we are going to add another feature with your subscription.  We have decided to add stock trades to our portfolio after listening to your requests.  And it makes sense. 

There are stocks under $10 that have tight trading ranges and sometimes it is hard to play the options on them.  We have had some success trading these type of options but we know they can be tricky.

We have also fielded dozens of requests about position sizes and our rule of thumb is 10 option contracts for each trade.  Sometimes we might recommend 20 contracts on options that are trading for under 50 cents as we like to keep our trades between $1,000-$2,000 per position.

With the stock trades, we will try to do the same thing but it may be a little more expensive.  For our stock trades, all we are looking for is a $1-$2 move so that the trade nets $500-$1,000.  That might mean doing 250 or 500 shares, whichever is your preference.


Buy DryShips (DRYS, $6.19, down $0.16)

DryShips has traded in a range of $6 to $8 for months and traded to a low of $6 on Friday.  There is a chance the stock slips to $5.50-$5.75 where there is major support but since this is a stock trade, we have time to wait for a rebound if shares do slip from here.

If the stock opens higher this morning, use limit orders up to $6.25 and if we open lower, let’s try to get in for $6.

Our exit target will be $7 or $8 depending on momentum.  We will create a new portfolio to reflect our stock recommendations.


TiVo (TIVO, $9.98, down $0.24)

Buy to OPEN TIVO February 12.50 calls (TUKBV, $0.75, down $0.05)

Set limit prices at 75 cents.  Do not pay over 80-85 cents for these options if the stock opens higher.

TiVo got hammered last Wednesday after reporting a loss that matched Wall Street’s estimates, but revenue come in slightly below expectations.  The company also set a revenue forecast for the current quarter below Wall Street’s targets.

TiVo also said subscription additions for the third quarter totaled 34,000, compared with 44,000 a year ago. 

As some of you may know, TiVo has been locked in a long-running patent dispute with Dish Network (DISH, $20.65, down $0.47) and EchoStar (SATS, $19.56, down $0.48) that is closely being watched by Wall Street.

TiVo also has patent lawsuits against AT&T (T, $26.99, down $0.09) and Verizon Communications (VZ, $31.63, down $0.40) which began court hearings just recently.  The company also expects favorable results from these cases as well.

We also like the fact that TiVo’s has partnered with Google (GOOG, $579.76, down $5.98) and Virgin Media (VMEDW, $0.06) to help streamline revenues.  These events lead us to believe that TiVo could easily trade back to $12+ with any favorable court ruling over the near-term.  This position will NOT have a stop at first due to the current market conditions.