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Wednesday, July 29th, 2009
11:30pm (EST)
Don’t shoot the messenger…
Green Mountain Coffee Roasters (GMCR, $67.50, down $0.25) reported earnings after the bell and said profits doubled but they missed Wall Street’s expectations on the revenue side. I kept mentioning to get out of this earnings trade before the closing bell and now you know why…in after-hours trading the stock was down $5.
We did keep a couple of trades open going into earnings and we got a mixed bag from as Cerner (CERN, $65.13, up $0.95) missed the Street’s forecast while Visa (V, $66.78, up $0.48) beat expectations. So here is what we are looking at…
Cerner was down $2.63 to $62.50 in extended trading and the August 70 calls (CQNHN, $1.35, up $0.15) will likely take a beating.
Visa was only off by a $1 after the close and almost held even at one point. However, the August 70 calls (VEHHN, $1.15, down $0.15) still lost a little shine.
Now, this is important. There were stops listed for these two positions and they weren’t hit today but the Cerner’s call options will probably fall below the 65 cents stop. In other words, these call options still have three weeks before they expire so you can cut your losses or hope for a rebound. Go for the rebound.
With Visa, I don’t think the 80 cent stop will be hit but it could.
This is a tough call, no doubt. The thing to remember is that most of my trades DO NOT evolve around earnings announcements but every now and then I shoot the ball. It’s hard to tell people how much risk they should take on or how much money should go into a trade but if you look at the spreadsheet for all of my trades they are usually 10 or 20 lot contracts. In other words, I risk anywhere between $1,000 and $2,000 a trade. If an option is under 50 cents, I might buy 50 contracts. Or, if it is a risky trade I might only do 10 contracts which is $500.
So it depends on what level you want to take your trading to.
Trading around an earnings announcement is always tricky.
Now that I got that off my chest… Ford (F, $7.12, down $0.02) and Microsoft (MSFT, $23.80, up $0.33) have given us some nice returns while Bank of America (BAC, $13.52, up $0.18) wants to keep going higher. And let’s not forget what good fortunes IBM (IBM, $117.02) and Cisco (CSCO, $21.72, down $0.21) have brought to our pockets.
One last thought…Most of you know my “dislike” for Barron’s magazine. We had a few sweet Imax (IMAX, $8.78, down $0.22) trades that were making us some great returns before Barron’s ruined the momentum in the stock.
On June 25th, we went long the July 7.50 calls (IMQGU) at 35 cents and we played the trade like a fiddle. We had set an exit to be out by the July 4th weekend and we were for a profit of 143%. We were out at 85 cents.
Then came the Barron’s weekend article as Imax was setting 52-week highs and the height of the summer movie releases were about to hit.
The September 7.50 calls (IMQIU, $1.55, down $0.20) were at 85 cents in June and were stopped out at $1.00 on July 6th that Monday. As you can see, they have doubled. The December 7.50 calls (IMQLU, $1.90, down $0.05) were at $1.25.
Imax lost more than 10% after that Barron’s article but has since rebounded. I haven’t lost site of Imax and some of you may have kept the December calls open. Congrats.
Keep these on your Watch List but I wouldn’t pull the trigger again right now. Let’s see where they are next week.
Rick Rouse
Tags: Cerner, Cisco, Ford, Green Mountain Coffee Roasters, IBM, Microsoft
Posted in Company Commentary, Earnings, Market Analysis, Option Trades, Strategies, Trading Tips | No Comments »
Wednesday, July 29th, 2009
1:00pm (EST)
The bulls seem to be on vacation this week and the ones left behind are trying to hold Dow 9,000. The market is holding up well despite the lack of momentum which is a good sign. There are still political and economic risks to this market and I mentioned this morning the bulls are searching for the next catalyst.
The Dow is currently down 40 points to 9,057 and has been in the red all day. We have seen some buying in the late afternoon and hopefully we get that going into the close. There are, however, some pockets of strength in the market and we happen to be enjoying those gains in some of the stocks that are trading higher.
Ford (F, $7.21, up $0.07), Bank of America (BAC, $13.69, up $0.35) and Microsoft (MSFT, $23.57, up $0.10) continue to roll…
The fireworks are coming after the bell as Cerner (CERN, $64.69, up $0.51), Green Mountain Coffee Roasters (GMCR, $66.53, down $0.97) and Visa (V, $66.08, down $0.22) report earnings…
We were stopped out of the other half of the IBM (IBM, $116.37, down $0.91) August 115 calls (IBMHC, $3.00, down $0.70) and the August 105 calls (IBMHA, $11.69, down $1.17) are nearing the $11.00 stop. We were also stopped out of the DryShips (DRYS, $6.57, down $0.22) September 7.50 calls (OOCIU, $0.50, down $0.10) at 50 cents. The entry price was 35 cents which gave us about a 50% return.
