October 2010 | Members

 

Please remember, ALL “Exit Targets” and “Stop Targets” are targets.  You should not have any “Hard Stops” entered to close any trades or “Exit Orders” in your brokerage account unless we list one.  We will send out an “Alert” or “Trade Update” if we want you to close a position OR if a new trade comes out.  Otherwise, follow instructions at all times in the 9am and 1pm updates.  Also, we will usually give you a heads-up if we think we are going to send an email outside of these time frames but it is rare that we do.

12:45pm (EST)

American Tower (AMT, $50.63, up $0.41) 

April (2011) 60 calls (AMT110416C00060000, $0.65, up $0.05) 

Entry Price:  $0.65 (10/20/10)

Exit Target: $1.30+

Return: 0%

Stop Target: None

Action:  The company announces earnings a week from today and we think they might announce a special dividend or give more information in about becoming a REIT.  Continue to hold.     


Biodel (BIOD, $3.99, up $0.26) (Strangle Trade)

November 7.50 calls (BIOD101120C00007500, $0.80, up $0.10)

Entry Price:  $0.60 (10/18/10)

Exit Target: $1.20+

Return: 33%

Stop Target: None


November 2.50 puts (BIOD101120P00002500, $0.60, down $0.05)

Entry Price:  $0.50 (10/18/10)

Exit Target: $1.00

Return: 20%

Stop Target: None


March (2011) 7.50 calls (BIOD110319C00007500, $1.20, up $0.05) 

Entry Price:  $1.10 (10/18/10)

Exit Target: $2.20+

Return: 9%

Stop Target: None  

Action:  From this morning:

“You can see the premiums building in both the calls and put options so we may be able to make money on all three trades.  We will have to see how this plays out but this will be exciting.

For our new subscribers, we want to go over one important thing.  It is safer to buy the stock. 

We are hoping to make enough of a return on the straddle option position to offset any losses from either side of the call or put and if Biodel’s fast acting diabetes drug gets approved then we will have a homerun.  If not, we are hoping to break even.

This drug might not get approved because of some botched trials during their phase 3 study but there is enough evidence to show the FDA the drug works.  However, the FDA has been slamming the door on a lot of promising drugs and they may want more data.  So, if you are buying the stock, buy half now and half later in case the company has to do more work in getting approval.  Shares will suffer and languish but over time this is a billion dollar drug and a double-digit stock.”


Juniper Networks (JNPR, $32.18, up $0.24)

November 33 calls (JNPR101120C00033000, $0.63, up $0.05)

Entry Price:  $1.19 (10/13/10)

Exit Target: $2.00+

Return: -47%

Stop Target: None

Action:  The 52-week high is $32.84 and a break above this level could carry shares to $35 which gets these options to $2+.  We have 25 days before they expire.  Continue to hold.


Brocade Communications Systems (BRCD, $5.87, down $0.03)

January (2011) 6 calls (BRCD110122C00006000, $0.43, down $0.02)

Entry Price:  $0.40 (10/13/10)

Exit Target: $1.00+

Return: 8%

Stop Target: None


April (2011) 6 calls (BRCD110416C00006000, $0.57, down$0.05)

Entry Price:  $0.60 (10/13/10)

Exit Target: $1.20+

Return: -5%

Stop Target: None


Action:  The January calls have 88 days before expiration while the April calls have 172 days.  Shares ran to a high of $5.96 and the call buying option activity remains brisk.  Continue to hold.



Chesapeake Energy (CHK, $21.26, up $0.06)

January (2011) 25 calls (CHK110122C00025000, $0.30, flat)

Entry Price:  $1.15 (10/13/10)

Exit Target: $2.30

Return: -74%

Stop Target: None

Action:  Continue to hold.    


Dendreon (DNDN, $37.22, up $0.33) (COVERED CALL)

Entry Price:  $41.96 (9/13/10) sold October 45call @ $1.30
Exit Target: $45
Return: -8%
Stop Target: None

Action:  We are watching the January calls but want shares to move past $40 before we sell another covered call.

Dendreon opened at $41.96 and you could have sold the October 45 call option for $1.30 on 9/13/10.  This lowered the cost basis to $40.66. 


TiVo (TIVO, $10.62, up $0.29)

November 12 calls (TIVO101120C00012000, $0.27, up $0.02)

Entry Price:  $0.50 (8/17/10)
Exit Target: $1.00+
Return: -46%
Stop Target: None

Action:  We are still expecting a huge move in the stock by the first week of November on litigation news.  Shares have made a nice base above $10 but we will need some sort of good news from a settlement to give the stock a 20% pop.  Continue to hold.


Other 2010 Portfolio OPEN positions (1):  These are trades that are still open in the portfolio that have longer expiration dates or are on “hold” but are not worth mentioning until they turn around.  We are still keeping track of the trade and we will record the results, accordingly, when we close them or the options expire.  Click on the 2010 Portfolio link in the Members Area to view ALL open/ closed trades. 

Intel November 18 puts (from October) (Strangle Trade, call options closed for 42% profit)


WATCH LIST SECTION 

These trades are NOT recommendations until we send out an alert.  These are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because we are waiting for better entry prices.  We will not list entry prices because these stocks are on the verge of breaking out or they could sell-off.


Aruba Networks (ARUN, $20.23, down $0.23)

December 21 calls (ARUN101218C, $0.90, down $0.10)

Action:  If shares hold $20, we might get in.


Plum Creek Timber (PCL, $37.07, down $0.02)

November 38 calls (PCL101120C00038000, $0.40, flat)

December 38 calls (PCL101218C00038000, $0.65, flat)

Action:  The company announces earnings today and we are staying on the sidelines.  We may be missing a good trade but we didn’t want the added risk in case they miss.  If shares run higher, there will be a trade on a run to $40+.


PowerShares India ETF (PIN, $25.88, up $0.15)

November 26 calls (PIN101120C00026000, $0.60, flat)

Action:  These options are thinly traded but we think this ETF will soon break its 52-week high of $26.52.


Strayer Education (STRA, $130.30, up $2.31)

November 100 puts (STRA101120P00100000, $1.00, down $0.75)

November 95 puts (STRA101120P00095000, $0.70, down $0.30) 

Action:  We are dropping coverage of this one as we don’t like the wide bid/ ask prices. 

Savient Pharmaceuticals (SVNT, $11.96, down $9.75)

December 25 calls (SVNT101218C00025000, $0.05, down $1.05)

Action:  This is why we watch but we should have listed the puts as well.  Biotech stocks make the sharpest of moves and we missed a great strangle or straddle trade.  The company failed to find a bidder and the December 15 puts (SVNT101218P00015000, $3.85, up $3.45) are up 775%.  We told you a big move was coming…  

 

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