June 2012 | Members

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  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 a “Profit 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.

12:25pm (EST)

AOL (AOL, $27.26, up $0.11)

August 24 puts (AOL120818P00024000, $0.60, up $0.05)

Entry Price:  $0.53 (6/26/12)
Exit Target:  $1.00
Return:  13%
Stop Target:  None

Action:  The market makers were a little stingy with our limit order as we were trying to get these puts for less than 50 cents.  They split the difference and let us in at 53-55 cents so everyone should have got great fill prices.  We are looking for a test to $26 over the near-term and if this level cracks, look out below.   

Consumer Discret Select Spider (XLY, $43.00, up $0.36)

August 41 puts (XLY120818P00041000, $0.70, down $0.10)

Entry Price:  $0.80 (6/25/12)
Exit Target:  $1.60
Return:  -13%
Stop Target:  None

Action:  We are expecting a test to $40 over the next week or two, mid-$30’s by August.   

 

Coinstar (CSTR, $64.23, down $1.16)   

July 60 puts (CSTR120721P00060000, $1.05, up $0.15)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  17%
Stop Target:  40 cents

Action:  We would like to see a close below $63.50 today.   

 

iShares Dow Jones US Real Estate (IYR, $61.70, up $0.36)

August 57 puts (IYR120818P00057000, $0.70, down $0.10)

Entry Price:  $0.85 (6/25/12)
Exit Target:  $1.70
Return:  -18%
Stop Target:  40 cents

Action:  We would like to see a close below $60 this week.

 

KLA-Tencor (KLAC, $47.32, up $0.26)

August 43 puts (KLAC120818P00043000, $1.00, down $0.10)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  11%
Stop Target:  45 cents

Action:  There is risk up to $50 but we have a $40 price target by mid-August. 

 

Freeport-McMoRan Copper & Gold (FCX, $31.66, up $0.06)

August 31 puts (FCX120818P00031000, $1.70, up $0.20)

Entry Price:  $1.05 (6/20/12)
Exit Target:  $2.10
Return:  62%
Stop Target:  $1.50 (Hard Stop)

Action:  The puts have traded down to $1.54 today so our stop is still holding up. We are looking for a drop below $30 to $28 or worse by mid-August but we are close to closing at least half of the trade considering the nice gains we have made in under a week.  

 

PowerShares QQQ (QQQ, $62.35, up $0.25)

August 60 puts (QQQ120818P00060000, $1.15, down $0.10)

Entry Price:  $0.75 (6/20/12)
Exit Target:  $1.50
Return:  47%
Stop Target:  None

Action:  Our mid-August target is for a test to $58, possibly double-nickels ($55).  We will close half of the trade once the puts hit $1.50.

 

Illinois Tool Works (ITW, $51.70, down $0.56)

July 50 puts (ITW120721P00050000, $0.90, up $0.20)

Entry Price:  $1.05 (6/4/12)
Exit Target:  $2.10
Return:  -14%
Stop Target:  None

Action:  We would like to see a close below $51.50 today.

 

Apollo Group (APOL, $34.96, up $2.49)

August 27 puts (APOL120818P00027000, $0.35, down $0.55)

Entry Price:  $0.90 (5/10/12)
Exit Target:  $1.80
Return:  -61%
Stop Target:  45 cents

Action:  We still have until mid-August for Apollo to crumble and there will be some headline news in July that will impact the “Education” stocks.      

 

Arena Pharmaceuticals (ARNA, $9.10, down $0.10)  

July 3 calls (ARNA120723C00003000, $6.30, flat)

Entry Price:  $1.00 (4/30/12)
Exit Target:  $2+ (closed half on 6/5/12 at $3.40, closed a quarter at $6.75)
Return:  396%
Stop Target:  $2 (Hard Stop on remaining quarter position)

Action:  Arena will meet with the FDA tomorrow so shares will likely be halted all session long.  The FDA doesn’t always follow its panel’s recommendations although the drug won an 18-4 pre-approval decision.  If there is a delay on bringing the company’s obesity drug to market due to additional tests the FDA might require, shares could fall to $7, or $5.50 in a worse case deal.  If all goes well, we expect shares to make a run to $13-$15. 

On our 20 contract trade, we sold half at $3.40 and a quarter at $6.75 which netted $3,400 (10 contracts x $3.40) and $3,375 (5 contracts x $6.75).  The remaining 5 contracts are valued at $6.30, or $3,150.  The total cost of the trade was $2,000 and the value is now at $9,925.  If shares fall to $5 these options would still be worth $2 so our gain would be 339%.  If the stock moves past $13, the calls would be worth $10, or $5,000, and we would show a profit or 489%.  We can live with either outcome.   

 

Other 2012 Portfolio OPEN positions (8):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and 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 if the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

E*Trade Financial July 12 calls (from March 2012)

Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)

Best Buy July 16 puts (from May 2012)

First Solar July 10 puts (from May 2012)

FedEx July 77.50 puts (from June 2012)

Potash July 35 puts (from June 2012)

iShares Russell 2000 July 70 puts (from June 2012)

Facebook July 24 puts (from June 2012)

 

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 but these are the trades we are watching as new candidates.