That is all I have for now and I will be back tonight (by 11pm EST) to give the update.
Rick@MomentumOptionsTrading.com
Tags: $64.69, Bank of America, Cerner (CERN, DryShips, Ford, Green Mountain Coffee Roasters, IBM, Microsoft, up $0.51), Visa
Posted in Company Commentary, Earnings, Option Trades | No Comments »
Wednesday, July 29th, 2009
9:00am (EST)
Futures are pointing towards a negative open after Durable Goods orders came in lower than expected. Dow futures are down 38, S&P 500 index futures were down 6, while Nasdaq futures were down 7.
I mentioned the bulls were trying to hold Dow 9,000 and with earnings season nearing a close the bulls are looking for the next catalyst.
Bank of America (BAC, $13.34, up $0.25)
November 15 calls (BYOKO, $1.00, up $0.05)
Entry Price: $1.50 (6/12/09)
Exit Price: $2.25
Return: -33%
Stop: If BAC falls below $11, close the position.
Action: This position has gained over 30% since Sunday night’s Weekly Wrap but is still down from an entry price of $1.50. Open Interest continues to build in the November options as the 15’s have an OI of over 100,000 contracts. That means there are a lot of bets being placed at the $15 strike and they are very liquid. This is great if you are trading 50 or 100 lot contracts. I still like current positions at these levels.
For our new subscribers, BofA was below $5 on March 11th when I recommended a couple of call options, May 6’s and July 10’s. They returned 400% and 500% as BofA stood at $10 a month later. If you do the math and the stock doubles from here it puts BofA at $26. These calls would be worth $11 and you would have a 1,000% return on you hands. Anything is possible, right? However, all we are looking for is a run past $15 so we can double or triple or money. (PS, if you haven’t gotten my track record for 2009 or 2008, email us by going to the website and sending us a request)
Cisco Systems (CSCO, $21.93, up $0.09)
October 20 calls (CYQJD, $2.50, up $0.05)
Entry Price: $1.50 (6/2/09)
Exit Price: $3.00
Return: 67%
Stop: $2.00
Action: Tech held up well on Tuesday and Cisco traded up to $21.99. The 52-week high is $25.25 which is my target for the stock. The options traded as low as $2.16 so we will keep the $2.00 stop in place.
Green Mountain Coffee Roasters (GMCR, $67.50, down $0.25)
August 80 calls (QGMHP, $1.50, down $0.10)
Entry Price: $1.40 (7/27/09)
Exit Price: $2.10+
Return: 7%
Stop: $0.70
Action: The goal is to be out of this trade by the closing bell. We will be watching this one all day as the company reports earnings after the bell today. These options are inflated meaning the premiums are rich so be careful with this one. If you can escape with a gain, even if it’s 10%, it may be better than leaving this one open.
Buffalo Wild Wings (BWLD, $39.32, up $2.21)
August 40 calls (BQUHH, $1.25, up $0.01)
Entry Price: $1.10 (7/27/09)
Exit Price: $1.50 (7/28/09)
Return: 36%
Stop: CLOSED
Action: I told you the best time to sell is at the open and these calls traded as high as $1.60. The first 20 minutes are when the sharks are in the water and we all know sharks usually win these battles. I can’t stress this point enough to the beginners we have on board. If a stock is hot, the best time to sell is shortly after the bell because all of the rookie options traders were in there BUYING these call options on Buffalo reporting and beating Wall Street’s estimates. Each earnings trade is different as you will see and it’s best to have a plan going in and an exit on when to close the trade.
This trading tip is invaluable.
Cerner (CERN, $64.18, down $0.81)
August 70 calls (CQNHN, $1.20, down $0.15)
Entry Price: $1.30 (7/27/09)
Exit Price: $2.20
Return: -8%
Stop: $0.65
Action: Cerner got a 50 cent pop at the open and these call options trades as high as $1.50. The company reports after the bell on Wednesday.
Another point I want to make is how some option traders will only look for a 20 or 30 cent move in an option and then sell it. If you buy 20 contracts and an option goes up 30 cents in price you have made $600. Do it twice a week and you are making $50,000 a year. Hard but not impossible.
