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Thursday, February 14th, 2013
1:15pm (EST)
Sketchers USA (SKX, $21.81, up $2.24) shares are approaching their 52-week high of $22.37 as they have traded up to $22.15 today. We have played this name in the past and shares always seem to make a huge move after they report earnings so keep this in mind down the road.
We recently revised and sent out our trading manual, How to Trade Options on Momentum Stocks, so for all of those who ordered the 1-year deal back in December, you should have your copy as they shipped last week. If you haven’t, email our support team.
We wanted to cover Sketchers because we profiled a strangle option trade on our Watch List this week that did really well today. These options trading strategies can be hard to understand but we have simplified it in our option manual and will try to do so here in this space.
With February options expiring todmorrow, we could have used “cheap” options to play this move in Sketchers. Now, trades like this will need a move of 10% or more or otherwise the options premiums will get deflated as both options could expire worthless if shares would have stayed flat or moved less than 5%.
Sketchers went into yesterday’s close at $19.57 so a 10% move would mean they needed to trade up to $21.50 or fall below $17.50 for this trade to have a good chance of hitting a triple-digit return. Here is how it would have played out.
The February 20 calls (SKX130216C00020000, $2.00, up $1.50) were going for 50 cents into Wednesday’s close and are up nearly 300% on the news.
The February 19 puts (SKX130216P00019000, $0.05, down $0.35) were at 40 cents going into yesterday’s close and will likely expire worthless tomorrow.
A 10 contract trade in each option would have been $900. Ten contracts of the call options would have cost $500 and they could be closed at $2.00. This would net $2,000 into your account. The puts cost $400 for 10 contracts and they will likely expire worthless tomorrow.
The $900 you invested is now worth $2,000 and you would be out of the trade after the puts expire. The return is a little more than 100%.
These type of trades are also know as “chicken trades” because you are unsure which direction shares will move after the earnings announcement. We may use these types of strangle option trades in the future as they can pay 100% or more in a matter of a day or two as you can see but you have to be careful.
As far as the market today, the bears are growling but support is holding as better-than-expected economic news has shielded Wall Street from the worse-than-expected GDP numbers from around the world.
The Dow is down 10 points to 13,973 while the S&P 500 is up a point to 1,521. The Nasdaq is higher by 3 points to 3,200. Subscribers, check the Members Area for the latest updates and we will be back in the morning with a full report.
Posted in Market Analysis, strangle option trades, Strategies | Comments Off
Wednesday, February 13th, 2013
9:00am (EST)
The bulls took another step at setting new 52-week highs on Tuesday and did a good job of holding their gains considering the headwinds before the bell. North Korea will remain a dark cloud over the market for 2013 (and beyond, as well as other nations) and we have mentioned geopolitical events or saber rattling will effect Wall Street but nonetheless, the indexes moved higher.
The Dow added 47 points, or 0.3%, to settle at 14,018. The blue-chips fell 3 points after the open to 13,968 but were up by 70 points intraday before giving back a little into the close. The bulls aren’t going to rest until 14,200 trips and, believe it or not, it was only the second close above 14,000 in February. At the first of the month, the Dow closed at 14,009 and yesterday’s peak of 14,038 was higher than 14,019 set that day. Support has been moving up but the bears would like to get the action back below 14K and then 13,900. We have said to watch for anything below 13,800 as a reversal and our wiggle room is 1.5% from current levels.
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If you are not a subscriber but would like to read more please click here. We are one of the fastest growing stock options trading advisors on the internet and we had an incredible 2012. We offer 2-3 powerful call or put option trades each week (depending on market conditions) aimed at triple-digit returns for our Daily newsletter and our Weekly Wrap Covered Call Portfolio strides for double-digit returns on a monthly basis. Together, we were 159-70 (70% win rate) for both newsletters in 2012 with over 30-triple-digit winners. Our 5-year track record from 2008-2012 is now a staggering 621-273 that is also a 70% win rate. We doubt you will find a better options trading service. We are 14-2 so far for 2013 with 2 trades that returned triple-digits.
Our average option recommendation usually last 3 weeks or less and we have closed some trades in as little as 24 hours. We target triple-digit returns for all of our option picks for the Daily and double-digit returns for the Weekly Wrap.
