1:35pm (EST)
It was good to see “The Duke” ring the NYSE opening bell this morning as no one in the NFL has done a better of job of pulling off big-time acquisitions than number 7.
Ditching a dicey, yet exciting, stock pick (think Tebow) for a beaten down blue-chip (think Manning) was perhaps the most guttiest call ever made. But, the man knows quarterbacks, put his boots to the ground, did his homework, and has made a nice return on his investment.
The big payday will be winning the Super Bowl, of course, and going into battle there is no other quarterback we would take right now, other than Peyton. He is the Warren Buffet of QB’s and we would bet a Fifty if we were in Vegas he has his team well prepared for the Big Game. Tip, give the points.
As far as the market, the indexes have once again bounced off the bottom of the trading ranges and are pushing resistance as we head into the second half of trading. Earnings have been the big story as Facebook (FB, $61.41, up $7.88), Qualcomm (QCOM, $73.11, up $1.99) and Under Armour (UA, $104.18, up $18.97) passed Wall Street expectations.
We were expecting Under Armour to have a big quarter as we were watching February call options on the stock. The current market volatility has made earnings trades much more trickier but we had a good feeling shares would make a huge move based on the results.
The stock had been in a tight $80-$85 trading range going into the announcement and we were following the February 87.50 calls (UA140222C00087500, $16.45, up $13.90) up until last week. As you can see, these options are up 545% today after closing at $2.55 into Wednesday’s close.
We usually don’t like to pay over $2 for an option as most of our trades are on options that have premiums in the $0.50-$1.25 range. These aforementioned calls were a little pricey but we should have pulled the trigger on a small position as we could have purchased 5 contracts to keep the position in the $1,000-$2,000 range and where we are comfortable trading.
The risk with higher priced premium options is that if UA would have disappointed and shares dipped below $80, these options would likely expire worthless.
Next week will offer some great possible earnings trades but we are trying to pick stocks that have other headline events pending (drug trials) or ones that appear to be ready to breakout or breakdown based on the chart work.
We list a lot of these types of trades for our Weekly Wrap EVERY week and a few of them make it to our Daily Watch List. We have said for the past 2 weeks with volatility picking up, 10%-20% moves are coming in stocks and strangle or straddle option trades could do well.
These types of option strategies are a good way to make high double-digit and even triple-digit gains with less risk as you are hedged. However, it is important not to overpay and to figure out the breakeven points.
Our trading course, How to Trade Options on Momentum Stocks, goes more in-depth on how use straddle and strangle option trades to reduce risk and enhance returns. For those of you that upgraded or purchased a 1-year deal in December, you should be getting tracking numbers by Friday afternoon to let you know when the course will arrive on your doorstep. The coupon code to get a 1-year deal for $789 on our DAILY publication, and the option course at no charge ($895 value), is still open and expires Friday at midnight. For the coupon code, please email us as we only have a limited amount of extra copies available.
The Dow is up 140 points to 15,878 and the S&P 500 is higher by 23 points to 1,797. The Nasdaq is surging 78 points to 4,129 and the Russell 2000 has hit blackjack (up 21) and is at 1,143. The S&P Volatility Index ($VIX, 16.05, down 1.30) remains stuck between 17.50-15.
Amazon.com (ANZN, $400.92, up $16.72) and Google (GOOG, $1,140.55, up $33.63) report their numbers after the close.
We have a lot to talk about inside the Members Area so let’s get on it.
