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Archive for November, 2008

Citigroup Gets $20B

Monday, November 24th, 2008

Citigroup (C, $6.27, up $2.50) got its wish over the weekend and we got ours. News that the government will give $20 billion to the struggling bank and guarantee $300 billion in troubled mortgage assets has the stock rolling today. In exchange, the government gets $27 billion in Citigroup preferred stock while the taxpayer once again gets the wrong end of the stick.

I spent the majority of Friday watching the action in Citigroup and talked about the December 5 calls (CLP, $2.30, up $1.36) which closed under a $1 on Friday. The calls have traded to a high of $2.50 today. Obviously, if you got into these calls then you don’t need me to tell you to close half the position.

The financial stocks are having a stellar day as you might expect but don’t get caught up in the rally. There are likely more bailouts to come with other banks and I wouldn’t be surprised if Citigroup hits the coffee can again down the road. Remember, Citigroup got $25 billion last month and now another $20 billion. Meanwhile, the auto companies must be scratching their heads and wondering what the heck is going on. They pretty much left Congress with a brown nose and no cash.

Truth is, the banks will get money before the auto companies although a collapse of one or more of the auto makers could have major negative implications on the economy. However, a Citigroup bankruptcy would have an even greater effect on an already fragile financial system.

Rick Rouse
Rick@OptionsMentoring.com

Market Rallies, Gambling on Citigroup

Friday, November 21st, 2008

The market is so amazing. There are so many moving parts and subplots happening at the same time that is making this market so incredible to trade right now. There are people losing their shirts and there are the others making a killing. It’s that simple.

The Dow managed a furious comeback in the final hour of trading as the cat got let out of the bag on who President elect Obama would likely nominate for treasury secretary. His name is Timothy Geithner and he was responsible for the 500 point pop in the Dow. Wall Street cheered the New Yorker’s current role and pushed the Dow above 8k to 8,046. The Nasdaq jumped 68 points to finish at 1,384 while the S&P 500 surged 47 points to close at 800 on the button.

The one story I want to jump right into is Citigroup (C, $3.77, down $0.94). Remember on Tuesday when I said “let’s see how this one turns out”? Citigroup had just issued a “Buy” rating on AutoZone (AZO, $92.41, up $3.32) which hit a low of $84.66 today when the stock was at $104.

I questioned the “analyst upgrade” because Citigroup was a $9 stock and had been sinking like the Titantic yet AutoZone was at a serious technical breakdown. Yeap, we made some dough with the AutoZone put options but the real deal has been Citigroup. There was a fortune being made this week as Citigroup dropped from $9 to $3 in just three days. Think about that for a second. Citigroup was a $20 stock just six weeks ago.

So here is the dilemma with Citigroup. Can you trust it? My take is that Citigroup will survive because it is part of the “good ‘ol buddy” system. Citigroup was one of the nine initial banks to sell preferred stock and warrants to the government last month. They also received $25 billion in the process which happens to be more than the company’s current market value right now. How crazy is this getting?

Here’s the kicker. The November options expired today but there was plenty of trading in the December contracts. The December 5 calls (CLP, $0.94, down $0.31) saw 100,000 contracts trade hands. That is phenomenal. Period.

If you bought 10 of these call options today then basically you have entered into a lottery ticket. Ten contracts would have cost under a $1,000 although the calls did trade to a low of 60 cents when the stock hit $3. So let’s say $600 if you had bought at the low.

Now, if Citigroup can rally, which to be quite honest could, then the calls could see some super-duper returns. The contracts expire on December 19 and if the stock can rally to $6 then the calls would be worth $1. If you got in at 60 cents that’s a 67% return. If you got in around a buck, you break even.

But what if Citigroup can get back to $7 or $8? At $7, you got a double on your investment, at $8 your return is 200% if you’re in at $1. If the stock is under $5, you lose your entire investment. Of course the returns or losses could come quicker depending on the outcome but that is how playing these call options will shake out.

You can bet I’ll be following this one.

Rick Rouse
Rick@OptionsMentoring.com

Bears Dominating Market

Friday, November 21st, 2008

What a long strange trip it has been. Well, we are Grateful and the market has been left for Dead. Thursday’s market action could certainly be summed up by one of the most famous lines in music history and today’s “songs” from the stock market will be enjoyed for many years to come that’s for sure.