I’m throwing all of this information and tips at everybody this morning because I’m trying to teach you how to use options and the many different ways people trade them. What kind of profits you want to make is up to each trader. And each trader’s strategy is different. Some people like straddles and strangles, some investors write covered calls while others get naked. “Naked” option trading is not my game but all it means is that you are taking on a ton of risk.
Microsoft (MSFT, $23.47, up $0.36)
August 23 calls (MSQHQ, $0.98, up $0.23)
Entry Price: $0.78 (7/27/09)
Exit Price: $1.60
Return: 26%
Stop: $0.30
Action: Well, well, well…Yesterday I said “these calls options are technically in-the-money and we only need the stock to recover by 5% to make a decent return off of the trade.” Microsoft was in the red all morning but made a comeback along with the Nasdaq. The stock only made a 1.5% gain but the options gained 30%. Again, it was a short-term trade and I wanted to be out Friday. Hopefully we can ride this one a little higher but 25% is 25%.
IBM (IBM, $117.28, down $0.35)
August 105 calls (IBMHA, $11.69, down $1.17)
Entry Price: $3.40 (7/14/09)
Exit Price: $12.00 (7/24/09 1/2 the trade was closed)
Return: 253%
Stop: $11.00
August 115 calls (IBMHC, $3.70, down $0.40)
Entry Price: $1.05 (7/16/09)
Exit Price: $2.00 (7/24/09 1/2 the trade was closed)
Return: 281%
Stop: $2.00-$2.25, raise to $3.25
Action: We closed half of each side of these call options to make it a risk free trade from here on out. Our stops are in place and you’ll notice I raised the stop on the August 115’s. IBM has made a nice run but $118 is the new hurdle. The stock was down 60 cents in after-hours so we may be close to getting stopped out on the other half of the trade.
Visa (V, $66.30, down $1.89)
August 70 calls (VEHHN, $1.30, down $0.50)
Entry Price: $1.60 (7/27/09)
Exit Price: $3.20
Return: -19%
Stop: $0.80
Action: Visa will no doubt be the crown jewel of announcements on Wednesday. On Monday, the company said it would “continue to meet or exceed” Wall Street’s expectations. The numbers we want to watch for after the close is 64 (cents a share) and $1.63 billion on the revenue side. Warning: If Visa misses or doesn’t impress the Street then these options will drop like a rock if the stock heads south.
DryShips (DRYS, $6.79, down $0.29)
August 7 calls (OOCHJ, $0.50, down $0.15)
Entry Price: $0.25 (7/21/09)
Exit Price: $0.65 (7/27/09)
Return: 160%
Stop: CLOSED
September 7.50 calls (OOCIU, $0.60, down $0.13)
Entry Price: $0.35 (7/21/09)
Exit Price: $0.70
Return: 71%
Stop: $0.40, raise to 50 cents
Action: I don’t like giving gains back which is why we closed the August calls on Monday for a 160% return. The September call options had given us over a 100% gain and our stops were set just above our entry point to protect profits. I didn’t like the action in DryShips yesterday which is why I raised the stop. These calls hit a low of 45 cents on Tuesday so if DryShips doesn’t rebound we will let the market take us out with a small profit. This is exactly why we sold the August options. DryShips is a very liquid stock capable of making huge moves but let’s take what the market gives us.
Ford (F, $7.14, down $0.13)
December 6 calls (FLI, $1.63, down $0.07)
Entry Price: $1.25 (5/18/09)
Exit Price: $2.50
Return: 30%
Stop: $1.00, raise to $1.45
December 7 calls (FLJ, $1.06, down $0.01)
Entry Price: $1.00 (5/18/09)
Exit Price: $1.50-$2.00
Return: 6%
Stop: 50 cents, raise to 75 cents
Action: It is looking as though Ford is trying to build a solid base at the $7 level which would be perfect for this longer-term play. If we can build a base at $7 then move towards $8-9 then were are golden.
Check back after lunch for an update on today’s action.
Rick Rouse
Tags: Bank of America, Buffalo Wild Wings, Cerner, Cisco Systems, DryShips, Ford, Green Mountain Coffee Roasters, IBM, Microsoft, Visa
Posted in Earnings, Option Trades, Stock Earnings, Strategies, Trading Tips, Yahoo / Microsoft | No Comments »
Tuesday, July 28th, 2009
1:00 pm (EST)
The bulls are struggling to extend yesterday’s gains as the Dow is currently down 67 points to 9,041. There is a bevy of news, some good, some bad. Most of our positions are holding up well and the bulls still appear as if they want to hold Dow 9,000. Wednesday and Thursday will be crucial in the direction that some of our trades will be taking. A few I want to talk about now are…
Buffalo Wild Wings (BWLD, $39.24, up $.13) has made a high of $39.80 but I mentioned $40 being a serious area of resistance. The August 40 calls (BQUHH, $1.230, up $0.05) traded as high as $1.60 when the market opened and one of the trading tips I gave was that it is better to sell at the open then buy. The premiums in the options were a little jacked-up going into earnings which is why we aren’t seeing a bigger pop. This trade wasn’t a homerun but we weren’t expecting one. This trade is now officially closed and if you decide to leave the position open it could do well IF Buffalo breaks $40.
