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Friday, June 26th, 2009
10:00am (EST)
I wanted to wait until the market opened to do today’s morning blog. Futures were pointing towards a lower open and that we got. The Dow is currently down 46 points to 8,426 but was making a charge towards positive territory. However, the sentiment has been negative this morning and it remains to been seen if the bulls show up today.
One stock that is having no problem trading higher is Imax (IMAX, $8.10, up $0.28). The stock broke through $8 this morning and if shares can make it past its 52-week high of $8.28, we will be in great shape.
Another stock I’m watching this morning is ChangeYou.com (CYOU, $42.89, down $0.16) which jumped 10% yesterday. I’m kicking myself for not setting an “alert” when the stock fell to $35 on Monday…this was the bottom of its most recent trading pattern. I’m not sure what the July 40 calls (CQUGH, $4.60, down $0.10) were trading for on Monday but it couldn’t have been more than $1.50. The calls closed at $2.35 on Wednesday, opened at $2.50 yesterday and hit a low of $2.15 before doubling. They closed for a 100% return in one day.
If the stock makes a run at its 52-week high of $44.85, watch the July 50 calls (CQUGJ, $0.75, down $0.10). I’m not suggesting getting into a position now but but add them to your Watch List for next week or down the road. I like the action in this stock.
Tags: ChangeYou.com, Imax
Posted in Company Commentary, Market Commentary, Option Trades | No Comments »
Friday, June 26th, 2009
11:50pm (EST) Wednesday Night
There was a ton of action today in the market and it was a great day to be long. It’s been a busy week so let’s get to some of the action.
The Dow finished the day at 8,472 and the 175 pop puts us within spitting distance of 8,500. Just when you thought the bulls were dead. I echoed the “floor of support” at 8,250 for the Dow on Monday morning before the opening bell and the Dow closed at 8,300 that day. On Tuesday and Wednesday, the Dow hit a low of 8,239 and 8,246. Then we got today’s bounce. If it holds then it means we are reading the map right. So far, so good.
I also went on to say that for the S&P 500, support lies at 870 and 800. We got down to 888 for the S&P on Tuesday and today the index closed at 920. I got quite a few emails on the S&P 500 June 925 calls (JXDFZ, $1.10, up $0.25) today which was cool as some of you probably made some cash. I thought I was seeing things when I saw where they OPENED for 20 cents and hit a high of $2.60. Two sites confirmed this and I used the quote from CBOE (Chicago Board of Options) after seeing it in my OptionsXpress account:
Too bad we didn’t set limit orders, huh? I told you if you wanted to play the bounce these options would be hot and when I first looked at them this morning they were trading for $1.60. The options still have a huge spead (bid $1.15, ask $1.45). That is why I always stress limit orders folks because if you put in a “market order”, the market makers will scalp you.
Another trade that would have worked was Bed Bath & Beyond (BBBY, $31.08, up $2.69). I said last time out the company announced earnings the stock made a run from $25 to over $31. Today the stock opened at $30 and traded as high as $31.48. The July 30 calls (BHQGF, $2.00, up $1.24) opened at $1.15 and traded as high as $2.10. Just sayin’. That, and I constantly remind you that history does like to repeat itself when it comes to the market and certain stocks.
I talked about BBBY but I was more focused on the Imax (IMAX, $7.82, up $0.68) trades. We got some great entry prices if you did the trade(s) but the stock has a pattern of falling to $6-something and trading back up to $8, excuse me, $7.99.
The July 7.50 calls (IMQGU, $0.250, up $0.25) opened at $0.35 and at 10:10am they were at 60 cents. If you played these be careful not to give back your profits back and use stop orders. You could have easily made over 50% and rolled the profits into the September 7.50 calls (IMQIU, $1.00, up $0.15). I liked these the most out of the three call options I mentioned and they opened at 85 cents. By 10:10 they were at $1.10 and hit a high of $1.20. The December 7.50 calls (IMQLU, $1.55, up $0.30) also did well.
The stock hit resistance once again at $7.99 and its 52-week high is $8.28. If we get past those levels over the next couple of weeks the September 7.50’s will be money. For those wanting to get in, if we pull back, look to get in around $6.90.
The Bernanke testimony consumed most of my morning but it was good to see ol’ Ben taking the heat. That dude looked cool as a cucumber under pressure but almost cracked at one point. Still, the more he kept talking, the higher the market went.
