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Monday’s Mid-Day Update

Monday, August 31st, 2009

1:00pm (EST)

The market has traded in the negative all morning following the continued turmoil in the Chinese market. Futures were weak all morning after the Shanghai Composite plunged nearly 7%, as investors dealt with liquidity concerns and an anticipated slowdown in lending. China has suggested they would cut back on bank lending in coming months, essentially removing one of the stimulus packages they have added to the Chinese economy.

As a result, the Dow is lower by 92 points to 9,451 while the S&P 500 is off by 12 and is currently at 1,016. The Nasdaq is down 1.3%, or 26 points, to 2,002.

Oil is back below $70 and has lost $3.30 and is currently at $69.44 a barrel. Oil is having a hard time breaking through the $75 level and the fundamentals have turned bearish after a pop last week.

As far as trades, I will go over them tonight and the entry prices for Dendreon (DNDN, $23.25, down $0.53) which is giving us a lower entry price. September is historically a nasty month for the market but May was supposed to be as well. This year we didn’t see a “sell in May and go away” attitude but we need to hold support levels if the bulls are going to prove September will be a month to remember.

Rick@MomentumOptionsTrading.com

Tags: China's Shanghai Composite Index, Dow, option picks, S&P 500
Posted in Option Trades | Comments Off

Disney Buying Marvel

Monday, August 31st, 2009

9:15am (EST)

The Walt Disney Company (DIS, $26.84) has agreed to acquire Marvel Entertainment (MVL, $38.65) in a stock and cash deal that will provide significant opportunities for Disney over the long run.

Under the terms of the deal and based Disney’s closing price as of Friday, Marvel stockholders will receive a total of $30 per share in cash plus approximately three quarters of a Disney share for each Marvel share they own. In other words, the merger equates to about $50 per Marvel share or approximately $4 billion.

Marvel is up $10 in pre-market trading to $48.75, Disney is down 70 cents to $26.14.

Rick@MomentumOptionsTrading.com

Tags: DIS, Marvel Entertainment, MVL, Option Trades, options trading strategies, Walt Disney
Posted in Mergers and Acquisitions | Comments Off

Dendreon

Sunday, August 30th, 2009

11:30pm (EST)

This is the last FREE option trade before we launch our paid service…

It has been a while since I have mentioned Dendreon (DNDN, $23.78, down $0.74) here in the Blog but it is STILL a stock I watch daily. Many of you have been following me when the stock was below $5 back in March and saw the explosion in the shares when news of its cancer drug, Provenge, took Wall Street by surprise.

I have been following the stock for years so I’ve become enamored with the company. I was fortunate enough to catch some of that action from $5 to $27 earlier this year. Some of our members made upwards of 2,500% on the option trades I profiled and they can researched by typing “Dendreon” in the search box. I also profiled a number of call AND put options when the story on provenge broke over two years ago.

There were a ton of talking heads telling everybody how risky this stock is and even Mr. Mad Money was telling you to stay away from the stock. I was going against the grain because I knew the story and I was blogging about it daily. Here is a chart for Dendreon over the past two years.

But that was then and this is now. The next chart I want to show you is the move from $5 to $27 for this year:

Now, notice how since May the stock has stayed in a”channel” after the explosive move? In 2007, after the drug was denied FDA approval, it spent the next two years consolidating in the single digits. For two years.

We then got the big move this year and the stock has done nothing since May. It is building the same base but at higher levels.

When you have stock that is “channeling” then usually a breakout eventually occurs either to the upside or downside. Basically it all comes down to timing and this is where beginning option traders make mistakes. We know the stock makes huge moves on any company drug new news and they are also building a nice pipeline. But Dendreon’s baby right now is Provenge and it is about to grow up.

The potential of FDA approval this time around is almost 100% and is expected in December. The company has already begun building a $70 million manufacturing plant in Hot-lanta with a 10-year land lease and will launch Provenge from its New Jersey manufacturing facility which is being expanded.

Dendreon has also made it no secret that it is searching for a corporate partner to market Provenge outside the US. In fact, a recent comment from it’s CEO, Dr. Mitchell Gold, was “we are in active discussions.” That sets the stage for worldwide sales, folks.