We are one of the best option trading services you will find with solid option trading strategies. We have auto trading partners that will handle all of our options recommendations for you in your account in real-time. Come see how our stock option picks can return you 100%, 200%, 400%, and even 800%. We recommended over 31 triple-digit winners in 2012. Learn how to trade stock options with an option newsletter that is trusted and verified with proven track records.
Posted in Option Trades, strangle option trades, Strategies | Comments Off
Friday, September 28th, 2012
1:00pm (EST)
The bears are pushing the second wave of support as we head into the second half of trading, the weekend, and October. Futures were flat before the European markets opened and got progressively worse before the opening bell here at home.
Earnings and economic news are in focus today and things got ugly after the release of the Chicago PMI. The index fell below 50 to 49.7 versus forecasts for a print of 53, or unchanged from a month ago. This was the lowest reading since September 2009.
Shares of Research In Motion (RIMM, $7.78, up $0.64) are popping higher today after the company reported a narrower-than-expected loss for the quarter. RIMM posted a loss of 27 cents a share on revenue of $2.9 billion. The suit-and-ties were looking for red ink of 47 cents a share on sales of $2.5 billion.
This now makes 3-straight quarter the company has reported a loss but its cash reserves were actually up. Many analysts believed RIMM was burning through its cash reserves as it readies its BlackBerry10 for release in early 2013.
We actually looked at the stock last week for our Weekly Wrap portfolio as a covered call trade but we were a little unsure on what kind of numbers they would report and wanted to listen to RIMM’s conference call. Then again, we weren’t really concerned with their numbers because we penciled-in another loss but we do believe their intellectual properties have some value.
We looked at a possible option trade or two yesterday before our midday update and there were a number of ways we could have played RIMM’s earnings. Of course, this is after the fact but these strategies will help you down the road with other possible setups.
The RIMM October 8 calls (RIMM121020C00008000, $0.45, up $0.07) closed yesterday at 38 cents and traded to a high of 71 cents at the open this morning. The October 6 puts (RIMM121020P00006000, $0.05, down $0.20) ended the session at 25 cents.
With shares at $7 heading into yesterday’s close, a 10% move, or 70 cents, would not have been enough to get either of these options “in-the-money”. The strangle option trade, or “chicken trade”, could have been used if you were unsure on the direction shares might trade after the announcement. We then penciled-in a 15% move which would have moved shares more than a buck and shares did reach a peak of $8.20 but we decided to sit on the sidelines.
We will keep the stock on our Watch List as a possible long, or short, idea but RIMM still hasn’t proved anything and losses are expected to continue into the next quarter.
Although we may have missed on RIMM, we have been hot since mid-August as we have ran our recent streak to 17-out-of-19 winners. This includes 4 triple-digit returns of:
+193% on WellPoint (WLP) put options in 9 days
+113% on Monster Beverage (MNST) put options 8 days
+160% on Green Mountain Coffee Roasters (GMCR) call options in 24 hours
+100% on JC Penney (JCP) put options in 15 days
We plan to be aggressive during earnings season because we have had a tremendous year despite a choppy June and July. Our Closed Trades for 2012 are now at 132-43 for a 75% win rate for all of our trade recommendations. This includes our Weekly Wrap publication that is 24-0 for the year.
We have a lot to cover as we want to get to our current trades so that’s it for today.
The Dow is down 47 points to 13,439 while the S&P 500 is off by 6 points to 1,441. The Nasdaq is lower by 13 points to 3,123.
September was a sweet month for us and we will be back to go over the numbers on Sunday night with our Weekly Wrap and on Monday with our Daily update. We will also take a peak at historical October’s over the years to see what could be in store for us next month if the bulls fail to hold support. Until then, have a great weekend everyone!
Tags: chicken option trade, RIMM earnings, RIMM weekly options, strangle option trade
Posted in Earnings, Market Analysis, Market Commentary, strangle option trades | Comments Off
Wednesday, August 8th, 2012
12:20pm (EST)
Shares of First Solar (FSLR, $20.91, up $0.31) cleared $20 yesterday and have traded up to $21.69 today. The stock is off its highs but the strangle trade we profiled in our Weekly Wrap on Sunday and in the Daily Tuesday morning for First Solar hit our targets this morning. The trade was up over 130% shortly after the bell which is when you should have cashed out the call options so let’s go over how it went down.
