9:05am (EST)
Walt Disney (DIS, $30.03, up $0.19)
February 30 calls (DIS100220C000300000, $0.51, down $0.13)
Entry Price: $0.60 (2/9/10)
Exit Target: $0.80+
Return: -15%
Stop Target: 20 cents, up to 30 cents
Action: We were hoping Disney’s cable results and the iPad news would be enough to offset some of Wall Street’s worries on the stock and we got a break. We also thought at least ONE analyst would out with a “Buy” rating but no one was bold enough. Barron’s did us that favor after the bell, suggesting investors “buy the dip”.
We had set a 60 cent limit price to close the trade and here is the reason we did that.
We have told you the importance of using “limit orders” over “market orders” at all times if possible and here is why. If some an option trader would have came in at the open Wednesday morning and placed a “market order” to buy these calls then we might have gotten lucky and been filled at 60 cents.
Since we did not and the stock rebounded we now have the luxury of trying to catch a profit. The move above $30 was very bullish for us but we still would like to be out of the trade today and by Friday we are surely gone.
Let’s do this. If the calls can make a run to 80 cents, close half. If they continue higher we will update you at 1pm. If they get to $1 before then, close the other half. SPECIAL NOTE: If the calls trade 80 cents and you close half and then they start to fade, sell the other half at 65-70 cents.
We don’t need to play with fire if we can get out with a profit and the options expire next Friday. We also have a 3-day weekend ahead.
Berkshire Hathaway Class B (BRK/B, $74.42, down $0.11)
June 100 calls (BPYFT, $0.40, flat) (BPY100619C00100000)
Entry Price: $0.50 (2/1/10)
Exit Target: $1.00+
Return: -20%
Stop Target: None
September 100 calls (BPYIT, $0.60, flat) (BPY100918C00100000)
Entry Price: $0.95 (2/1/10)
Exit Target: $2.00
Return: -37%
Stop Target: None
Action: Shares traded in a tight range and volume was well below normal as only 13 million shares traded hands. Folks, this means no one was selling and no one was buying. The individual investors are hoping to sell to the mutual fund managers at higher prices or they are simply holding on for the ride.
Fund managers are trying to get the best price possible before the rush comes in to buy the shares but they don’t want to tip their hand.
EMC (EMC, $16.76, down $0.19)
April 19 calls (EMCDS, $0.14, down $0.02) (EMC100417C00019000)
Entry Price: $0.55 (1/19/10)
Exit Target: $1.00+
Return: -78%
Stop Target: None
Action: This one feels like a death by a thousand cuts but we knew that going in. The position is 3 weeks old and we profiled the trade right at the market top. We either went higher or faded and the latter has happened. A 10 contract trade was only $550. The stock will need to move 20% to get to $20 and for us to make 100%. This is how we are looking at the $140 left over which is what the positioned is valued at. Continue to hold.
Shuffle Master (SHFL, $8.93, up $0.06)
May 10 calls (SFQEB, $0.55, flat) (SFQ100522C00010000)
Entry Price: $0.85 (1/19/10)
Exit Target: $1.70+
Return: -35%
Stop Target: 40 cents
Action: Continue to hold.
WATCH LIST SECTION
These trades are NOT recommendations until we send out an alert or the limit prices are hit. These are trades that we like but have not added to the portfolio as an official recommendation because of market conditions or because the portfolio is full.
Nasdaq PowerShares ETF (QQQQ, $43.02, down $0.09)
March 42 puts (QQQ100320P00042000, $0.94, up $0.03)
Action: Continue to watch
Chipotle Mexican Grill (CMG, $99.51, down $1.14)
February 105 calls (CMG100220C00105000, $1.48, down $0.18)
Action: Chipotle always seems to trade higher after announcing earnings and is on the verge of breaking out to new 52-week highs. We think the calls are a little juiced so we are going to stay on the sidelines.
Panera Bread (PNRA, $72.37, down $0.20)
February 75 calls (UPA100220C00075000, $0.95, flat)
Action: The 52-week high for the stock is $74.42 which was hit at the beginning of the month. We don’t see Panera having an issue topping estimates but this could be an all-or-nothing trade. We are a little hesitant because of the recent run to make it an official recommendation but they could be worth a day trade.
Although earnings should be outstanding we are nervous of a “buy the rumor, sell the news” event with this one.
Freeport McMoRan (FCX, $71.03, down $0.55)
February 65 puts ((FCX100220P00065000, $0.50, down $0.08)
March 70 puts (FCX100320P00065000, $2.19, up $0.09)
Action: There may be an opportunity for a day trade or two in the February options if Copper heads lower from here. The March options are the safer play and this stock has been volatile. Shares have fallen from $90 to a recent low of $66 in just a month. A break below $70 could lead back down to a test of $65-$66. A break below that paves the way to $60.
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