12:45pm (EST)
The bulls showed up today to try and take the market into positive territory for the month but they have a long way to go. We have talked about how Wall Street uses January as a barometer to gauge how the market might trade for 2010 so we knew we would probably go higher today.
The theory goes that if the Dow ends January higher there is usually a pretty good chance the market ends higher for the year. If the index is lower, the market ends the year with a loss.
Based on this theory we thought the bulls would show up yesterday as well because they needed a couple of hundred points to take the Dow into positive territory for the month. They lost 100 yesterday so we are about 300 points away…Currently, the Dow is at 10,145, up 25 points and would need to reach 10,428 for the bulls to pull this one off.
If the Dow does end the month for a loss, we don’t think it’s a slam dunk we end 2010 lower but the current market environment feels like we are going lower over the near-term despite today’s rally.
We wanted to do an update on Amazon.com (AMZN, $129.00, up $2.97) now that we can give you exact prices for the strangle trade we talked about yesterday. Here were our comments:
“The premiums are probably overpriced or super rich for Amazon.com (AMZN, $123.19, up $0.44) which is why we won’t play this one but the ideal place to try and do this trade would be at the $125 level.
The February 135 calls (QZNBG, $2.90, down $0.05) and the February 115 puts (QZNNC, $3.80, flat) would cost $6.70 or $670 for just one contract of each which is why we said the premiums are rich and we are NOT doing the trade.”
If we take the current prices for these options the calls are at $2.16, down $1.42 while the puts are at 90 cents, down $2.30. This is only $3+ in premium so you would be down 50%.
The strangle trade with Netflix (NFLX, $63.15, up $0.11) wasn’t priced as rich as Amazon’s and we used both of these trades to show the risks of not knowing what to look for. One trade would have returned 200% while the other was a loser.
We have received a tremendous amount of feedback from our subscribers wanting these types of trades so we will be offering them in the future at no additional charge. However, please remember these types of trades won’t be as frequent because we have to find the right candidates and we need movement of 10%. In other words, they are a little harder to find.
Special Announcement: We have told you about the new changes coming to the options market and it looks like it is right around the corner. New options tickers will take effect on February 12th and some financial sites are already using the updated 21-character symbols.
We will be talking about these changes in the Members Area THIS weekend as we also begin to implement the new ticker symbols.
One bit of good news…Berkshire Hathaway Class B (BRK/B, $77.44, up $3.69) continues its recent surge and our subscribers are enjoying some HUGE gains on the call options we recommended last Thursday. At current levels, the trade is up 200%. We have locked in profits on half but we think this stock easily runs to $100 sometime this year.
Tags: option picks, option signals, options alerts, stock options trading
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Working For The Weekend
12:45pm (EST)
The bulls showed up today to try and take the market into positive territory for the month but they have a long way to go. We have talked about how Wall Street uses January as a barometer to gauge how the market might trade for 2010 so we knew we would probably go higher today.
The theory goes that if the Dow ends January higher there is usually a pretty good chance the market ends higher for the year. If the index is lower, the market ends the year with a loss.
Based on this theory we thought the bulls would show up yesterday as well because they needed a couple of hundred points to take the Dow into positive territory for the month. They lost 100 yesterday so we are about 300 points away…Currently, the Dow is at 10,145, up 25 points and would need to reach 10,428 for the bulls to pull this one off.
If the Dow does end the month for a loss, we don’t think it’s a slam dunk we end 2010 lower but the current market environment feels like we are going lower over the near-term despite today’s rally.
We wanted to do an update on Amazon.com (AMZN, $129.00, up $2.97) now that we can give you exact prices for the strangle trade we talked about yesterday. Here were our comments:
“The premiums are probably overpriced or super rich for Amazon.com (AMZN, $123.19, up $0.44) which is why we won’t play this one but the ideal place to try and do this trade would be at the $125 level.
The February 135 calls (QZNBG, $2.90, down $0.05) and the February 115 puts (QZNNC, $3.80, flat) would cost $6.70 or $670 for just one contract of each which is why we said the premiums are rich and we are NOT doing the trade.”
If we take the current prices for these options the calls are at $2.16, down $1.42 while the puts are at 90 cents, down $2.30. This is only $3+ in premium so you would be down 50%.
The strangle trade with Netflix (NFLX, $63.15, up $0.11) wasn’t priced as rich as Amazon’s and we used both of these trades to show the risks of not knowing what to look for. One trade would have returned 200% while the other was a loser.
We have received a tremendous amount of feedback from our subscribers wanting these types of trades so we will be offering them in the future at no additional charge. However, please remember these types of trades won’t be as frequent because we have to find the right candidates and we need movement of 10%. In other words, they are a little harder to find.
Special Announcement: We have told you about the new changes coming to the options market and it looks like it is right around the corner. New options tickers will take effect on February 12th and some financial sites are already using the updated 21-character symbols.
We will be talking about these changes in the Members Area THIS weekend as we also begin to implement the new ticker symbols.
One bit of good news…Berkshire Hathaway Class B (BRK/B, $77.44, up $3.69) continues its recent surge and our subscribers are enjoying some HUGE gains on the call options we recommended last Thursday. At current levels, the trade is up 200%. We have locked in profits on half but we think this stock easily runs to $100 sometime this year.
Tags: option picks, option signals, options alerts, stock options trading
This entry was posted on Friday, January 29th, 2010 at 12:47 PM and is filed under Company Commentary, Market Analysis, Market Commentary, Option Trades, strangle option trades, Strategies. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.