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Thursday, December 18th, 2008
Take-Two Interactive Software (TTWO, $9.07, down $3.00) is down 25% after reporting lousy earnings. The company posted a loss of $15 million, or $0.20 a share, which doubled the loss of $7 million, or $0.10 cents a share, from a year ago. Even worse, Take-Two said it now expects earnings to range from zilch to $0.20 a share for next year. Wall Street had forecast an estimate of $1.21. Whew!
We should have seen this coming after Electronic Arts (ERTS, 16.75, down $0.47) warned earlier this month that its year-end earnings would fall short of its expectations. The company blamed disappointing holiday sales, but “analysts” said that should not be viewed as an indication of Take-Two’s performance.
Yeah, and we were suppose to believe that one? If one company says sales are weak, it’s going to effect others. Although Take-Two has some premium games, the enthusiasm has peaked to some degree.
It would have been a risky trade but here is one case where a put option on Take-Two would have paid off. The December 10 puts (TUOXB, $1.00, up $0.80) are up 400% and I have to admit I blew that one (sly grin). I had mentioned in the Weekly Wrap that the company would be reporting earnings this week and a $200 all-or-nothing trade would have been worth a grand. Pretty sweet.
What is still hard to believe is that Take-Two turned down Electronic Arts offer of $27 a share months ago to buy the company…
Rick Rouse
Rick@OptionsMentoring.com
Tags: Electronic Arts, Take-Two Interactive Software
Posted in Earnings | No Comments »
Thursday, December 18th, 2008
The market started Wednesday off in the red and managed to turn things around in the afternoon before giving up its gains in the final two hours. There wasn’t any panic selling and it appears both bulls and bears are waiting to see how Friday unfolds with Triple Witching. Then again, the Volatility Index (^VIX, 49.84, down 2.53) was at 80 just three weeks ago and is now below 50. As the VIX continues lower, the market gets more confident.
Although the VIX retreated, the Dow finished lower by 100 points and closed at 8,824. The S&P dipped 9 points to 904 while the Nasdaq slipped 10 points to 1,579. Once again, the Dow couldn’t penetrate the 9,000 level and several more failed attempts would not be good.
The dollar tanked after the market had a full day to digest what the new Fed rates will do for the economy. The dollar dropped more than 4 cents to $1.44 versus the euro. Over the past week, the dollar has plunged nearly 10%, moving well away from October’s two-year high of $1.23 versus the euro. The Fed frenzy is weakening the dollar but we got a ways to go before we should panic.
Of course, I’ve been bleeding yellow as the gold stocks have rallied but all of our positions hit their stops yesterday.
Barrick Gold (ABX, $35.49, up $0.58) traded as high as $37.84 and our December calls were closed for a 100% return while the January calls were closed for about a 30% gain.
Goldcorp (GG, $30.62, down $1.03) fell 10% from its high of $33.20. The December 30 calls (GGLF, $1.25, down $0.90) traded as high as $3.30 and were profiled at $1.65 Monday morning. Good thing we set that $2.90 stop, huh? The January calls returned 25%.
It was all downhill for Newmont Mining (NEM, $39.17, down $0.84) after the stock hit a high of $41.79. The December calls were closed for a double while the January calls returned about 35%.
All-in-all these were great returns for three days worth of work. Gold finished at $868 an ounce, up $26, and could continue higher. I’m not quite sure if gold will break $1000, let alone $900, but it worked well for us this week. There will be another opportunity to trade gold again (we have traded gold numerous times this year) and we made a few triples this time around.
The last time gold broke $900 was September 23 when gold prices surged more than $44 an ounce to settle at $909 for the day. That was the same day oil jumped $25 to over $130 a barrel. Those were huge moves but now gold is at $870 while oil is at $40. See what I’m saying…
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold, Goldcorp, Newmont Mining, VIX
Posted in Gold, Market Analysis, Oil, VIX | No Comments »
Wednesday, December 17th, 2008
Gold is up strong this morning as the yellow metal is higher by $27 and now stands at $870/ ounce. I’ve been talking about the correlation between gold and a weak dollar and the gold trades outlined on Monday have been low risk/ high reward. I have been expecting a continuation of the sell-off in the dollar and today’s move in gold could put it on a track to $900 by the end of the week.
This week’s “triple witching” options expiration on Friday could have a big effect in both gold and silver. If gold continues higher it will fuel the buying in the shares of gold producers. Barrick Gold, Goldcorp, Gold Fields and Newmont Mining all are moving higher today.
