The IPO (Initial Public Offering) sector has been hot this year as there have been a number of new offerings over the past few months that have done well. Some of the companies are intriguing and worth second looks while others look like overpriced duds.
The beauty of the market is that we have the opportunity to go long or short these stocks and in most cases we can use options. The options on IPO’s usually take a few weeks to make their debut if they are made available and could offer tremendous profit potential down the road.
One name walking the red carpet today is Rocket Fuel (FUEL, $55.89, up $26.89), a company that sells online advertising. Shares have nearly doubled after opening north of $59 and reaching a peak of $62.40 before backing off.
Rocket Fuel offered 4 million shares priced at $29, with an additional 600,000 available based on over allotments (demand). The expected price range for the stock was $27-$29 a share and investors that got in ahead of the offering are having a banner day.
There has been some zombie talk this morning, and believe it or not, one of the Fed Heads said there was the possibility of a taper cut in October. We thought the horse was dead but the zombies keep kicking it.
There has also been some political rhetoric today with more to come this afternoon as the other zombies clash over the debt ceiling and a possible government shutdown. We will save our breath and talk more about the drama this weekend in our Weekly Wrap but the chatter could affect the close.
Speaking of our Weekly, we have a tiger by the tail with one of our LEAP option trades. We recently opened up the playbook to include more LEAPs, strangle and straddle option trades for the publication and our latest recommendation is rapidly approaching a 200% return.
We mentioned when shares were at $26 in August there could be a run past $30 and today’s surge to $31.67 has been beautiful. Even better, we have said shares could trade to $35 but based on momentum and the company’s prospects, shares could reach $50 in 2014. We could add additional call options if shares hold $30 into next week.
As far as the market, usually when a zombie talks, things turn red and that is what we are seeing. The Dow is down 67 points to 15,569 while the S&P 500 is lower by a 6-pack to 1,716. The Nasdaq is off 3 points to 3,786.
We have some last minute updates for our current trades, including a Profit Alert on some call options that are up 50%. We will be back Sunday night with the Weekly Wrap and Monday morning with the Daily. We can’t wait to do our chart work because things are setting up for us to make a lot of money. Until the, have a great weekend everyone!