Although there are numerous topics to discuss and never enough time, I’ll try and be brief about the market. To start, you have to realize that the current market environment is the quickest downturn, correction, or oversold market that we may ever see. Ever. If you have followed the market closely then you may be one of the lucky ones making money because this market has become easily predictable.

The drop in America’s 401k plans, pensions, and other investments have caused a wave of cascade selling that is hitting the market like a cannon ball going through a wet napkin. There is no support and there is no buying. There are no leaders. Everybody is selling.

That scares everybody and the natural reaction is to “save what you have left”. This sort of reaction or over-reaction has provided us many opportunities to buy puts on stocks that are sinking. As option traders, you buy call options in a bull market and puts in a bear market. And because you always have both bull and bear markets, it is the main reason why I don’t own a single share of stock.

With options you control more shares with less money and the returns are 10x more powerful. Once you discover these secrets then you will understand why I love both bull and bear markets. I really don’t care. “The trend is your friend” has been providing us with triple-digit profits for quite some time now.

The point I’m trying to make is now that we have tested the market lows and broken through those levels, it is going to get a little tougher to predict what is going to happen…to a degree. I still think we go below 7,000 if the auto companies fail but something dramatic is about to happen. That I can feel.

Yes, it has been “dramatic” for many people because they feel as though their life savings are going up in smoke. However, they could have protected their 401k’s and pensions by buying put options as insurance to protect the stocks in their portfolios. That’s another subject but the point I’m trying to make is that you really need to learn how the market works and more importantly how option trading works. We offer some kick-butt courses that will make you money but you have to educate yourself.

On that note, I’ll get back to the market. The Dow fell 449 to close at 7,552 while the S&P dropped 54 to finish at 752. The Nasdaq tanked 70 points and is now at 1,316. Add that to Wednesday’s decline and you have the worst two days in the market since 1987. I predicted 7,500 for the Dow in yesterday’s morning blog and we got down to 7,506.

I swear I don’t have a crystal ball but I’m taking the clues the market is giving me and I’m just trading the trend. When the trend changes you will have losing trades but more often than not you can limit those losses. As we change over, you simply look for the next stocks that are to move the “new” trend.

If I’ve said it once, I’ll say it again anyway. The market never dances with the same partner twice. I have no idea where the market will close today but the futures are pointing to a higher opening. Today is option expiration day so we will have a crazy open and a crazy close.

Rick Rouse
Rick@OptionsMentoring.com

Update on AZO, ANF, AAPL, GOOG, BIDU

Thursday, November 20th, 2008

Here are some updates on the trades we are following.

AutoZone (AZO, $86.93, down $7.32)

November 95 puts (AZOWS, $8.60, up $4.80) were profiled at 90 cents and traded as low as 75 cents on Tuesday. Sell them right now. If you were brave enough to roll with these November put options your return is up over 800%. Close them today as the contracts expire on Friday.

December 95 puts (AZOXS, $14.70, up $3.30) were profiled at $5.40. Sell 75% of your position today and let the other 25% ride. The return is 175%.

December 75 puts (AZOXU, $6.20, up $1.70) were going for $1.80. I said to buy them up to $2.00 and if you got into this trade, you can bank the 250% return. Close 75%, keep the other 25% open.

Baidu.com (BIDU, $106.05, down $5.69)

November 100 puts (BDQWT, $5.40, up $1.90) were going for $2.50. Close the trade.
December 100 puts (BDQXT, $16.70, up $2.00) are up from $8.75. Close the trade.

Although we were on the sidelines with Baidu, some of you may have rolled the dice on this one. Take your profits and run to the hills.

Abercrombie & Fitch (ANF, $14.75, up $0.20)

The stock made another fresh 52-week low yesterday and this trade is pretty close to reaching max potential.

November 22.50 puts (ZWRWX, $7.80, up $0.30) were profiled at $3.30. Close the entire position today.

December 17.50 puts (ZWRXW, $4.00, up $0.30) are up from $1.70. These put options were our main focus and we have done well with them. We are up 135%. You could set stops at $3.40 but you would be giving up profits if ANF reverses course.

