8:30am (EST)
Seattle Genetics (SGEN, $21.34, up $0.79)
August 22.50 calls (SGEN110820C00022500, $1.25, up $0.30)
Entry Price: $1.10 (6/28/11)
Exit Target: $2.50
Return: 14%
Stop Target: $0.55
September 20 calls (SGEN110917C00020000, $3.20, up $0.50)
Entry Price: $1.50 (5/9/11)
Exit Target: $3.00 (closed half at $2.20 on 6/8/2011)
Return: 80%
Stop Target: $1.60, raise to $2.20 (HARD STOP on other half)
Action: We raised the stop on the September 20 calls following the nice pop we got and we also initiated coverage on the August 22.50’s yesterday. Seattle Genetics announced it received a $5 million milestone payment as part of an agreement with Millennium for its drug brentuximab which was accepted by the EMA (European Medicines Agency). This is what we love about their business model.
Wall Street is slowly catching on to this sleeping giant and Seattle “G” still remains an attractive takeover target. We have a price target of $30 on a buyout and $25 over the short-term.
LinkedIn (LNKD, $85.56, up $9.18)
July 55 puts (LNKD110716P00055000, $0.45, down $0.30)
Entry Price: $1.20 (6/24/11)
Exit Target: $2.40
Return: -63%
Stop Target: None
Action: LinkedIn has surged $15 this week which has obviously set this trade back. We knew we were playing with fire because the stock doesn’t have a long history of trading but for a company with zero profits and a CEO Wall Street doesn’t like, we know it’s an overvalued stock.
The good news is that we still have some premium left but if shares keep heading north we will continue to take hits. We also knew going in this was an all-or-nothing trade but if shares start to crack, the drop will be much harder and faster than this week’s spike.
It is also possible for an option to lose 95% of its value before it comes back and hands you a profit and it recently happened with one of our trades – Alpha Natural Resources – which was down 95% before we closed the trade for a 20% win. We only mention this because this could happen with this position. We will continue to hold the trade open but we don’t want to close it as we like the protection it might provide if the market reverses course.
Symantec (SYMC, $19.50, up $0.46)
October 20 calls (SYMC111022C00020000, $1.10, up $0.20)
Entry Price: $0.93 (6/21/11)
Exit Target: $2.00
Return: 18%
Stop Target: None
Action: There was an EXPLOSION in the August 20 calls as nearly 7,000 contracts traded which bodes well for this position. The talking heads were all over this move but we got you in before the herd. We mentioned we liked this stock in any kind of market because cyber security is a growing threat and a real concern. We also went for the October calls because it allowed more time for our thesis to play out and it looks as though this story is gaining momentum.
Symantec traded to a high of $19.62 yesterday and we were looking for a close above $19.65. A break above this level should clear the way for a run at the 52-week high of $20.50. These options have 114 days before they expire and we are expecting shares to run up to $22+ by mid-October which gets these calls to at least $2.
Wells Fargo (WFC, $27.49, up $0.04)
July 26 puts (WFC110716P00026000, $0.30, flat)
Entry Price: $0.50 (6/20/11)
Exit Target: $1.00+
Return: -40%
Stop Target: None
Action: Shares traded to a high $27.70 and resistance at $28 is still holding. We only need shares to drop to $25 to make a double so we still like the risk/ reward as the options were only 50 cents.
Rambus (RMBS, $14.33, up $0.26)
August 17 calls (RMBS110820C00017000, $0.40, up $0.05)
Entry Price: $0.60 (6/20/11)
Exit Target: $1.20+
Return: -33%
Stop Target: None
Action: If Rambus can win it current litigation case then there is a big gap to fill on positive news. A break above $15 could get us off to the races.
Krispy Kreme Doughnuts (KKD, $9.73, up $0.21)
July 10 calls (KKD110716C00010000, $0.40, up $0.05)
Entry Price: $0.20 (6/14/11)
Exit Target: $0.40+
Return: 100%
Stop Target: None
Action: Krispy Kreme is within spitting distance of $10 and set a new 52-week high of $9.78 yesterday. We would like to see a run past double-digits this week which could lead to a breakout up to $12.
RealD (RLD, $22.97, down $0.19)
July 20 puts (RLD110716P00020000, $0.60, flat)
Entry Price: $0.45 (6/9/11)
Exit Target: $0.90+ (closed half at $1.60 on 6/10/2011)
Return: 147%
Stop Target: 30 cents
Action: The 3D wave has a lot riding on it with the release of Transformers last night. If the numbers suck, RealD could continue its recent slide. Specifically, we are looking for a close below $22.50.
