8:10am (EST)

Imax (IMAX, $12.30, down $1.02) 

March 12.50 calls (IMQCV, $1.00, down $0.50) (IMQ100320C000125)

Entry Price:  $1.25 (2/4/10)
Exit Target: $1.75   
Return:  -20%

Stop Target:  60 cents

Action:  We didn’t expect such a huge drop for Imax and it will probably be our last call option that we add since the Dow has violated 10,000.  Great stocks with solid fundamentals are getting crushed in the current environment but we don’t trade scared.

It is hard to trade in environments like the one we’re in but we went through this last March when the market was in transition and we went out to July and August on some of our option plays. 

We are in some good stocks and we knew going into the New Year that if our targets were reached for the Dow, S&P 500 and Nasdaq that the market could get choppy; trade higher; or sell-off.

The problem is that we were in a sideways market up until two weeks ago and the bulls made one last effort early this week to keep the indexes above their moving averages.  That changed again on Thursday as the indexes fell below their 10 and 20-day MA’s. 

We don’t want to panic with this trade but Imax could fall back to $10 if this correction has any legs.  Our stop is 60 cents which could be hit before shares fall to $10 so we will have to see how things play out.   

Berkshire Hathaway Class B (BRK/B, $72.61, down $1.75)  

June 100 calls (BPYFT, $0.30, down $0.10)

Entry Price:  $0.50 (2/1/10)
Exit Target: $1.00+   
Return:  -40%

Stop Target: None   

September 100 calls (BPYIT, $0.45, down $0.10)

Entry Price:  $0.95 (2/1/10)
Exit Target: $2.00   
Return: -53%
Stop Target: None   

Action:  It’s hard “feel” good about the way this trade has started off for us but we are keeping our eye on the prize.  We saw some intriguing things happening in the option pits that are important to note. 

We noticed that there were 105 strike prices added as well as LEAP options yesterday.  For the rookies, LEAPs are “Long-term Equity AnticiPation securities” or options that expire in 2011 and 2012. 

The January 2011, the BRK/B January 85 calls (XPBAQ, $2.90, up $2.90) are the highest strike price available.  The bid is $2.35 while the ask was $4.40 as of yesterday’s close.  The quote reads that way because like we said, they were just added yesterday. 

The January 2012 options have 714 days to expiration.  The January 85 calls (WDWAQ, $6.10, up $6.10) are also the highest strike you can purchase and the bid is $5.00 while the ask is $6.10.  

Folks, this means you would have TWO years for Berkshire to make a move to $100.  The calls for both 85 strikes would be worth at least $15 if shares trade that high.

So, although you might be down on our current two trades, you have banked profits on the first trade and these LEAPs can be saved to your Watch Lists.

The market might be in a short-term correction mode but there are too many things happening with corporate America right now for us to believe this market won’t be higher in six months or two years from now.

We also wanted to point out the impact on DeVry’s (DV, $61.88, down $0.74) share price after it was added to the S&P 500.  Shares were at $45 when the stock was added to the index in June 2009 and here we are 7 months later.  

Berkshire shares may or may not rally 30% which is what DeVry has done over that time span and is what we need Berkshire to do when it gets added to the S&P.  If we get that close these current trades should be a double from our entry price despite the way things have started off.  We have PLENTY of time.       

EMC (EMC, $16.63, down $0.43)

April 19 calls (EMCDS, $0.16, down $0.04)

Entry Price:  $0.55 (1/19/10)
Exit Target:  $1.00+
Return: -70%
Stop Target:  None  

Action:  Continue to hold. 

Shuffle Master (SHFL, $8.95, down $0.15)

May 10 calls (SFQEB, $0.55, down $0.10)

Entry Price:  $0.85 (1/19/10)
Exit Target:  $1.70+
Return: -35%
Stop Target:  40 cents

Action:  Continue to hold.     


These trade are NOT recommendations until we send out an alert or the limit prices are hit.  These are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because the portfolio is full.     

Apollo Group (APOL, $60.41, down $0.47)

February 55 puts (OAQ100220P00055000, $0.45, up $0.10)

March 55 puts (OAQ100320P00055000, $1.35, up $0.20)

Action:  We would like to see shares of Apollo run back up to $64 before we do this trade.  However, the stock could make a quick drop to $58 if the $60 level is taken out today. 


Toyota (TM, $71.78, down $1.71)

February 75 puts (TMNO, $4.35, up $0.55) (TM100220P0007500)

March 70 puts (TMOW, $3.40, up $0.60) (TM100320P0007000)

Action:  The February puts were at $2.70 while the March puts were at $2.30 when we sent out our 1pm update on Wednesday.  They have done well since as the February puts are up 60% while the March puts have returned nearly 50%.  There will likely be continued weakness in shares today if the market continues lower and we would at least take half off the table to protect profits.

Amazon.com (AMZN, $115.94, down $3.16) 

February 110 put (QZNNB, $1.77, up $0.67) (QZN100220P001100)

March 100 puts (QZNOT, $1.82, up $0.57) (QZN100320P001000)

Action:  These put options are up 40% and 50%, respectively, as shares of Amazon looks poised to test the $100 level.