Of course, one company/stock that kept getting mentioned over and over was Bank of America (BAC, $12.35, unchangd). The stock made it in positive territory by a penny after spending much of the day in the red. There wasn’t a rush to sell the stock as it held $12 which was a good sign. The November 15 calls (BYOKO, $1.04, down $0.01) look good down here at a buck.
Cisco Systems (CSCO, $19.03, up $0.42) rebounded back above $19 which was nice to see and Ford (F, $5.68, up $0.05). Monsanto (MON, $75.66, down $0.50) continued its slide as it fell to a low of $73.55. The July 75 puts (MONSO, $2.70, up $0.10) traded to a high of $3.90. That strangle trade I profiled was right on Q but it won’t be listed as an official trade in the portfolio results.
All-in-all we couldn’t have asked for a better day and let’s hope the trend continues into Friday. I’ll be back in the morning to let you know how we look heading into the open.
Rick@TheOptionInvestor.com
Tags: Ford, Imax, Monsanto
Posted in Company Commentary, Market Commentary, Option Trades | No Comments »
Thursday, June 25th, 2009
1:30pm (EST)
The market is having a great day and Ben Bernanke is holding his own. The Dow is currently up 175 points to 8,475. I’ve been watching the hearing all morning and it has been great. Real quick, if you remember yesterday, I said there was a way to play a breakout to the upside.
The S&P 500 June 925 calls (JXDFZ, $2.30, up $1.50) closed at 80 cents yesterday and OPENED at 20 cents this morning. Once Bernanke spoke, the love started pouring in.
Wherever you got in at, make sure you protect profits!
Also, Imax (IMAX, $7.63, up $0.49) is doing well and opened at $7.40. The stock has traded as high as $7.99 and has since slipped but people are starting to build positions. The 52-week high is $8.28.
I’ll be back tonight (or Friday morning) with a complete wrap.
Rick Rouse
Tags: Imax, S&P 500 call options
Posted in Market Commentary, Option Trades | No Comments »
Thursday, June 25th, 2009
1:30am (EST)
Mornin’ Folks,
One thing I didn’t go in-depth on last night was the Fed meeting. I mentioned if we would have gotten some stronger words, the bulls would’ve jumped on the wave and all the stars were aligned for us to have a huge pop. However, just before 2pm and the big Fed announcement there was an attack on Ben Bernanke and the words “cover up” were being echoed across Wall Street.
This could get interesting as Big Ben will be facing the House Oversight and Government Reform Committee today. Basically, it all comes down to what role he played in Bank of America’s (BAC, $12.35, up $0.12) takeover of Merrill Lynch. I don’t normally monitor these types of events but I may grab a cup of java and listen in. This won’t be O.J. material but it will have the feel of some “court room” drama. Somebody is going to be sweating bullets today…
I also mentioned the action in some of the stocks reporting earnings this week and we had another winner in after-hours trading last night. Bed Bath & Beyond (BBBY, $28.39, up $0.65) was up 7% in extended trading to $30.06, up $1.67. When the company reported three months ago, the stock jumped from $25 to over $31. We have seen some bullish action in the companies that are beating earnings and if that trend continues when we get the flood in July, the bulls will seek higher ground.
The bets were about even on the Bed Bath & Beyond July 30 calls (BHQGF, $0.76, up $0.18) and the July 25 puts (BHQSE, $0.36, down $0.14) as each option traded around 3,000 contracts. It appears the call options are going to do well today and here is an example where another strangle option trade could have been used.
As you can see, there are so many ways to play options and when you get into credit spreads and iron condors it gets even more interesting. Use these “pointers” as a way to start your own research. Like I said, the trade was there. I told you about the earnings announcements on Monday morning and you could have circled “BBBY” as a trade you could have researched. I always get asked how do you come up with trade ideas and these are the tips of the trade.
Information and creativity are traits you will develop as your put together your own trading plan. Collect as much information as you can on how options work and what moves them. The biggest thing you are looking for when directional trading is price action.