We will update this section in the morning.

*************************************

10:15am (EST)

NEW TRADE!!!

AOL (AOL, $27.40, up $0.25)

Buy to OPEN August 24 puts (AOL120818P00024000, $0.45, down $0.10)

Action:  Use limit orders up to 50-55 cents but do not pay more than 60 cents to open positions. 

AOL shares surged from $18 to $26 back in April after selling Microsoft some patents for $1 billion.  Shares have held up well but seem stuck at the top of a trading range.  We are expecting the stock to go back and fill in some gaps and we like these puts for a possible move below $25. 

 

CURRENT TRADES

Veeco Instruments (VECO, $31.36, up $1.16)

July 30 puts (VECO120721P00030000, $1.00, down $0.50)

Entry Price:  $1.00 (6/6/12)
Exit Target:  $2.00
Return:  25%
Stop Target:  $1.25 (Hard Stop)

Action:  Veeco is rebounding today and our Hard Stop of $1.25 has been triggered this morning.  We wanted to roll the position into August but the premiums for the puts are a little juiced.  We will keep an eye on Veeco but unfortunately we were whipsawed out of this trade but we still made a nice profit after being down over 50%.

*************************

9:00am (EST) continued…

The Dow dropped 138 points, or 1.1%, to finish at 12,502.  The blue-chips traded to a low of 12,458 as all 30 components ended lower with the exception of Wal-Mart (WMT, $68.18, up $0.88) which gained 1.3%.  The next level of support comes in 12,350 while short-term resistance remains at 12,600 and then 12,800.

The S&P 500 fell 21 points, or 1.6%, to close at 1,313.  The index kissed a low of 1,309 intraday and is in danger of falling below 1,300.  A move below this level will get 1,275-1,250 back into play while the bulls are looking to clear 1,325 this week.

The Nasdaq declined 56 points, or 1.9%, to settle at 2,836.  Tech closed below the 2,850 level after bottoming at 2,829 which opens the door for a retest of 2,800 which will be crucial in holding.  The bulls are trying to get the action back above 2,900 but they face a big challenge.

The Russell 2000 tanked 13 points, or 1.7%, and ended at 761 while the S&P 500 Volatility Index ($VIX, 20.38, up 2.27) jumped over 12% to close back above 20.

Moody’s (MCO, $34.09, down $0.94) cut their ratings on 28 Spanish Banks after the close on Monday but the news had little effect on overnight futures.  We have mentioned Moody’s absence during the credit crisis and housing bust but they continue to hog headlines on the European downgrades.  In May, Moody’s cut their ratings on 16 Spanish banks.

Cyprus became the fifth euro nation to ask for a bailout yesterday so expect Moody’s to be all over this one as well.  That was a joke.  But seriously, the country did ask for $6 billion euro and blamed it on Greece.  The talking heads will try to downplay the impact but a bailout is a bailout even if the country is tiny. 

As far as this morning’s action, futures are showing a slightly higher open but have been slipping.  Dow futures are up 16 points to 12,447 while the S&P 500 futures are higher by a point to 1,307.  The Nasdaq 100 futures are advancing 5 points to 2,531. 

 

Do not risk more than 5% of your trading account on any one trade but do try to take ALL of the trades.  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 a “Profit 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.

 

Consumer Discret Select Spider (XLY, $42.63, down $0.68)

August 41 puts (XLY120818P00041000, $0.80, up $0.10)

Entry Price:  $0.80 (6/25/12)
Exit Target:  $1.60
Return:  0%
Stop Target:  None

Action:  We are expecting a test to $40 over the next week or two, mid-$30’s by August.   

 

Coinstar (CSTR, $65.39, down $0.05)   

July 60 puts (CSTR120721P00060000, $0.90, up $0.25)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  0%
Stop Target:  40 cents

Action:  Shares rebounded to finish near even but in after-hours last night Coinstar was down 5% to $62.  After the bell, the company announced earnings would take a hit.   

 

iShares Dow Jones US Real Estate (IYR, $61.34, down $0.34)

August 57 puts (IYR120818P00057000, $0.80, up $0.10)

Entry Price:  $0.85 (6/25/12)
Exit Target:  $1.70
Return:  -6%
Stop Target:  40 cents

Action:  We would like to see a close below $60 this week.

 

KLA-Tencor (KLAC, $47.06, down $1.43)

August 43 puts (KLAC120818P00043000, $1.10, up $0.50)

Entry Price:  $0.90 (6/25/12)
Exit Target:  $1.80
Return:  22%
Stop Target:  45 cents

Action:  There is risk up to $50 but we have a $40 price target by mid-August. 

 

Freeport-McMoRan Copper & Gold (FCX, $31.60, down $0.70)

August 31 puts (FCX120818P00031000, $1.80, up $0.30)

Entry Price:  $1.05 (6/20/12)
Exit Target:  $2.10
Return:  71%
Stop Target:  $1.50 (Hard Stop)

Action:  We have raised the Hard Stop to $1.50 to lock-in further gains should shares rebound.  We are looking for a drop below $30 to $28 or worse by mid-August but we are close to closing at least half of the trade considering the nice gains we have made in under a week.  

