2:00pm (EST)
Futures were showing a slightly higher open ahead of midnight but turned into pumpkins afterwards and ahead of the overseas markets opening. They recovered ahead of this morning’s open here at home but the choppy action continues as the zombies put pressure on Russia.
There is a lot of headline risk over the weekend with the referendum scheduled on Sunday for Crimea to join with Russia. The outcome will likely have serious consequences and the result will cause another response from head officials here at home on Monday.
For this reason, Wall Street is nervous.
We mentioned the other indexes could follow the Dow’s test to their 50-day MA’s (moving averages) and as option traders, next week could offer a great opportunity to play this move, or, a possible rebound from here.
Most slick talking pros are hoping for a 5%-10% pullback, and are saying they will buy it, but they missed the gravy train all of last year and most of this year. Although the action has been volatile, fresh all-times highs have been set and they may not get the opportunity to “get in” this time around if Monday’s open is strong.
This would assume all goes well over the weekend but the word “assume” can be damaging if there is a continued selloff and long positions are taken today.
Although it has been a slightly down week, we were well prepared for the action as we limited our exposure while locking in a monster call option winner (WWE, up 203%) and a few other breakeven trades.
Our plan was to trim our Daily and Weekly portfolios where we could to lock-in gains and to prepare for the possible upcoming volatility.
While we normally don’t like to add new positions ahead of the weekend, we’ve had a phenomenal first quarter so we can nibble a little bit and be aggressive while the big boys play catch up. We are adding 2 New Trades today.
As we make the turn, the Dow is lower by 10 points to 16,099 while the S&P 500 is down a point to 1,844. The Nasdaq is down 5 points to 4,255 and the Russell 2K is up a 6-pack to 1,182.
Meanwhile, the S&P Volatility Index ($VIX, 16.89, up 0.67) is up 4% and has traded to a high of 17.29. While we have mentioned most suit-and-ties ignore the VIX, once again it is giving us very telling clues on if a bottom is in or if there will be further weakness. We should know by Monday’s close how next week unfolds but our feeling is there could be a bull party if Putin is slow playing his hand.
Get the New Trade and current updates. We also have a Profit Alert on a trade up 21%.
Closed Trades for 2014: 29-9 – the Weekly Wrap is 12-2 for 2014 (97-9, or 92% win rate, since 2011) and is designed for traders that want to use options with less risk.
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.
New Trades
Valero Energy (VLO, $54.33, up $0.29)
Buy to OPEN April 57.50 calls (VLO140419C00057500, $1.05, up $0.10)
Action: We are expecting a run past double-nickels ($55) over the next few weeks and a possible push to $58-$60.
PowerShares QQQ (QQQ, $88.87, down $0.41)
Buy to OPEN April 90 calls (QQQ140419C00090000, $1.10, down $0.10)
Action: We are betting on a bounce to start the week and if there isn’t we will set a tight stop in case we are wrong.
Current Trades
Zynga (ZNGA, $5.50, down $0.02)
April 5.50 calls (ZNGA140419C00005500, $0.40, flat)
Entry Price: $0.55 (3/12/2014)
Exit Target: $1.10
Return: -27%
Stop Target: None
Action: We would like to see $5.50 hold but there is risk to $5, if $5.40 fails to hold. We will be watching this level into the close. If shares can reach $6.50 by mid-April these options will double from our entry price and why we want to leave it open.
Verizon (VZ, $46.08, up $0.05)
April 45 puts (VZ140419P00045000, $0.75, flat)
Entry Price: $0.62 (3/10/2014)
Exit Target: $1.30
Return: 21%
Stop Target: 60 cents
Action: Close HALF the trade at current levels.
We believe shares could test $40 over the longer-term and fall below $45 over the near-term. Resistance is at $48. If shares do rebound, we could protect profits.
Opko Health (OPK, $9.70, up $0.38)
April 10 calls (OPK140419C00010000, $0.60, up $0.10)
Entry Price: $0.65 (3/4/2014)
Exit Target: $1.30
Return: -8%
Stop Target: None
Action: Resistance remains at $9.50-$10 and a close above the latter would be super bullish for a run to $12-$13 on short covering. Support is at $9-$8.75.
Kodiak Oil & Gas (KOG, $11.57, up $0.20)
June 13 calls (KOG140621C00013000, $0.55, up $0.10)
Entry Price: $0.70 (2/13/2014)
Exit Target: $1.40
Return: -21%
Stop Target: None
Action: We believe the company is a takeover candidate that could get a bid north of $15. Support is at $11. Resistance is at $11.75.
Exact Sciences (EXAS, $13.01, down $0.20)
April 19 calls (EXAS140419C00019000, $0.40, flat)
Entry Price: $0.88 (1/22/2014)
Exit Target: $1.75
Return: -55%
Stop Target: None
Action: Support is at $13. Resistance is at $14.50 and a move above this level should get us back near even.
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 (6): 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 mkh jb√ 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
Ariad Pharmaceuticals March 10 calls (from January 3014)
May 11 calls (from January 3014)
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 on Monday with some fresh ideas.
We will be back Sunday night with the Weekly Wrap and Monday morning with the Daily. You will not want to miss either issue. Until then, have a great weekend everyone!