Apple (AAPL, $80.00, down $6.29)

I mentioned Apple last Thursday and although it has taken a little longer than expected, the stock is breaking down like a rented mule. The December 80 puts (QAAXP, $8.00, up $2.40) are up 57% from our entry price of $5.10. Set atops at $7.65 to ensure a 50% return.

Google (GOOG, $270.00, down $10.18)

On November 12, I had mentioned the November 280 puts (GGDWP, $16.00, up $7.40) at $6.00 and they traded above $12. We had set stops at $11.00 and we were stopped out of the trade earlier this week.

The December 240 puts (GOUXH, $15.00, up $3.70) were trading at $6.60 and we had set a stop of $9.00 for the position. Raise the stop to $12-$13 and sell 75% of the position if these levels are hit today.

The market looks like it is going to test its low as the Dow is down over 100 points to 7,820. The thing to watch for here is a bounce off the October 10 low of 7,773. If we don’t get a convincing bounce then we could be setting up for a faded rally. If we test the low, bounce, and come right back down then we can expect more weakness.

The market is at a pivital point and we should get a clear direction of which way we are heading by Friday’s close.

Rick Rouse
Rick@OptionsMentoring.com

VIX Climbing Higher

Thursday, November 20th, 2008

I have been talking about the Volatility Index (^VIX, 74.26, up 6.62) on a monthly basis now and for those of you new to the blog, the VIX is the CBOE Market Volatility Index that measures market sentiment. The market has had a lot of downward momentum and when the market goes down, the VIX goes up. The value of the VIX decreases when the market heads higher.

At the end of September I had mentioned how the VIX had spent 10 trading sessions in the 30’s and looked poised to jump into the 40’s, which at the time was suggesting Wall Street was anticipating a dramatic price decline in the market. As we headed into October the VIX kept rising and we saw the market fall to a fresh low a few weeks later as the Dow hit 7,773.

The VIX hit a high of 90 once we bottomed and fell to a low of 44 right before the President election which is still high. For you history buffs, if the VIX is at 30 or more then it means the market is nervous. If the VIX is under 20, the market is confident. It’s not clear what the “new” standards should be for the VIX because the volatility has also been historic.

However, this week is getting worse by the trading day and we could see the VIX test its high. If that’s the case, be prepared for another leg down. If the VIX reaches 100 the Dow could easily fall below 7,500 which could trigger a massive sell-off

Rick Rouse
Rick@OptionsMentoring.com

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Trader Comments:

    REGINA L.
    I just want you to know that I love the way you write and explain everything. I am new to this, and have lost 50% of my account until I met you guys. Iit is slowly coming back. I will be calling to set up a year
    of membership rather than the one quarter. Thanks again, and LOVE YOU ALL.

    STEVE T.
    Rick, I appreciate the advice. I think I will just sit back and utilize your selections only for awhile. This will obviously save me a great deal of money in commissions. I have gone thru your entire site including the video on money management. This has brought me to the stark realization that I have been trading too much for too little. I definitely have not been "swinging for the fences", but I also think I have been getting impatient with trades and getting out too fast. This has no doubt caused me too trade too much. I like, and definitely agree on, the advice on money management. Thanks for the help.

    SCOTT H.
    Thank you!!! I held on to the NFLX position since Nov. 13 at a cost of $1.89. Sold ½ on April 14th for a 540% return and the other ½ upon earnings for 702% return. Total profit of $11,615 a 621% return. Keep the recommendations coming and thanks to you and your team for the service you provide.

    PETER G.
    Rick & Team, GREAT Call on NKE for my two trading accounts:
    1) Entry at .65, out at 1.45, 1.55 Profit = $415
    2) Entry at .60, out at 1.75, 1.50 Profit = $485

    LAWRENCE O.
    Hey Rick! Here is an update on what your picks have done in my accounts.

    1) Great call on the JoyG March 55. I bought when you said, then bought again on one of the dips. Booked 80+% profit. Made enough to pay for your service for years to come.

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    3) Took profit on your Imax March 12.5. 20 cent trailing stop at 1.90 yesterday. Not sure what the profit on that was, but profit is profit.

