9:10am (EST)
Spiders S&P 500 (SPY, $131.95, down $0.11)
May 133 calls (SPY110527C00133000, $0.35, down $0.15)
Entry Price: $0.60 (5/24/11)
Exit Target: $1.00
Return: -42%
Stop Target: None
Action: We are going to take a hit with these options as they were a bet on support holding and a strong rebound. We thought there would be one last test to the top but like crabs in a pot struggling to get out, we are going to get steamed. The support levels we mentioned in our commentary could hold but since these options are WEEKLY, there will need to be a monster rebound by Friday which we don’t see happening.
Vivus (VVUS, $8.39, down $0.26)
September 10 calls (VVUS110917C00010000, $0.55, down $0.10)
Entry Price: $0.65 (5/20/11)
Exit Target: $1.30
Return: -15%
Stop Target: None
Action: We went into Biotech to deflect some of the current turmoil but we also went with longer-term options so that our story can play out, regardless of what the market does. Vivus has the best shot at getting a diet drug to market and Qnexa is being tested to be more than a one-hit-wonder. There could be several uses for Qnexa and we hope these developments start to take shape over the next month or two.
Alpha Natural Resources (ANR, $49.89, down $0.39)
June 44 puts (ANR110618P00044000, $0.45, up $0.05)
Entry Price: $0.80 (5/13/11)
Exit Target: $1.60
Return: -44%
Stop Target: None
Action: This trade could pick up steam if there is a continued pullback in the market. We have a price target of $44 over the near-term with a possible drop to $40 if there is a continued retest from the October breakout.
MGM Resorts International (MGM, $14.94, up $0.01)
September 17 calls (MGM110917C00017000, $0.85, flat)
Entry Price: $0.70 (5/13/11)
Exit Target: $1.40
Return: 21%
Stop Target: 75 cents
Action: These options have 4 months before expiration and our target is $20 for MGM by mid-September. This would get these options to at least $3.
Research In Motion (RIMM, $43.11, down $0.41)
June 40 puts (RIMM110618P00040000, $1.00, up $0.05)
Entry Price: $1.00 (5/10/11)
Exit Target: $2.00
Return: 0%
Stop Target: 75 cents
Action: Shares of Research in Motion were downgraded to “Hold” from “Buy” by one brokerage firm today. We still have a “Sell” rating on RIMM and our near-term target is $38 which gets these options to at least $2.
Seattle Genetics (SGEN, $18.66, down $0.14)
September 20 calls (SGEN110917C00020000, $1.90, down $0.10)
Entry Price: $1.50 (5/9/11)
Exit Target: $3.00
Return: 27%
Stop Target: $1.25
Action: Continue to hold.
Starbucks (SBUX, $36.29, down $0.15)
June 38 calls (SBUX110618C00038000, $0.30, down $0.10)
Entry Price: $0.60 (5/9/11)
Exit Target: $1.20
Return: -50%
Stop Target: None
Action: The 52-week high is $38.21 and we are expecting a run to $40 for the stock which gets these options to $2. However, today’s action could push our premiums even lower.
Dendreon (DNDN, $39.72, up $0.21)
August 50 calls (DNDN110820C00050000, $0.70, flat)
Entry Price: $1.85 (4/14/11)
Exit Target: $3.70
Return: -62%
Stop Target: None
Action: Continue to hold.
Other 2011 Portfolio OPEN positions (4): These are trades that are still open in the portfolio that have longer expiration dates or 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 the options expire. Click on the 2011 Portfolio link in the Members Area to view ALL open/ closed trades.
Vivus June 14 calls (from January 2011)
eBay July 40 calls (from February 2011)
RF MicroDevices August 10 calls (from February 2011)
KLA-Tencor June 48 calls (from May 2011)
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 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.
Kraft Foods (KFT, $34.87, down $0.11)
September 35 calls (KFT110917C00035000, $1.05, down $0.05)
Thoughts: Watch for now.
Illumina (ILMN, $71.20, down $0.55)
June 75 calls (ILMN110618C00075000, $0.75, down $0.20)
Thoughts: We want to make sure the $70 level holds before starting positions.
Caterpillar (CAT, $101.55, down $0.34)
June 95 puts (CAT110618P00095000, $0.55, up $0.10)
Thoughts: Shares could be headed below $100 and back to a quick test of $95. If so, these options could double.
Freeport-McMoRan (FCX, $48.82, up $1.40)
June 50 calls (FCX110618C00050000, $1.35, up $0.35)
June 45 puts (FCX110618P00045000, $0.70, down $0.35)
Thoughts: Watch this straddle trade for a break back above $50 or a breakdown below $45.
Peet’s Coffee and Tea (PEET, $49.45, up $0.19)
June 55 calls (PEET110618C00055000, $0.60, flat)
Thoughts: Continue to watch.
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