Barrick Gold (ABX, $36.90, up $1.99)
The December 35 calls (ABXLG, $2.15, up $1.00) were going for 80 cents. Set stops at $1.60 and remember they expire this Friday. The January 35 calls (ABXAG, $4.10, up $0.90) were profiled at $2.70. Set stops at $3.75.
Goldcorp (GG, $32.65, up $1.00)
The stock is up $2 in two days and the December 30 calls (GGLF, $3.00, up $0.85) are now deep in-the-money. They haven’t quite hit a double from an entry price of $1.65 but set stops at $2.90. The January 30 calls (GGAF, $4.60, up $0.60) were at $3.50 and are up 30%. Set stops at $4.25.
Gold Fields (GFI, $9.78, down $0.30)
The December 10 calls (GFILB, $0.20, down $0.30) were profiled at 50 cents. They hit a high of 70 cents when the stock hit $10.10 but are quickly fading. The January 10 calls (GFIAB, $1.20, down $0.10) closed yesterday at entry prices but are down 8%. Gold Fields has always lagged the “Big Three” and really, probably, should’ve never made this list.
Newmont Mining (NEM, $41.59, up $1.49)
The December 40 calls (NEMLH, $2.00, up $0.70) were trading for $1 and you could close positions now for a 100% return. We will keep the January 40 calls (NEMAH, $4.30, up $0.70) open which were profiled at $2.85 and are showing a gain of over 50%. Set stops at $3.90.
It looks like NovaGold Resources (NG, $2.87, up $1.15) is going to get the $20 million it needs to survive. The stock was trading at $1.30 and I had mentioned the heavy volume it was experiencing as the bears were circling the wagons. Three weeks ago the stock dropped 80%, from $1.70 to 58 cents, when the company announced that it might not be able to repay the loan. Don’t get caught up in the hype.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold, Gold Fields, Goldcorp, Newmont Mining
Posted in Commodities, Company Commentary, Gold | No Comments »
Wednesday, December 17th, 2008
Looks like Wall Street got an early Christmas present after yesterday’s surprise Fed announcement concerning interest rates. Most experts had expected the Fed would cut the rate for overnight loans between banks from 1% to 0.5% but jaws hit the floor when the Fed said it use “all available tools” to deal with the current economic crisis. The rate now stands at a range of zero to 0.25%. Amazing.
The news sparked a big rally as the Dow surged 360 points, or 4%, to close at 8,924. The S&P 500 jumped 45 points to finish at 913 while the Nasdaq outperformed both, charging higher by 5.4% and settled at 1,589. More on the Nasdaq in a minute.
Naturally, the flood of money had an adverse effect on the U.S. dollar which fell hard after the FOMC made its statements. A weak economy and low interest rates are not the best elements for a rising dollar which had done well against other currencies recently. However, we got a new ballgame now.
Oil prices slipped about $1 to $43.55 a barrel ahead of today’s OPEC meeting. There is talk they could cut production by 2 million barrels per day so the market will be watching this event closely. Despite the drop in oil, gold put in a good day as it added $6.20 and now stands at $842.70/ ounce. Good news for the gold stocks as well. The gold trades from Monday morning’s blog are up 20+%.
The surge in the Nasdaq also paid big dividends for our PowerShares QQQ Trust (QQQQ, $30.56, up $1.40) trade. The December 29 calls (QAVLC, $1.65, up $0.72) were originally profiled at 80 cents and were going for $1.15 before the Fed announcement. Our initial target was $1.20 so if you held out you gained another 30% which now makes the trade a solid double from our original entry price. If you closed the trade out before the market closed on Tuesday, good for you. If you sold half and kept the other half open then you could be looking at further gains if the market continues to rally.
Goldman Sachs (GS, $76.00, up $9.54) added on another $4.50 after I mentioned their earnings yesterday morning. If hindsite is 20/20 then I should’ve pounded the table on the December 75 calls (GSLO, $3.55, up $2.30) which were going for $1.50 at the time. I told you there would be some action in the calls but they were too rich for my blood. They traded to a high of $4.70. Yeap, we could have turned $1,500 into $4,700 in a matter of hours…
Futures are pointing towards a lower openimg this morning so I wouldn’t be surprised if these two trades gave back a little of their profits to start the day. However, it will be interesting to see if the Dow can take out 9,000 and if the Nasdaq can trade past 1625-1650 today and add to yesterday’s gains. With 15 minutes to go before the opening bell, the Dow futures are down 81, Nasdaq futures are down 6 while the S&P futures are lower by 10.20.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Dow Futures, Goldman Sachs, Nasdaq futures, PowerShares QQQ Trust
Posted in Company Commentary, Economic News, Market Analysis | No Comments »
Tuesday, December 16th, 2008
I put out a trade yesterday morning that is off to a good start. The Dow is enjoying a triple-digit gain on the heels of a historic FOMC meeting. More importantly, the Nasdaq is outperforming the Dow as it is up over 2%, or 35 points, to 1,543. The PowerShares QQQ Trust (QQQQ, $29.85, up $0.69) look poised to break $30 if we can continue the rally and get an even stronger close.