    I see that you took a loss on some of these. It’s all good. I look to trade your “ideas” not your exact calls. I THANK YOU! For your ideas and commentary. Keep up the good work. And keep those ideas coming.

    C.J.
    Loving this subscription so far! I got into the BRK feb 76 calls the day you talked about right before the split...now up over 300% (0.70 to 2.475)! Keep the good picks coming and let's see some OSIS and EMC upside soon! Just wanted to share my positive enthusiasm on your newsletter...it gives us individual investors great ideas on not only the options market, but also the broader equity market! Case in point is BRK...I can't always read the breaking business news but its easy to read your twice daily updates on my smartphone...helped me get some BRK shares immediately after the split which I will hold for the long haul! Thanks again!

    SHAUN
    Aloha Rick - Thank you so much for the great CL pick. I am not sure if there was buy-out/merger news or what but at 3PM today Colgate-Palmolive absolutely EXPLODED to the upside, and my calls turned into green candy when they went from 1.40 to 3.8 in a matter of seconds! I even sold a few for over 4.0! Much thanks and keep the solid picks up my friend, honestly. Only a fool would scoff at 267% gains... Peace!

    MICHAEL K.
    I like the fact that you ask for comments from subscribers. Good customer service. By the way, am enjoying the service so far. Some good
    profitable calls. Keep up the good work.

    PARAG P.
    Woo hoo! Out for 50% on WMT this am. Making up for my depression for getting out of pcln for a 30% gain monday :( you the man! any word on the manual? My friend Mike ( who I sent to your service) told me he emailed you about your integrity in reporting fills. I echo that sentiment big time.. keep it up! Cheers!

    JAY P.
    Hi Rick, as a new member all I can say is, 'show off' LOL, with PCLN.

    MIKE
    Rick, I am a new subscriber to your service, and I want to say I am impressed. I am impressed by your results, but more than that I am impressed by your reporting of your fills. You could have easily said you got that Wal-Mart call today for 80 cents, instead you reported 98 cents! Good job and keep it up, I watched the reporting of the fills first, and then I subscribed. Thank You.

    TRISH D.
    Hi, good morning. I jumped the gun a little on this one (PCLN). But still made $1,675.00 profit!! Very happy!! Keep up the good work!! Thanks.

    MIN L.
    Hi there, I have joined recently, and I am very happy to tell you that I am up over $10,000 on your picks in a month. I started on 10/7 with the Intel pick. I'll be your member for life. Please don't quit on us. Also, I am learning a lot about options. I didn’t get in your recent APOL and that gold trade and only had one loss on CHK. I appreciate all the DD you do. I enjoy your market commentaries. Best advice site period, and I have tried a few here and there. Again, you guys rock!

    JOE G.
    Thanks be to Momentum Options Trading for providing me with some fantastic wins. I just started with this service and am up nearly 50% in less than a month. There have been losses, but if I manage them properly, I will continue the best efforts given on the blog (in which there are no complaints). What a great cause for humanity. I feel more confident about my trades and continue to play the wins. Best of all, I am now keeping my regular paychecks in the bank! Thank you!

    GREG F.
    Rick - I wanted to say thanks for getting me started on the right foot with your service. I have made six trades since starting on October 22, 2009. Five are winners and One loser netting me $6,245. Thanks again and keep the trade recommendations coming.

    NOEL
    I got into the Nike 60 Call at 1.85, sold at 5.00, also bought a 55 put at 1.05, but got stopped out at .35. What a ride! $2830.00 in the black even with the put. It's right at 100% return. I hope earnings season coming up is going to look like this trade.

    TODD F.
    Nice call on Nike. I think I'll go buy a pair with my profits! : ) I did the straddle for safety but still made 62% on the trade. Not bad for less than 24 hours. If Goldman is right, then the Nov 70s or 75's could be a steal today.

    PAUL H.
    What a sweet way to get introduced to Momentum. My first trade based on your picks and it a 2X. Thank you!

    NOEL
    “Limit order was set at 1.60 on RIMM so it sold. I may have left some money on the table but you can't go broke making a profit. That was a fun trade. Thank you. Good call. I’ve been watching and trading Rick's advice since March. It’s usually a fun ride, but I give him heck when it's wrong to. :) ”

    CHRISTIAN
    “Your service rocks! I made bank on Dendreon last week! The other thing I have to say is that it took me quite a while to find a REAL options trading service like yours. Most of what’s out there is 99% scam and very sketchy. Momentum Options Trading is the first service I found that I can trust and seriously make money with.”

