11:00pm (EST) Special Update
We have been talking about the new option symbol changes that will take place starting next Friday, February 12th, and we wanted to get everyone prepared for the transition. As you know, current option symbols range from 3-to-5 characters but all options will become 8 to 21 symbols long once the conversion takes place.
The goal is to make options easier to decipher but all you really need to know to place a trade is the underlying stock, the expiration month you want, the strike price and whether it’s a call or a put. They will look more complex but most brokerage accounts have already upgraded their trading platforms so that you really don’t even need to remember the option symbols anyway.
We have already started incorporating the new style of options symbols for our latest trades and ideas and we will continue displaying the old or current symbols up until the change. Some financial sites have already made the switch but even if you see different symbols you can still place a trade as long as you know the option you want.
The one problem with current option quotes is that some stocks use their stock symbols as the first part of the option while others don’t. For instance, the option quotes for International Business Machines (IBM, $123.52, up $0.52) start with “IBM” while the options for Microsoft (MSFT, $28.02, up $0.18) start with “MSQ”.
We will look at these two stocks and their current options and show you the new change.
The IBM February 125 Calls (IBMBE, $1.16, up $0.04) currently look like this. The new option symbol becomes (IBM100220C00125000). NOTE: The “option root symbol” can be up to 6 characters long.
The Microsoft February 27 Puts (MSQNB, $0.24, down $0.10) will become (MSQ100220P00027000). NOTE: Until February 12th the option root will be the same as the previous. After the 12th, they should read (MSFT100220P00027000).
The stock’s underlying ticker symbol will always be used in the new symbol. MSQ will soon become MSFT. The days of “decoding” option root symbols are coming to a close. This wasn’t a big deal anyway but it does make things easier.
The second element, the expiration date, is always six numbers. In this case, “100220″ for both IBM and Microsoft represents February 20, 2010, the expiration date for February 2010 options. The first two numbers, “10″, represents 2010; the “02” for February; and “20” for the day. A 2011 option reads “11”, a December option would be “12”
The expiration date is always on the Saturday that follows the third Friday of the month, unless that Friday is a market holiday, in which case the expiration is on the Friday. This is a little confusing though as the last day to trade options for February is Friday, the 19th.
The third part is if the option is a call or put which is represented with a ”C” or “P”.
The last set of numbers represents the strike price, which consists of eight numbers. The first 5 denote the strike dollar price, and the remaining 3 represent the decimal (if any).
Thus, “00027000″ represents the Microsoft February 27 put strike. If it were a 27.50 strike, it would read “00027500.”
The new terminology will take some getting used to but again, as long as you know the stock, the month you are playing, the strike price and if it’s a call or put option you will be fine. If you have any questions, email us.
Nike Call Options Hit 235% Return
Thursday, March 18th, 2010
12:30pm (EST)
Folks, we hit one out of the park today and we are smiling (no pun intended as you will see). We have been busy all morning updating the action in our Members Area and we have another trade on the tip of our tongue as we speak.
We have been talking about Nike (NKE, $75.10, up $4.22) in our Members Area all week and we thought we would give those of you who haven’t joined us a sneak peak. Here were our thoughts when we recommended a Nike call option trade in our 9am update yesterday morning:
“Action: Tiger is back and the company reports earnings after the bell today. It’s almost too good to be true and it just feels funny how all of this is coming together. In fact, it almost feels like the perfect “buy the rumor, sell the news” event.
We are going to be honest with you. This feels like a setup and we could get a baseball bat to the face on this trade if we are wrong. But we like it and the options are only 50 cents. A 10 contract trade is $500.
We recommended a Nike call option the last time out the company reported earnings which was back in November. That trade returned 173% for our subscribers and we are hoping this one doubles.
We doubt the stock moves 10%, or $7, on Thursday’s open but we do think a 5% move is a given. That should be plenty to make the April 75’s double.
If Nike misses, we still have 5 weeks before the options expire. Roll the dice. Use limit orders of up to 65-75 cents but try to get them cheaper at the open. If the calls open HIGHER than 75 cents, VOID the trade.” (END)
The calls we mention opened at 50 cents yesterday so we got even better prices than we anticipated. They closed for a 50% paper profit by Wednesday’s close but have exploded today and are currently trading at $1.85. We alerted our subscribers to close half of their position into strength but we can still ride the wave if Nike runs to $80.
We also have another trade we are profiling that we think has the chance to at least double so we released today’s update a little early. We are also close to shutting down another trade for a 50% profit so timing is crucial for current subscribers.
As we head to press, the Dow is up 7 points to 10,740 and is going for 8-in-a-row. The Nasdaq is down 2 to 2,386 while the S&P 500 is off 3 points to 1,162.
Tags: Nike call options, Nike earnings, NKE, NKE call options, option picks, option signals, options alerts, stock option picks, stock options trading
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