We took a look at some December options that I said could easily experience 20%-25% swings during the trading day this week and here we are. I wanted to provide some insight to the trade and why I decided to go long. The December 29 calls (QAVLC, $1.15, up $0.22) were going for 80 cents and I was pretty bullish on the market’s direction this week. I had did my homework over the weekend and looked at the past trading patterns of “triple witching” week. I had also factored in the barrage of news that would be hitting the market and how sentiment could be turning. I normally play options on stocks but I figured there was a chance to make a quick return by playing the market straight-up.
Things got even better when as we got a break when the market opened lower on Monday morning and we were able to get into this position at 80-85 cents. My initial target was $1.20 as an exit. Well, we’re right there heading into the Fed meeting. If you close the trade right now you walk away with a 50% return in less than 24 hours. If you hold out and the market takes a dive on the Fed news, you will quickly see a loss. However, if the market continues its rally, you could make even bigger gains. You could also close half out and let the rest ride.
Welcome to the life of an option trader…
Rick Rouse
Rick@OptionsMentoring.com
Tags: FOMC meeting, life of an option trader, PowerShares QQQ Trust trade
Posted in Company Commentary, Strategies | No Comments »
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Gold Stocks Continue Rally
Wednesday, December 17th, 2008
Gold is up strong this morning as the yellow metal is higher by $27 and now stands at $870/ ounce. I’ve been talking about the correlation between gold and a weak dollar and the gold trades outlined on Monday have been low risk/ high reward. I have been expecting a continuation of the sell-off in the dollar and today’s move in gold could put it on a track to $900 by the end of the week.
This week’s “triple witching” options expiration on Friday could have a big effect in both gold and silver. If gold continues higher it will fuel the buying in the shares of gold producers. Barrick Gold, Goldcorp, Gold Fields and Newmont Mining all are moving higher today.
Barrick Gold (ABX, $36.90, up $1.99)
The December 35 calls (ABXLG, $2.15, up $1.00) were going for 80 cents. Set stops at $1.60 and remember they expire this Friday. The January 35 calls (ABXAG, $4.10, up $0.90) were profiled at $2.70. Set stops at $3.75.
Goldcorp (GG, $32.65, up $1.00)
The stock is up $2 in two days and the December 30 calls (GGLF, $3.00, up $0.85) are now deep in-the-money. They haven’t quite hit a double from an entry price of $1.65 but set stops at $2.90. The January 30 calls (GGAF, $4.60, up $0.60) were at $3.50 and are up 30%. Set stops at $4.25.
Gold Fields (GFI, $9.78, down $0.30)
The December 10 calls (GFILB, $0.20, down $0.30) were profiled at 50 cents. They hit a high of 70 cents when the stock hit $10.10 but are quickly fading. The January 10 calls (GFIAB, $1.20, down $0.10) closed yesterday at entry prices but are down 8%. Gold Fields has always lagged the “Big Three” and really, probably, should’ve never made this list.
Newmont Mining (NEM, $41.59, up $1.49)
The December 40 calls (NEMLH, $2.00, up $0.70) were trading for $1 and you could close positions now for a 100% return. We will keep the January 40 calls (NEMAH, $4.30, up $0.70) open which were profiled at $2.85 and are showing a gain of over 50%. Set stops at $3.90.
It looks like NovaGold Resources (NG, $2.87, up $1.15) is going to get the $20 million it needs to survive. The stock was trading at $1.30 and I had mentioned the heavy volume it was experiencing as the bears were circling the wagons. Three weeks ago the stock dropped 80%, from $1.70 to 58 cents, when the company announced that it might not be able to repay the loan. Don’t get caught up in the hype.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold, Gold Fields, Goldcorp, Newmont Mining
Posted in Commodities, Company Commentary, Gold | No Comments »