We have already sold half the position at $1.60 and our entry price was 45 cents. The gain on the closed half was 256% so even if these puts expire worthless the trade will make 78%. However, a test back to $18 gets these options at $2.
Other 2011 Portfolio OPEN positions (7): 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. This means we would not open any new positions. We are still keeping track of the trades and we will record the results, accordingly, when we close them or the options expire. Click on the 2011 Portfolio link in the Members Area to view ALL open/ closed trades.
eBay July 40 calls (from February 2011)
RF MicroDevices August 10 calls (from February 2011)
Dendreon August 50 calls (from April 2011)
MGM Resorts International September 17 calls (from May 2011)
Rediff.com India October 15 calls (from June 2011)
Darling International July 20 calls (from May 2011)
Vivus (September 10 calls (from May 2011)
WATCH LIST SECTION
These trades are NOT recommendations. They 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 try not to have more than 12-15 open trades at any one time which is why we created a Watch List. We will not list entry prices because these stocks are on the verge of breaking out or they could sell-off.
iShares Russell 2000 (IWM, $81.81, up $1.25)
August 85 calls (IWM110820C00085000, $1.10, up $0.25)
Thoughts: If there is a breakout, we like the small-caps and think they could outperform Tech. Stay locked and loaded for this one.
Freeport-McMoRan (FCX, $50.44, up $1.75)
August 55 calls (FCX110820C00055000, $1.20, up $0.30)
Thoughts: We said last week that Freeport could trade back above $50 so $52 should come quickly. If this level is cleared, shares could challenge double-nickels ($55) over the near-term.
Garmin (GRMN, $31.92, down $0.30)
August 30 puts (GRMN110820P00030000, $0.95, up $0.05)
Thoughts: We have been saying Garmin is due for a crash and after holding the $34 level forever, shares seem to be cracking. The company will report earnings in early August and this could be the quarter that makes Wall Street push the panic button. We have been saying this company could be a non-factor down the road as GPS becomes more popular on smart-phones and Tom-Tom recently lowered their guidance.
Apollo Group (APOL, $43.05, up $1.17)
July 40 puts (APOL110716P00038000, $0.80, down $0.40)
Thoughts: Apollo Group will announce earnings after the bell on Thursday. If Apollo misses Wall Street’s estimates then shares could finally make a trip below $40. These options are “expensive” based on the premium which is holding us back from making this an official recommendation.
Polycom (PLCM, $64.04, up $1.24)
July 67.50 calls (PLCM110716C00067500, $1.10, up $0.50)
Thoughts: After the 2-for-1 stock split announcement, shares surged and then pulled back like we expected. There should be continued strength as the split takes effect this week.
PowerShares QQQ Trust (QQQ, $56.07, up $0.83)
July 55 calls (QQQ110701C00055000, $1.30, up $0.55)
Thoughts: These options opened at 75 cents yesterday and we told you a break above 2,700 would be a positive. We thought about and in-an-out trade before the Greece news but we went with Seattle instead because we think we can hit bigger profits in a safer way. Still, this one would have been nice to add to the portfolio for a one-day trade. If the Greece news is good then these options should continue to do well.
Potash (POT, $54.95, up $0.79)
July 55 calls (POT110716C00055000, $1.40, up $0.25)
Thoughts: We said Monday morning shares were poised for a run to $55 and here we are. These options opened at 72 cents on Monday and our chart work was spot on. The calls trade to a high of $1.67 and we would have closed half of the trade once shares broke $55 as they traded up to $55 – if we were in.
The WEEKLY July 55 calls (POT110701C00055000, $0.50, up $0.25) gained another 50% and we also would have closed half, if not all of the position because they are weekly options. These puppies opened at 21 cents on Monday. There is a chance Potash runs to $60 so we will keep following these options for the week.
Williams-Sonoma (WSM, $35.82, down $0.68)
August 39 calls (WSM110716C00039000, $0.75, down $0.20)
Thoughts: We may have to start looking at put options if support doesn’t hold.
SanDisk (SNDK, $40.77, up $0.41)
July 39 puts (SNDK110716P00039000, $0.70, down $0.10)
August 35 puts (SNDK110820P00035000, $0.80, down $0.25)
Thoughts: We could look at a strangle position because there is water-cooler talk that Apple might make a bid for SanDisk.
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