I warned you of the risks of leaving the August call options on DryShips (DRYS, $6.68, down $0.40) open. We closed the August 7 calls (OOCHJ, $0.50, down $0.15) yesterday at 65 cents for 160% return and they are still up 100% from an entry level price of 25 cents on July 21st. The September 7.50 calls (OOCIU, $0.55, down $0.18) have a stop of 40 cents. Earnings are Friday.
USEC (USU, $4.15, down $2.03) was the one trade that blew up on us. I mentioned in the Weekly Wrap to hold off on opening any new positions and I’m glad I did. The August 7.50 calls (USUHU, $0.05, down $0.20) were recommended at 52 cents on July 16th based on the company getting some funding. They were at 26 cents Monday morning. This trade was based on an event and I knew the stock was capable of making a 50% move but I was VERY surprised that they did NOT get the funding. The smarter trade would have been to place a strangle or a straddle on the position…the August 5 puts (USUTA, $1.10, up $0.85) are up over 325% today.
For those of you who have just signed on this week, scroll down to get a complete overview of the trades. I have started a new format that gives entry and exit prices and what the current “Action” is but sometimes I will talk about trades in this format.
If I don’t do an update tonight, I’ll be back with the complete list of the trades in the morning. For our new readers, I post the Blog before 9:30am, or before the opening bell, and another around lunchtime between 12pm and 2pm. If I post at night, it’s a bonus and it means we are busy. I wanted to get this information out because some of you have said you don’t have time to check me every hour. This way, you can check on the market or trades at set times so that you won’t be guessing when I post.
Also, if some of you would like to follow some of the past trades, request a track record, and look up the trades in the archived sections. Each trade on the spreadsheet has a date and you can reference it by doing a search or through the archives. Many of you who have followed me for a couple of years know I don’t blow smoke. I have included the time in the Blog posts so that when subscribers click on the Title of the blog they can see that the times I post are accurate.
We are the only website that I know of that makes our trading results available, ALL of them. My success rate is 70%-75% on directional trading and I want everyone to be able to use this blog to their advantage. Take a look at the Watch Lists and Trading Tips in the Categories section if you are new. The goal is to be able to follow a ton of stocks in a little amount of time to se where the money is flowing. This is how I come up with trades. We target 100% returns while keeping losses at 50%.
I didn’t mean to be long-winded but I want all of you to get the most bang for your buck with your subscription. And as always, email me if you have ANY questions. I respond in 24 hours or less. Also, if you are new to options trading and do not have a trading account, I will help you set up one. Just ask.
That is all I have for now. See you tonight or in the morning.
Rick@MomentumOptionsTrading.com
Tags: Buffalo Wild Wings, DryShips, USEC
Posted in Earnings, Option Trades, Strategies, Trading Tips, Watch Lists | No Comments »
Tuesday, July 28th, 2009
9:25am (EST)
Ahead of the opening bell, Dow futures are lower by 50, or 0.5%, to 9,024. The S&P 500 index futures are down 7, or 0.7%, to 973, while Nasdaq futures are off by 9, or 0.6%, to 1,590. This equates to about a 40 or 50 point loss for the Dow going into the open.
I went over a lot of trades last night and we will be looking to see how Buffalo Wild Wings (BWLD, $37.11) opens this morning. The bid is around $38 so we will have to see where the August 40 calls (BQUHH, $1.25) open. We are looking for quick profits on this one…
DryShips (DRYS, $7.08) is back below $7 and is currently down 14 cents in pre-market trading. We closed out the August calls last night and have a tight stop on the September call options.
Rick@MomentumOptionsTrading.com
Tags: Buffalo Wild Wings, DryShips
Posted in Company Commentary, Option Trades | No Comments »
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Wednesday’s Wrap
Wednesday, July 29th, 2009
Tags: Cerner, Cisco, Ford, Green Mountain Coffee Roasters, IBM, Microsoft
Posted in Company Commentary, Earnings, Market Analysis, Option Trades, Strategies, Trading Tips | No Comments »