11:45am (EST)
The market was on pins and needles early on rumors of Russia demanding Ukrainian forces in Crimea to surrender by 5:00 AM (EST) this morning or face an attack. Those rumors proved false after Russian President Vladimir Putin spoke for over an hour and said the Ukraine crisis won’t immediately escalate and that war was the last resort.
Futures immediately soared after showing strength throughout the night that lead to a strong open on Wall Street. The gains have held as the indexes have pushed record highs but the situation between Russia and Ukraine is by no means over. It has only moved to the back burner.
We mentioned Monday’s bounce off the lows was bullish and we have penciled-in higher prices into March with the indexes possibly challenging our December fluff targets. Of course, the rest of the week is full of headline risk but the bulls seem determined to push higher highs.
This is good news for us as we are still mostly long call options. We still need to be careful with opening new positions because March options expire in less than 3 weeks and April premiums are a little more expensive as they offer more time premium.
This means we can play possible earnings trades with March options and longer-term trades on fundamentals with April (or longer) options.
We do have a New Trade today as we have room for a quickie after being stopped out on our S&P 500 Spider (SPY, $187.28, up $2.30) trade yesterday. We still made 40% on the call options but the whipsaw action cost us some nice gains on today’s huge rebound.
Our other call option trades are showing strength so let’s go check the tape.
As we make the turn, the Dow is up 211 points to 16,379 while the S&P 500 is higher by 26 points to 1,871. The Nasdaq is surging 73 points to 4,350 and the Russell 2000 is zooming 32 points, or 2.8%, to 1,208. Wow.
Stay locked-and-loaded into the close in case we have additional Trade Alerts.
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 tradesor “Exit Orders” in your brokerage account unless we list one. We will send out a “Profit Alert” or “New Trade” 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. Closed Trades for 2014: 22-8 – the Weekly Wrap is 9-2 for 2014 (94-9, or 91% win rate, since 2011) and is designed for traders that want to use options with less risk.
NEW TRADE
Opko Health (OPK, $9.50, up $0.10)
Buy to OPEN April 10 calls (OPK140419C00010000, $0.65, up $0.05)
Action: We are expecting a surge past $10 over the next few weeks and we like these call options at current prices.
Current Trades
Ingersoll-Rand (IR, $61.10, up $0.97)
April 62.50 calls (IR140419C00062500, $1.05, up $0.15)
Entry Price: $0.90 (2/27/2014)
Exit Target: $1.80
Return: 17%
Stop Target: 90 cents
Action: We have a near-term target of $64-$65. If reached, these options will easily double from our entry price. Support will try to hold at $60 on any pullback with $59 serving as backup. The April options have 45 days before expiration.
Discovery Laboratories (DSCO, $2.75, up $0.08)
April 2 calls (DSCO140419C00002000, $0.90, up $0.10)
Entry Price: $0.65 (2/24/2014)
Exit Target: $1.00-$1.30
Return: 38%
Stop Target: 60 cents
Action: Shares continue to climb higher after the break out of the symmetrical triangle but Friday’s close felt bearish. Support is at $2.50 but we are still looking for shares to test $3.
World Wrestling Federation (WWE, $24.63, up $1.43)
March 30 calls (WWE140322C00030000, $0.35, up $0.10)
Entry Price: $0.40 (2/18/2014)
Exit Target: $0.80
Return: -13%
Stop Target: None
Action: We are expecting a pop past $25 with a possible run to $30. Support is at $22.
Kodiak Oil & Gas (KOG, $12.40, up $0.28)
March 12 calls (KOG140322C00012000, $0.65, up $0.10)
Entry Price: $0.60 (2/13/2014)
Exit Target: $1.20
Return: 8%
Stop Target: None
June 13 calls (KOG140621C00013000, $0.90, up $0.15)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: 29%
Stop Target: None
Action: Support is at $11.50 with $11.25 serving backup. We are still expecting a run to $12.50-$13 over the near-term. We also believe the company is a takeover candidate and why we are also long the June calls.
Ariad Pharmaceuticals (ARIA, $8.76, up $0.18)
March 10 calls (ARIA140322C00010000, $0.30, flat)
Entry Price: $0.95 (1/28/2014)
Exit Target: $1.90
Return: -68%
Stop Target: None
May 11 calls (ARIA140517C00011000, $0.75, flat)
Entry Price: $1.05 (1/28/2014)
Exit Target: $2.10
Return: -29%
Stop Target: None
Action: We are expecting a pop to $10 over the next few weeks. Support is at $8 with $7 serving backup.
Revenues should grow during the current quarter with the re-launch of Iclusig in the U.S. The company could also have a new drug debut in the second half of 2014 and why we also suggested longer-term options on this trade as well.
The water cooler talk is that Eli Lilly has made a “friendly approach” to buy the company and is willing to pay up to $20 a share. GlaxoSmithKline is also in the hunt along with Shire.
We have said there is a HUGE gap to fill on the stock’s drop from $23 to a 52-week low of $2. Eli is trying to get the company for cheap as it currently has a $1.25 billion market-cap.
Exact Sciences (EXAS, $13.98, up $0.43)
April 19 calls (EXAS140419C00019000, $0.50, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -43%
Stop Target: None
Action: Resistance is at $15 and a move above this level should get us back near even. Support is at $12.50.
The company should get some FDA news in March on its Cologuard drug. These are April options with 2 months until expiration and we plan to hold through the volatility because we want to be in when the March news is released. We do not have a Stop Limit listed.
Other 2014 Portfolio OPEN positions (5): 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 2013Portfolio link in the Members Area to view ALL open/ closed trades.
Sony April 20 calls (from January 2014) – continue to HOLD
General Electric March 28 calls (from January 2014) – continue to HOLD
Caterpillar March 85 puts (from January 2014) – continue to HOLD
McDonald’s March 90 puts (from February 2014) – continue to HOLD
Apollo Education Group March 29 puts (from February 2014) – continue to HOLD
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 and why we have 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.
