9:10am (EST)
Berkshire Hathaway Class B (BRK/B, $70.10, down $2.62)
February 74 calls (BVQBX, $0.75, down $0.75)
Entry Price: $1.50 (1/21/10)
Exit Target: $3.00
Return: -50%
Stop Target: None
Action: We know we should have “metal” stop for this one but this stock just split and we are playing the post bounce, if we get one. Shares are slightly higher in pre-market trading and we are looking for a run to $75 this week.
EMC (EMC, $16.76, down $0.77)
April 19 calls (EMCDS, $0.23, down $0.15)
Entry Price: $0.55 (1/19/10)
Exit Target: $1.00+
Return: -58%
Stop Target: None
Action: We went out to April with these call options because if the market corrects some of the stronger stocks will come back quickly once we do get a rebound. Shares are back over $17 this morning and these calls have 81 days before expiration.
Shuffle Master (SHFL, $9.03, down $0.14)
May 10 calls (SFQEB, $0.70, down $0.05)
Entry Price: $0.85 (1/19/10)
Exit Target: $1.70+
Return: -18%
Stop Target: 40 cents
Action: We went out even further with the Shuffle Master calls and these options have 116 days before they expire. Our breakeven point is $10.85 and this trade has plenty of time to take shape before then.
Applied Materials (AMAT, $12.63, down $0.95)
February 15 calls (ANQBC, $0.05, down $0.10)
Entry Price: $0.50 (1/1/10)
Exit Target: $1.00+
Return: -90%
Stop Target: None
Action: This is why we don’t “load” up on cheap out-of-the-money options. The stock was nearing a 52-week high when we added the position to the portfolio but the market correction has crushed this one.
If you bought 10 contracts you are down $500, if you bought 50 contracts you are down $2,500. See the difference? These types of options can provide super returns but they are the risky which is why we don’t bet the farm.
The good news is that we still have over 3 weeks before they expire so the trade is not a loss until we close the position or it expires worthless.
OSI Systems (OSIS, $27.77, down $1.41)
February 35 calls (UOJBG, $0.20, down $0.10)
Entry Price: $1.40 (1/11/10)
Exit Target: $2.80
Return: -86%
Stop Target: None
Action: This is the one trade that we have not managed well but the stock teased us when it was hanging around $30. Shares are back over $28 this morning but we are going to need a lot of help with this one.
Vivus (VVUS, $8.91, down $0.24)
March 10 calls (QJSCB, $0.65, down $0.15)
Entry Price: $1.35 (1/7/10)
Exit Target: $2.70
Return: -52%
Stop Target: 65 cents
Action: Vivus has a bright future and should easily be in mid double-digits by the summer. If the stock can make a run to $11 over the next 53 days we will be in good shape.
Research In Motion (RIMM, $61.68, down $1.91)
Feb 60 puts (RFYNL, $1.85, up $0.70)
Entry Price: $1.50 (1/6/10)
Exit Target: $2.25
Return: 23%
Stop Target: 75 cents
Action: We are showing a slight profit with this one and shares are slightly higher this morning in pre-market trading. We still believe this stock trades below $60 and we will have to be careful managing this one.
If shares were lower this morning in pre-market trading, we probably would have closed these puts at the open today but the premium will probably dip below $1.50 once the bell rings.
Let’s see how we open and if we see an opportunity to take profits we will send out an alert.
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