The company recently reported a huge loss in its most recent quarter as it prepares to bring the drug to market next year.

Most of my observations on Dendreon is positive and the one thing that “kinda” worries me are the arguements being made that expensive prostate cancer treatments must be made if we are to reform our nation’s bloated and expensive health care system.

However, it doesn’t change the fact that the stock could be on the move over the next few months. December is a given that we could see some movement because of the FDA news but we will also get a clue in September when the company has its webcast with Wall Street.

The timing thing I was talking about earlier is that some option traders might be betting on this conference call by playing the September options. Well, they expire on the 18th and the conference is a week LATER. There were some September call strike prices that traded over 1,000 contracts on Friday but the November 45 calls (UQBKO, $0.32, up $0.01) traded nearly 3,000 contracts. This was about 500 more contracts than the open interest indicating some traders are bullish

There are so many things that can happen between now and November. There are no listed December options, yet, on Dendreon and the November 45’s were the most active of the option strikes.

The stock has been slightly volatile of late because of the healthcare debate but there is also the chance of a partnership which could easily bring Dendreon a couple of hundred million.

These November 45’s are currently going for 32 cents and could get cheaper if the stock drifts lower. Since these things are so hard to time, Dendreon could be having this webcast for a number of reasons we may not even know about. I know I’m speculating but maybe there is something that moves this stock before then.

If you buy 30 contracts it would cost you about $1,000. To buy 1,000 shares of Dendreon it would cost you about $24 grand. That is the leverage that options provide and there is no clearer picture than that.

The 45 call strike price means that Dendreon must be above $45 a share for the options to be “in-the-money”. If not, these options will have a value of $0 even if the stock is at $44.99 by November.

This doesn’t mean that the call options won’t make money if the stock is not at those levels but these options could lose up to 50% in value before November gets here. The options are also more expensive because of the volatility.

I wouldn’t go out and buy normal positions this week. Instead you might want to do the trade in third’s or half’s. That means if you normally do 20 or 30 contracts, buy only 10 or 15 contracts. Then, if they get cheaper when Wall Street gets back from vacation (the market is closed next Monday) then we maybe complete the other half.

Rick@MomentumOptionsTrading.com

Tags: Dendreon, dndn, options trading strategies
Posted in Hot Stocks, Option Trades | Comments Off

Checking In

Friday, August 28th, 2009

2:00pm (EST)

The Dow is struggling after starting off the morning in the green. Intel (INTC, $20.25, up $0.78) got the ball rolling after the company raised its sales forecast for the current quarter from $8.9 billion to $9.2 billion and Dell (DELL, $16.08, up $0.43) came in with better-than-expected earnings. However, all the major indexes are now lower as the Dow has fallen 65 points and is currently trading at 9,515. The Nasdaq has slipped 6 points to 2,021 while the S&P 500 is down 5 to 1,025.

We added the Citigroup (C, $5.20, up $0.15) call options this morning and there are a few other names I like and don’t like.

As far as specific stocks, make sure you close the AIG (AIG, $49.81, up $1.97) call options today. The stock hit a high of $55.90 this morning which represented the perfect opportunity to sell the September 35 calls (IKGII, $15.80, up $1.70) which printed $21.00 today. Incredible. I’ve got another strangle option trade in the works for Sunday night and AIG has proven the kind returns that can made with strangles

DryShips (DRYS, $6.05, down $0.19) couldn’t carry the momentum from yesterday so there was no day trade.

I’ll be back Sunday night with the updates.

Rick@MomentumOptionsTrading.com

Tags: AIG, c, Citigroup, Dell, drys, IKG, INTC, Intel, options trading strategies
Posted in Company Commentary, Financial Stocks, Market Analysis, Option Trades | No Comments »

Layered Trade in Citigroup

Friday, August 28th, 2009

8:55am (EST)

Well, time to open up the playbook.

It may be preseason in the NFL but in option trading we are in the game every day. I’ve been pretty limited with our playbook because I have been feeding you a lot of information lately on how to use options but I’m excited.

