9:05am (EST)

American Tower (AMT, $50.22, up $0.20) 

April (2011) 60 calls (AMT110416C00060000, $0.60, up $0.05) 

Entry Price:  $0.65 (10/20/10)

Exit Target: $1.30+

Return: -8%

Stop Target: None

Action:  The options have 172 days before expiration.  The company will announce earnings on November 1 and we think shares are headed much higher over the next 6 months.  Continue to hold.     


Biodel (BIOD, $3.73, flat) (Strangle Trade

November 7.50 calls (BIOD101120C00007500, $0.70, up $0.10)

Entry Price:  $0.60 (10/18/10)

Exit Target: $1.20+

Return: 17%

Stop Target: None


November 2.50 puts (BIOD101120P00002500, $0.65, up $0.05)

Entry Price:  $0.50 (10/18/10)

Exit Target: $1.00

Return: 30%

Stop Target: None


March (2011) 7.50 calls (BIOD110319C00007500, $1.10, up $0.05) 

Entry Price:  $1.10 (10/18/10)

Exit Target: $2.20+

Return: 0%

Stop Target: None  

Action:  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.

 

Baidu (BIDU, $107.28, up $4.80)

November 120 calls (BIDU101120C00120000, $1.35, down $0.75)

Entry Price:  $1.60 (10/15/10)

Exit Target: $3.20 (closed half at $3.20 on 10/18/10, half at $1.50 on 10/22)

Return: 47%

Stop Target:  $1.60  

Action:  This trade was closed on Friday as shares traded to a high of $109 but the call options got no love.  We talked about the “rich” premiums that were already built into the prices but we were able to take advantage of the situation on last Monday by selling half of the position. 

We thought we would see a bigger run into earnings but we decided to take our profits before the weekend.  We are currently looking at some December calls and if we see another opportunity to Baidu, we will let you know.


Juniper Networks (JNPR, $31.94, up $0.25)

November 33 calls (JNPR101120C00033000, $0.58, up $0.03)

Entry Price:  $1.19 (10/13/10)

Exit Target: $2.00+

Return: -51%

Stop Target: None

Action:  Continue to hold.


Brocade Communications Systems (BRCD, $5.90, up $0.08)

January (2011) 6 calls (BRCD110122C00006000, $0.45, up $0.05)

Entry Price:  $0.40 (10/13/10)

Exit Target: $1.00+

Return: 13%

Stop Target: None


April (2011) 6 calls (BRCD110416C00006000, $0.62, up $0.07)

Entry Price:  $0.60 (10/13/10)

Exit Target: $1.20+

Return: 3%

Stop Target: None

Action:  Continue to hold.


Chesapeake Energy (CHK, $21.20, down $0.75)

January (2011) 25 calls (CHK110122C00025000, $0.30, down $0.10)

Entry Price:  $1.15 (10/13/10)

Exit Target: $2.30

Return: -74%

Stop Target: None

Action:  Chesapeake faked us out after breaking above its 100-day moving average last week as it has traded lower since we got into the position and is now below this level.  Shares are still above their 50-day MA so we aren’t too concerned as these options have 88 days before expiration.    


McDonald’s (MCD, $78.55, up $0.11)

December 80 calls (MCD101218C00080000, $0.95, down $0.05)

Entry Price: $0.53 (closed at $1.25 on 10/21/10) 
Exit Target: $1.10+
Return: 136%
Stop Target: $1.25 (Hard Stop)

Action:  We closed this trade last Thursday and here were our closing thoughts on Friday:

“We are getting emails asking if it is a good idea to keep them open since they have 56 days before expiration.  We can’t really say because $80 could be resistance for the shares but once a trade hits out exit target we like to close half or let it ride while upping our stop target.  So, it really depends on what you feel comfortable with and if you feel $80 will be busted.” 


Dendreon (DNDN, $36.89, up $0.01) (COVERED CALL)

Entry Price:  $41.96 (9/13/10) sold October 45call @ $1.30
Exit Target: $45
Return: -7%
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, $10.33. flat)

November 12 calls (TIVO101120C00012000, $0.25, flat)

Entry Price:  $0.50 (8/17/10)
Exit Target: $1.00+
Return: -50%
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.


Plum Creek Timber (PCL, $37.09, down $0.16)

November 38 calls (PCL101120C00038000, $0.40, down $0.12)

December 38 calls (PCL101218C00038000, $0.65, down $0.15)

Action:  We like both of these call options and lumber is on the rise.  We may go with the December options to allow more time for the trade to develop.  We think shares are headed to $40+ over the near-term which would mean bigger gains for the November calls. 

The stock recently broke above its 200-day moving average and has been building solid support above it ever since.  Plum Creek is the largest private timberland owner in the U.S. and operates as a publicly traded REIT so shares are slow moving.  This is a pure play on rising timber prices.  


PowerShares India ETF (PIN, $25.73, down $0.07)

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:  Watch for now. 

Savient Pharmaceuticals (SVNT, $21.70, up $0.09)

December 25 calls (SVNT101218C00025000, $1.10, down $0.10)

Action:  Continue to watch.

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