12:15pm (EST)
The Dow is currently down 26 points to 12,789 while the S&P is lower by 2 points to 1,377. The Nasdaq is declining 5 points to 2,899.
There were a few trades we liked coming into the week and while we don’t need to push the action, we feel there is one trade that will perform well over the next few weeks as the technical picture deteriorates in the stock.
MEMBERS AREA
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 we list one. We will send out a “Profit Alert” or “Trade Update” 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 2012 (144-50, or 75% win rate, including the Weekly Wrap which is 26-0).
NEW TRADE (WLP)!!!
Wellpoint (WLP, $56.06, down $0.10)
Buy to OPEN December 52.50 puts (WLP121222P00052500, $0.75, down $0.05)
Action: We said to wait for a move below $54.50 but we are going in a little early. Use limit orders up to 80 cents but do not pay over 85-90 cents to establish positions. If the stock drops to $50 by late December this trade will easily double. The current bid/ask is 73/ 77 cents.
CURRENT TRADES
KLA-Tencor (KLAC, $47.38, up $1.14)
December 43 puts (KLAC121222P00043000, $0.60, down $0.20)
Entry Price: $0.60 (11/7/12)
Exit Target: $1.20
Return: 0%
Stop Target: None
Action: We would like to see shares hold $47 if there is a rebound but there is risk up to $48. We are expecting a near-term test to $44 but if this level fails shares could push $40.
LifeLock (LOCK, $8.04, down $0.04)
December 10 calls (LOCK121222C00010000, $0.30, flat)
Entry Price: $0.10 (11/6/12)
Exit Target: $0.50
Return: 200%
Stop Target: None
Action: A close above $8.20 this week would be bullish. A drop below $7.60 would be bearish.
Apollo Group (APOL, $19.14, up $0.39)
December 18 puts (APOL121222P00018000, $0.80, down $0.20)
Entry Price: $0.88 (10/25/12)
Exit Target: $1.70
Return: -11%
Stop Target: None
Action: We would like to see shares close below $18.50 this week. If there is a rebound we would like to see $20 hold. We have said all year long shares could test the mid to low teens and we are already looking at longer-term options to play a continued slide.
Other 2012 Portfolio OPEN positions (7): 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 2012 Portfolio link in the Members Area to view ALL open/ closed trades.
***November Options Expire This Friday***
O’Reilly Automotive November 70 puts (from October 2012)
American Express November 60 calls (from October 2012)
Buffalo Wild Wings November 70 puts (from September 2012)
LeapFrog November 10 calls (from November 2012)
Bank of America January 12.50 calls (2013) (from March 2012) – continue to hold
Knight Capital Group January 2.50 calls (2013) (from August 2012) – takeover target
Solazyme December 12.50 calls (from September 2012)– 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 which is why we created 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.