We all know I have been putting in tight stops on some plays and loose stops on other trades. The reason I do that is beacuse I want each and every single one of you to make a ton of money. I get emails daily and as you would imagine most are good and some are bad. That is the nature of the game when you run a trading service and I know that.

The most important thing I want you to know is that if you are beginner option trader, don’t jump into this whole option trading thing blindfolded. Take some of the trades and follow them on paper. When my trading manual is ready, you will see how everything works in a better picture. And realize some of the trades I do are based how I manage money. All right, enough rambling…

I am looking at Citigroup (C, $5.05, up $0.42) once again and here is the deal. If you made 114% and 80% like you should have on the Citigroup trade then why not take that money and double down? The break above $5 was huge yesterday and that changes the ballgame because the stock becomes “marginable” again.

Buying on margin is like a double-edged sword. Margin buying is when you buy a stock with cash borrowed from your brokerage account using other stocks as collateral. By doing this, it will have a huge effect on any profit or loss you may have.

I have profiled the Citigroup January 7.50 calls (CAQ, $0.29, up $0.09) and the January (2011) 10 calls (VRNAB, $0.58, up $0.15) and they are a BUY today. We are going to do a “layered’ trade on Citigroup and here is what it will cost.

I always buy 10 contracts or more of an option and I’ve explained this because of brokerage fees. I usually do 20 lot trades and “half’ trades are normally 10 option contracts and sometimes even 5 contracts if the options are expensive.

If you buy 30 contracts of the January 7.50’s it’s gonna cost you $700. If you buy 20 of the 2011 January 10’s it’s gonna run you about $1,200. That is $2,000 in a layered Citigroup trade at current prices and that is usually how I manage each trade in my trading account. Sometimes when I say “do a half position” that means buying only 10 or even 5 contracts which means I’m only putting up $500 or $1,000. I have stuck to this plan for years and I never go outside of this comfort zone no matter how much I like a position. It is consistant with my overall trading strategies and it is what has kept my trading account growing year in and year out.

Back to Citigroup. Let’s just say the stock is at $10 by January 2010 and $20 by 2011.

You want numbers? The $700 you invested on the 7.50’s will be worth $7,500 (30 contracts x $2.50) because the stock is at $10 and the 2011 10’s would be worth $5 or $10,000 (20 contracts x $5) if Citigroup is at $15. So, your 2g’s is now worth $17,500.

That is how I’m approaching this trade from here on out. The risk is that this is all fluff and Citigroup’s numbers aren’t going to be as strong as many people feel they are going to be over the next few quarters.

Again, I like these call options and would “buy to open” today for a shot at having a huge payday in the future.

Update on MomentumOptionsTrading.com initial launch. Here are the introductory prices:

Monthly Recurring Subscription – $97 per month

Quarterly Subscription – $261 for 3 months. Save $30.

6-Month Subscription – $492 for 6 months. Save $90.

Annual Subscription – $924 for 12 months. Save $240.

Members Area:

Each week we will be introducing a new “Watch List” as a way to build and learn the different sectors of the market. The are dozens and dozens of sectors that have three or four stocks that really define their market. We show you how to follow them and create Watch Lists so that you will see where the money is flowing.

All of the current trades you see or that have been profiled will only be available in the Members Area.

We are expecting to launch by Monday but may do so over the weekend. Remember, we may limit the number of subscribers if the dmand is over subscribed.

Rick@MomentumOptionsTrading.com

Tags: Citigroup call options, Citigroup LEAP options, Momentum Option Trading, Momentum stocks
Posted in Financial Stocks, Option Trades, Rick's Account | No Comments »

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No fancy spreads. No iron condors. No need to watch the markets all day long.

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.

2) Also booked profits on your Berk Feb 74 (80%) and threw a major chunk of change at the March 75’s (190+%). I would have never known that Buffet's stock had split if it weren’t for your service. Bought the shares also for the long haul. Won’t look at them for another 20 years. Great job on getting us in before the indexes did.

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.”

Archive for August, 2009

Monday’s Mid-Day Update

Disney Buying Marvel

Dendreon

Checking In

Layered Trade in Citigroup