 

PowerShares QQQ (QQQ, $62.13, down $1.22)

August 60 puts (QQQ120818P00060000, $1.25, up $0.35)

Entry Price:  $0.75 (6/20/12)
Exit Target:  $1.50
Return:  67%
Stop Target:  None

Action:  Our mid-August target is for a test to $58, possibly double-nickels ($55).  We will close half of the trade once the puts hit $1.50.

 

Veeco Instruments (VECO, $30.20, down $3.87)

July 30 puts (VECO120721P00030000, $1.50, up $1.05)

Entry Price:  $1.00 (6/6/12)
Exit Target:  $2.00
Return:  50%
Stop Target:  $1.25 (Hard Stop)

Action:  This is why we constantly remind readers a trade isn’t over until we close it or it expires.  The options soared 233% yesterday as shares fell 11% and traded to a low of $29.77.  Our next target is for a test to $27.50 and we have placed a Hard Stop at $1.25 to protect profits in case shares rebound.

 

Illinois Tool Works (ITW, $42.26, down $1.41)

July 50 puts (ITW120721P00050000, $0.75, up $0.30)

Entry Price:  $1.05 (6/4/12)
Exit Target:  $2.10
Return:  -29%
Stop Target:  None

Action:  This is not a new trade but one that was on hold.  Shares fell nearly 3% yesterday and our puts got a nice pop.   

 

Apollo Group (APOL, $32.47, down $1.08)

August 27 puts (APOL120818P00027000, $0.90, up $0.30)

Entry Price:  $0.90 (5/10/12)
Exit Target:  $1.80
Return:  0%
Stop Target:  45 cents

Action:  There was a battle at the $32.50 level right into the close as traders took positions ahead of the earnings announcement.  Unfortunately, we didn’t get the results we were looking for, yet.  Shares made a run past $35 once the numbers came out and we can thank management for providing a good spin on a lousy quarter.  Shares raced past $35, came back to nearly even, before finishing up $2 in after-hours last night.  FYI, the results were UNAUDITED.  

 

Arena Pharmaceuticals (ARNA, $9.20, down $0.69)  

July 3 calls (ARNA120723C00003000, $6.30, down $0.75)

Entry Price:  $1.00 (4/30/12)
Exit Target:  $2+ (closed half on 6/5/12 at $3.40, closed a quarter at $6.75)
Return:  396%
Stop Target:  $2 (Hard Stop on remaining quarter position)

Action:  Arena will meet with the FDA tomorrow so shares will likely be halted all session long.  The FDA doesn’t always follow its panel’s recommendations although the drug won an 18-4 pre-approval decision.  If there is a delay on bringing the company’s obesity drug to market due to additional tests the FDA might require, shares could fall to $7, or $5.50 in a worse case deal.  If all goes well, we expect shares to make a run to $13-$15. 

On our 20 contract trade, we sold half at $3.40 and a quarter at $6.75 which netted $3,400 (10 contracts x $3.40) and $3,375 (5 contracts x $6.75).  The remaining 5 contracts are valued at $6.30, or $3,150.  The total cost of the trade was $2,000 and the value is now at $9,925.  If shares fall to $5 these options would still be worth $2 so our gain would be 339%.  If the stock moves past $13, the calls would be worth $10, or $5,000, and we would show a profit or 489%.  We can live with either outcome.   

 

Other 2012 Portfolio OPEN positions (8):  These are trades that are still open in the portfolio but are down over 50%.  They have longer expiration dates and 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 if the options expire.  Click on the 2012 Portfolio link in the Members Area to view ALL open/ closed trades.

 

E*Trade Financial July 12 calls (from March 2012)

Bank of America January 12.50 calls 2013, July 12 calls (from March 2012)

Best Buy July 16 puts (from May 2012)

First Solar July 10 puts (from May 2012)

FedEx July 77.50 puts (from June 2012)

Potash July 35 puts (from June 2012)

iShares Russell 2000 July 70 puts (from June 2012)

Facebook July 24 puts (from June 2012)

 

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 but these are the trades we are watching as new candidates.

Netflix (NFLX, $67.03, down $0.83)

August 50 puts (NFLX120818P00050000, $

July 60 puts (NFLX120721P00060000, $1.05, up $0.10)

Thoughts:  If shares fall below $65 a quick test to $50 could be in the cards.  We like the puts we have listed but the premiums are a little juiced which could keep us on the sidelines.

 

iShares Dow Jones Transportation Average (IYT, $89.36, down $1.75)

August 83 puts (IYT120818P00083000, $1.50, up $0.50)

July 86 puts (IYT120721P00086000, $1.20, up $0.45)

Thoughts:  Resistance has held up well at $95 and a drop below $90 would be bearish. 

 

Schlumberger (SLB, $61.06, down $1.50)  

August 55 puts (SLB120818P00055000, $1.50, up $0.30)

Thoughts:  We missed some great entry points last week and we are expecting a move below $60 this week.