One last thing before we head into the opening bell…
Imax (IMAX, $7.14, up $0.19) was up sharply in after-hours to $7.44 and it appears investors finally might be rushing in to buy the stock. If you have been a regular reader of mine, you know I have talked about the stock for the past few years and have recommended bullish option trades in the past. Most recently, on May 6th, I had this to say (stock quote from that day):
” I have mentioned Imax (IMAX, $6.86, down $0.12) here in the blog numerous times and most recently on April 23rd. Back then, the stock was at $6.28 and hit a high of $7.19 yesterday before fading. The company will report earnings on Thursday and here is what we can expect.
The company is expected to post a loss of 8 cents a share compared to a loss of 25 cents a year ago. I have written more extensively on Imax in the article section of OptionsMentoring.com and here is my point.
Although I don’t actively buy stocks, there are some that offer tremendous trading opportunities. If you have been following a stock for three years you should know how it trades. Imax trades between $4 and $8 and it is a great way to add income to your portfolio on trading stocks you know.
On March 8th when I mentioned the stock, it was at $4.10. If you had bought a 1,000 shares of Imax at the time, you could have sold it yesterday for nearly a $3,000 profit in just two months. If you had bought 1,000 shares on April 23rd, you could have made a “G”.
Now, the key from here is to not buy the stock today but to wait and see how it reacts. If we get a dip below $6 we will have to see what the company says before deciding to get in.
For those of you who don’t have a lot of money to trade options (yet) you can always start off by building a portfolio of good, quality stocks that are “cheap” but with serious homerun potential. Imax has that potential.
If Imax ever turns a profit, this stock will easily trade in the double-digits.” (END)
We could see some big volume today and I wouldn’t rush in at the open but I still like this play. However, I’m also going to list some options that are a trade recommendation as well. The July 7.50 calls (IMQGU, $0.25, up $0.05) traded over 200 contracts yesterday which is huge because there just hasn’t been any volume in the option chains.
Looking further out, the September 7.50 calls (IMQIU, $0.70, unchanged) only traded 50 contracts while the December 7.50 calls (IMQLU, $1.25, up $0.10) traded just 20 contracts. Out of the 3 choices I like the September 7.50′s the most because if Imax is going to make a move it will be over the summer when they have a couple of back-to-back blockbusters coming. However, for 50 cents more you can buy three more months of time value if you go with the December call options and the call options would still double if Imax heads to $10.
If you do the September calls it also gives you a chance to play the upcoming earnings announcement which should be late July/ early August. The company’s earnings have been improving but they just did a secondary stock offering. They raised a bunch of cash so it will be interesting to see how much they burn while doing their rollout while at the same time how much they bring in with these blockbuster movies.
If you want to do further research just type in “IMAX” in the search box there on the left of this page and the past Blogs will rise on up. I still think it is safer to play the stock instead of the options but the September 7.50′s will be worth at least $2.50 if Imax makes it to $10 by then. That is over a 200% gain folks. Yes, it is a gamble but look at the story. Compelling. Make sure you use LIMIT ORDERS if you do enter the trade. This trade is High Risk/ High Reward and should be used for specualtive accounts only.
Rick Rouse
P.S. Big ups to the US soccer team for beating the #1 team in the world, Spain, to make it to the finals. Nice! Sunday at 2pm (EST), be there or be square!
Tags: Imax
Posted in Company Commentary, Market Commentary, Option Trades | No Comments »
Thursday, June 25th, 2009
8:45pm Wednesday night (EST)
The market started off on a good note after we got a great Durable Goods report in the morning. We got a surprise 1.8% increase when Wall Street was expecting a 0.9% decline. As a result, the Dow managed a triple-digit gain and ran up to 8,428 an hour or so into the session. However, I mentioned the big Fed meeting and we needed them to say something powerful. It could have been the wave the bulls might have surfed but instead the Fed’s comments led to a sell-off.
The Dow was up about 40 points before the 2:20pm announcement and maybe jumped 10 points when the news was released but the bears quickly jumped in and all of the morning’s momentum was lost.
I had mentioned to watch for a breakout and confirm a strong move if you wanted to play the upside but we never got one and there was no trade on the S&P 500 June 925 calls (JXDFZ, $0.80, down $0.20). I should have mentioned the puts but I thought there was a slight chance we get a breakout. This only confirms our tight trading pattern I have been talking about.