    JOHN
    “I made $420.00 on ANF in 2 days. Thanks for the trade and updates on getting out of the trade.”

    CHARLES M.
    “I did follow a lot of your trades with 1-2 contracts per trade and YTD I’m up 108%. I try not to follow blindly by not entering all of your trades and sometimes entering the ones you don’t. I entered AIG a few weeks ago against recommendation – that one hurt.”

    BRYAN C.
    “I have been following you for several months and am interested in the new service. I hate to see the free service go away but as they say, “all good things must come to an end”. My ability to join will be greatly influenced by the monthly fee so I’m very curious to see the new prices. Thanks for making April a great month for me and my family.”

    JOHN H.
    “I have really enjoyed the past month since finding your blog. You have made some great calls. I would appreciate info. on the new options mentoring program. Thanks.”

    JEFFREY
    “Hi Rick, I have been following your blog for several months now and I would like to be including on the list for your new service and to receive more information about it. And yes I was a Dendreon winner with your tips. Turned $280 into $7700, and literally saved my butt.”

    ED
    “I made over 6k on your Dendreon trade, and I’m very interested in learning how you pick and trade options. Sign me up.”

    GREG
    “Rick – Wow what a day! I got in at the Dendreon calls at $2.25. Thanks to for your advice. I appreciate that. This company has a lock on this type of therapy and no one else in the world is close. Kind of reminds me of the type of companies that Peter Lynch and Warren Buffet suggest that investments be made in. Companies that can build a moat around their business model, that allows them to charge a premium for their product or service. In other words - a monopoly.”

    KEN
    “Hi Rick, Thank you so much for the Dendreon trade, I made almost $10,000 with that trade with a little over $2,000 investment. You have shown me the power of options trading. Again, thank you so much for all your inputs.”

    GARETT
    “Hi Rick, thanks for the encouragement to play the dendreon calls! did freaking great! Got in the first lot at $1.44 on 3-24-09, sold at $2.45, 70% not bad. Bought it back at $2.30 on 4-7-09 closed out on 4-14-09 for 454% gain! Wow! I love it when that happens. So, thanks the encouragement to get back in when others were saying sell, sell, sell. Keep up the good work.”

    TERENCE
    “Rick – Thanks for Dendreon – it has made all the headlines today! I missed on RIMM earlier, but I’ve been holding onto DNDN calls since 3rd week March. Of course today it all paid off today, as DNDN rocketed up.”

    Jan. 31 2012
    Rick, new member...Studied all current trades, did some chart work,picked ZNGA, PEP, MGM...Sold on Feb. 2 for $3600.00 profit...Cost for 1-year membership to your newsletter was less than $1000.00..All I have to say..Thank you. John H –

    3/18/11
    Rick, I purchased 10 contracts of the Nike March 85 puts Thursday afternoon for $2.00. Thing is, I was upset because the puts went down to $1.60 or so before the market closed. Well, needless to say Nike didn’t impress Wall Street and when I turned on the computer this morning the puts were worth $7.10! Sold them for a $5,100 profit!. Thanks again, you are the MAN. Chuck J-

    2/3/12
    Hi Rick,

    I will start off with a thank you for your time and dedication to all
    the research you and your team commit yourself to. This is not me just being excited about the profits I have accumulated aka (bank) ! You have helped me get back to the passion I had of researching stocks/options. Keith N-

    Hi Rick,

    I want to share my great results on GMCR. Based on your comments on February 15th, I bought 20 options at $0.28. They closed today at $7.00, which is a 2,300% gain. My $560 dollars turned into $14,000 in less than a month. In decades of trading, this is my single best trade ever. Thank you! By the way, the Dow was down 228 points today and I could care less. What a great trade. It proves the amazing power of options. I am so grateful for your service, which calls it straight all the time, your options trading manual, and most of all, your amazing skill
    at finding winning trades. I have attached a copy of the trade from
    my brokerage screen.

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