Dear Momentum Options Subscriber,
Futures were showing a nasty open this morning as Wall Street prepared for the fallout from this weekend’s negotiations regarding Greece. While it is sometimes hard to see the method to my madness, I have been trying to prepare us for a late-June swoon.
It is never easy picking market tops, and it’s just as difficult picking market bottoms. In April, I prepared us for a run to record highs in May and into mid-June. While I was hoping for a little more fluff into blue-sky territory during July, I used “cheaper” call options in case that scenario didn’t develop.
The put options I have added in recent weeks will easily offset some of today’s losses on our current call options, so there is no need to panic.
The July options we are holding are currently in the “danger zone,” but this morning I talked about the possibility of a snapback rally next week. The August, September and October expirations on some of our current trades give us a tremendous amount of built-in time premium, so keep this in mind as well.
The Dow is currently down 225 points to 17,720, while the S&P 500 is lower by 26 points to 2,074. The Nasdaq is off 72 points to 5,008, and the Russell 2000 is declining 16 points to 1,263. The VIX is surging 22% to 17.10, up 3.08.
I have a New Trade on a stock that is familiar to the portfolio that I want to add during today’s weakness. I also have a partial profit alert on our position in the S&P 500 SPDR ETF (SPY), so let’s go check the action.
Momentum Options Play List
Closed Momentum Options Trades for 2015: 65-20-1 (76%). All trades are dated and time stamped so new subscribers can look at the past history to see how the trades have played out.
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 I list one. I will send out a “Profit Alert” or “New Trade” if I want you to close a position or if a new trade comes out. Otherwise, follow instructions at all times in the 9 a.m. and 12 p.m. – 1 p.m. updates. Also, I will usually give you a heads-up if I think I’m going to send an email outside of these time frames.
All prices given in this update are current as of 12:35 p.m. EST.
I hereby disclose that I will be participating in the following trade(s). Every new Momentum Options recommendation is listed with the price at which I entered my own position. If the price is slightly different than my recommended entry or exit price when you receive the alert, don’t let that keep you from getting into or out of a trade. Occasionally, you might even get a better “fill” price than what is posted in the portfolio.
Krispy Kreme Doughnuts (KKD, $19.57, down $0.29)
Buy to open the KKD August 19 puts (KKD150821P00019000, $0.55, up $0.05) at current levels.
Shares have struggled with resistance at $20.50 following the company’s “better-than-expected” earnings report a few weeks ago. I like these puts at current levels to play further weakness and a backtest to $17.50.
These are the regular monthly options that expire on Aug. 21. I will provide the parameters of the trade in tomorrow’s Pre-Market Update.
S&P 500 SPDR ETF (SPY, $207.13, down $2.70)
SPY July 200 weekly puts (SPY150710P00200000, $0.80, up $0.42)
Entry Price: $0.45 (6/19/2015)
Exit Target: $3.00 (Limit Order at $3.00 on remaining 2/3-sized position)
Stop Target: $0.50 (Stop Limit)
Action: Take profits and sell to close one third of the SPY July 200 weekly puts at current levels. Also, set a Stop Limit at $0.50 on the remaining two thirds of the position.
I mentioned that this was our “blackjack” trade, and it is now paying off, as Wall Street is going bust today.
I wasn’t trying to get too greedy by raising our Exit Target to $3.00, but I didn’t want to short change us either. I also wanted to lock in partial profits given today’s huge gains.
Additional support is at $206 following today’s drop below $208.
You can read my full update on SPY and view the chart work in the June 22 Pre-Market Update.
US Steel (X, $21.13, down $0.47)
X July 21 puts (X150717P00021000, $0.80, up $0.25)
Entry Price: $0.28 (6/23/2015)
Exit Target: $0.60 (closed first half at $0.45 on 6/25/15)
Stop Target: $0.35 (Stop Limit)
Action: Support is at $20. Short-term resistance is at $22.
You can read my full report on X in the June 24 Pre-Market Update.
Rambus (RMBS, $14.87, down $0.34)
RMBS August 16 calls (RMBS150821C00016000, $0.47, down $0.08)
Entry Price: $0.55 (6/19/2015)
Exit Target: $1.40
Stop Target: None
Action: Support is at $15-$14.75, followed by $14.50 and the 50-day moving average.
You can read my full update on RMBS and view the chart work in the June 22 Pre-Market Update.
Microsoft (MSFT, $44.84, down $0.42)
MSFT July 47 calls (MSFT150717C00047000, $0.15, down $0.05)
Entry Price: $0.73 (6/18/2015)
Exit Target: $1.50
Stop Target: None
Action: There is additional risk to $44 and the 100-day moving average, which is curling higher. Resistance is at $46-$46.50 and the 50-day moving average.
Wells Fargo (WFC, $56.52, down $0.92)
WFC July 60 calls (WFC150717C00060000, $0.06, down $0.06)
Entry Price: $0.20 (6/5/2015)
Exit Target: $0.50
Stop Target: None
Action: Support is at $56.50-$56 and the 50-day moving average.
Rigel Pharmaceuticals (RIGL, $3.14, down $0.12)
RIGL September 5 calls (RIGL150918C00005000, $0.25, flat)
Entry Price: $0.40 (6/4/2015)
Exit Target: $0.80
Stop Target: None
Action: A move above resistance at $3.50 and the 100-day moving average would be bullish. Support is at $3.25-$3.
You can read my detailed write-up on RIGL in the June 5 Pre-Market Update.
Sony (SNE, $30.57, down $0.60)
SNE July 33 calls (SNE150717C00033000, $0.20, down $0.05)
Entry Price: $0.45 (6/1/2015)
Exit Target: $0.90
Stop Target: None
Action: A move above $32.50 should get the trade back to even. Support is at $31 and the 50-day moving average. A close below this level could lead to another backtest to $29.50-$29 and the 100-day moving average.
Trades on Hold — other 2015 Portfolio Open positions (2): 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 I would not open any new positions. I’m still keeping track of the trades and will record the results accordingly when the trade closes or if the options expire. Click on the Open Trades and Closed Trades pages to see all open and closed positions.
United Parcel Service (UPS) July 105 calls (from 6/11/15) — Continue to hold.
United Parcel Service (UPS) October 110 calls (from 6/11/15) — I will bring back coverage on both positions once shares clear $101 and the 200-day moving average — Continue to hold.
Editor and Chief Options Strategist