The good news is that we are getting some decent earnings reports and the companies reporting are seeing their stock price rewarded. Oracle (ORCL, $21.26, up $1.39) rose 7% after they announced a strong quarter and Sonic (SONC, $9.81, up $1.01) added 11%. I’ve done some Sonic blogs in the past but didn’t trust them this time around.
Some other things I want to talk about…the strangle trade on Monsanto (MON, $76.16, down $3.14). This was a “show-and-tell” trade for the new option traders we have on board and it would have been a huge homerun. The problem is that I couldn’t have updated the position on a “real-time” basis which is why we didn’t actually do the trade. I know some of the more seasoned options traders jumped all over it and here is how it played out.
The total cost of the trade would have been $535 (plus $10 in trading fees) as one call and one put option were trading for about $2.50 each on Tuesday. One of the things I said was “and you are hoping one side of the trade doubles after the company announces earnings”. Bingo.
The July 80 calls (MONGP, $1.40, down $1.95) were trading at $2.75 at the time I profiled the trade and soared to $4.10 right after the open. The stock raced to $82 before trending lower the rest of the day. You could have set stops at $3.90-$4.00 or when the stock fell back below $80 and collected that return. Let’s say you even got stopped out at $3.75. That is $375 back in your account.
The July 75 puts (MONSO, $2.60, up $0.60) traded to $3.10 and finished the day right at their profiled entry price so you could have closed them for $260. That gives you $635+ or a ballpark return of 20% in one day. Of course, you also could have kept the put options OPEN with the weak close we had and hope for more downside on Thursday or Friday.
Strangle (and straddle) options trades can work around earning announcements but as I’ve shown, you have to be at a computer or know what is going on in the market to pull one off most of the time. Keep this in your playbook and remember this down the road when you get more experienced trading options. Like I said, I don’t normally use these strategies but you can make some money if you know what you are doing.
Overall, it was a decent day as some of the trades we do have going held their ground. Ford (F, $5.63, up $0.10) made a run towards $6 and hit a high of $5.90. I have mentioned using a stop of $5 on the December call options we have open but make that a “loose” one. I still believe Ford gets to $8-$10 by the end of the year so I don’t want everybody to bail right away if we do get a breakdown.
Bank of America (BAC, $12.35, up $0.12) was making a run at $13 but still managed a small gain. The November 15 calls (BYOKO, $1.05, down $0.05) traded as high as $1.20 but finished the day lower. This another position of where we have a 55 cent stop but I’m also inclined to leave it open if we do test those levels. I don’t think we will but you never know with so many wild cards out there.
Cisco Systems (CSCO, $18.61, up $0.04) hit $19 which was a good sign and we are still holding the October 20 calls (CYQJD, $0.90, down $0.05). The stop is 75 cents but we will probably keep this one open as well.
Even if we do sell-off from here or when 2Q earnings roll in, there will be a market bounce. We hit lows in November and got a bounce and hit lows again in March and got a HUGE bounce. I don’t like the current environment but I try to take the emotions out of trading. You have to or otherwise you won’t follow your game plan.
Rick Rouse
Tags: Bank of America, Cisco Systems
Posted in Company Commentary, Option Trades | No Comments »
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Market Slightly Lower, Imax Up
Friday, June 26th, 2009
10:00am (EST)
I wanted to wait until the market opened to do today’s morning blog. Futures were pointing towards a lower open and that we got. The Dow is currently down 46 points to 8,426 but was making a charge towards positive territory. However, the sentiment has been negative this morning and it remains to been seen if the bulls show up today.
One stock that is having no problem trading higher is Imax (IMAX, $8.10, up $0.28). The stock broke through $8 this morning and if shares can make it past its 52-week high of $8.28, we will be in great shape.
Another stock I’m watching this morning is ChangeYou.com (CYOU, $42.89, down $0.16) which jumped 10% yesterday. I’m kicking myself for not setting an “alert” when the stock fell to $35 on Monday…this was the bottom of its most recent trading pattern. I’m not sure what the July 40 calls (CQUGH, $4.60, down $0.10) were trading for on Monday but it couldn’t have been more than $1.50. The calls closed at $2.35 on Wednesday, opened at $2.50 yesterday and hit a low of $2.15 before doubling. They closed for a 100% return in one day.
Tags: ChangeYou.com, Imax
Posted in Company Commentary, Market Commentary, Option Trades | No Comments »