9:20am (EST)

Special Notice:  Folks, I have been doing a lot of thinking with the stock service we just started and I want to be honest with you.  I’m not into it.  I’m just not a stock trader.

I have mentioned the LEVERAGE you get with options and to buy a 1,000 shares of a $20 stock will cost you $20,000.  To CONTROL a 1,000 shares of stock with options can cost as little at $500. 

I can’t tell you enough how powerful this is.  Options are the bomb…

If you who don’t trade options you can take the stock we are buying options on as “stock picks”.  I just think that with a stock service, it will take away from what I do best. 

So, if we recommend a CALL option trade it means we think the stock is going UP.

If we recommend a PUT options trade it means you can SHORT the stock.

Hopefully, I haven’t “upset” anyone but I need to be true to myself.  With that said, the two current STOCK trades are slightly up and I will include my last thoughts before we DROP coverage. 

Thank you for your understanding.  – Rick 


A123 Systems (AONE, $17.76, up $1.04)

January 20 calls (ZKQAD, $0.95, up $0.35)

Entry Price:  $0.65 (12/02/09)
Exit Target: $1.30
Return: 46%
Stop Limit: None

Action:  Wow.  We told you AONE is volatile and that there would be some action.  We sent the trade out at high noon and did an update one hour later when they we at 60 cents.  Hopefully, all of you got filled.

There was no specific news but a 2:30pm the stock got legs and hit a high of $18.73.  The call options traded to a high of $1.20, folks.  That is a quick 85% return in a matter of hours.  And who ever said options weren’t THE BEST trading tool on the planet?

We have a TARGET of $1.30 and we may take half off of the table if shares can rally before the weekend like they did yesterday.

We were going to mention this morning that resistance looked like it would be at $17.50-$17.75 but we shot through this level yesterday.  Again, we still think the stock has a chance at $20 but we are also nervous about trading an IPO because of the lack of price history.   In pre-market trading, the stock is at $18.

Aeropostale (ARO, $32.70, up $0.47)

December 35 calls (AQOLG, $0.55, flat)

Entry Price:  $0.65 (12/02/09)
Exit Target: $1.30
Return: -15%
Stop Limit: None

Action:  “This is an earnings trade so it wouldn’t make sense to list a stop.  We either hit the ball out of the park or we strike out.”

“We aren’t a big fan of retail but some names in the sector are showing strength.”

“No matter how much “homework” you do, there is the element of surprise.” 

“We would also only do “half” positions which means if you normally do 10 contracts, do 5.”

Folks, as I was doing the trade my gut was telling me to change the position to put options.  I could tell it in my writing now that I am reading yesterday’s comments but I went with what my research was telling me. 

In any event, the “half” trade looks like it will get smashed at the open.

We figured the company might beat by a penny and they did as they reported earnings of 92 cents a share.  That was UP 47% from last year’s 3Q number of 63 cents a share.  The problem is that the company issued a disappointing 4Q update and the stock is tanking in pre-market trading.  Shares are down $2+ to $30…

A “half” position would have been $325 if you had bought 5 contracts so we didn’t get hit too hard.  You also have to keep things in perspective when you have a trade like this and how it is “okay” to take chances on earnings trades.

Let’s say you bought 5 of the contracts because we said do “half” positions.  You also took a “full” position in A123 Systems trade as well.  That would mean 10 contracts and your cost would have been $650.  

This is $975 you are risking.  At one point yesterday, the A123 trade nearly doubled and let’s say you cashed out at $1.10.  That would put $1,100 back into your account.  Or, if A123 hits $1.30 today and you close the trade, it would put $1,300 in your account.

Now, if the current Aeropostale trade expires worthless you will still show a 33% profit ($975 out / $1300 in).  On a track record these trades will show a 100% winner and a 100% loser.  Hmm.  Looking at that, it looks like we broke even. 

The key is to really take a look at what YOUR goals are.  We had numerous subscribers who emailed us and said they closed A123 already for 75%+ profits. 

This is why EVERYONE will have different results and better results or worse results.

You have the choice of keeping this trade open because the options will probably have a “bid” of zero OR you can let it expire worthless and hope for a comeback which will probably not happen. 

But at least now you see the method to our madness…and why we try our best to detail each trade as much as we can.

TiVo (TIVO, $10.03, up $0.03)

February 12.50 calls (TUKBV, $0.85, up $0.08)

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

Return: 13%
Stop Limit: None

Action:  Continue to hold. 

American Sierra Gold (AMNP, $0.91, up $0.10)

Entry Price:  $0.89 (12/02/09)
Exit Target: $2.00
Return: 2%
Stop Limit: None

Action:  We have heard through the grapevine that this company is a potential buyout candidate but we are closing coverage of this stock trade. 

DryShips (DRYS, $6.30, down $0.02)

Entry Price:  $6.21 (11/30/09)
Exit Target: $7.21
Return: 1%
Stop Limit: $5.21

Action:  DryShips made a run to $6.52 yesterday which represented a 5% gain from our entry price and is back over $6.50 this morning.  We are dropping coverage of this stock trade as well.