Tuesday’s morning’s DAILY update:
Here were our thoughts in Sunday night’s Weekly Wrap (8/5/12) and the
option prices from Friday’s close (8/3/12):
“This looks like a good opportunity for a straddle or strangle option trade, if there is any follow through or a pullback. Keep an eye on the September 20 calls (FSLR120922C00020000, $0.65, down $0.35) for a quick trade if shares can regain their momentum following Friday’s 5% pullback. If not, watch the September 14 puts (FSLR120922P00014000, $0.70, up $0.15) for a drop back below $15. Together, the calls and puts would form a strangle option trade to whereas First Solar would need to be above $21 or below $13 by mid-September for the trade to have success.”
The September 20 calls (FSLR120922C00020000, $1.40, up $0.75) opened at 66 cents on Monday and zoomed nearly 120% for the day. The September 14 puts (FSLR120922P00014000, $0.40, down $0.30) opened at 59 cents. The total cost of the trade would have been $1.25, or $1,250 for 10 contracts each. The value of both the call and put options are currently at $1.80, or $1,800, which is already a 44% gain in 24 hours.
The object of strangle option trades is to make over 100% or more on one side of the position to cover the cost. Once the call or put gives you a triple-digit gain, you close that side of the trade to lock-in profits.
You would then have a free call or put to play a reverse.
In this case, if you sell the First Solar calls into strength now or on a pop over $20, the puts become house money and have over a month before they expire. If shares move lower and fall below $14 the September 14 puts would then be “in-the-money” which would allow you to profit from both sides of the trade. (END)
Update!
Tuesday’s close: The September 20 calls FSLR120922C00020000, $2.45, up $0.20) closed at $2.25 yesterday. The September 14 puts closed at 25 cents. The total value of the options is $2.50. The entry price on Monday morning at the open was $1.25. The return was at a 100% at yesterday’s close and shares are up today.
The calls traded to a high of $2.88 this morning after opening at 2.67. Let’s say you were able to close them at the open for $2.70. The 10 contracts you sold would have netted you $2,700. The original cost for both the calls and puts was $1,250. This would get the return up to 136% and the September 14 puts (FSLR120922P00014000, $0.25, down $0.15) are still open.
You could also close the put options now to lock-in the return but they are at 20 cents and they are free puts to play any downside until mid-September. It is only $200 and if the put options expire worthless because shares remain above $14, the trade would still return 116%. If shares trade to $13, the puts would then be worth $1 or an extra $1,000 (10 contracts) which would get the return to 196%.
We may use these types of option trades in our next batch of recommendations as we try to offset some of the volatility. We are sorry we didn’t make this an “official” recommendation but we wanted to get everyone comfortable with strangle option trades in case we need to use this strategy going forward.
For those of you who DID take the trade, this will be our last update on the options as we have fielded numerous emails on what to do today.
As far as the market, we are still in a wait-and-see-mood. The indexes traded lower at the open but have rebounded and are pushing greener pastures.
The Dow is up 16 points to 13,184 while the S&P 500 is higher by a a point to 1,402. The Nasdaq is down a half-point to 3,016. The indexes did slip below support which was prior resistance and the close will be interesting today.
Subscribers, check the Members Area for the updates.
Tags: chicken option trade, First Solar option trade, fslr, strangle option trades
Posted in Hot Stocks, strangle option trades, Strategies | Comments Off
Thursday, January 19th, 2012
1:10pm (EST)
The bulls got a bevy of good news before the bell this morning which led to a good start for the market as the major averages continue to push the July 2011 highs. Bank of America (BAC, $7.11, up $0.31) is giving the Financial stocks a lift after beating Wall Street’s revenue expectations. The suit-and-ties were floored when the company posted a profit of 15 cents a share on revenue of $25.1 billion which beat their projection of $24 billion in revenues. We have been pounding the table on the stock when shares were at $5 back in December as it is a current member of our Weekly Wrap Covered Call portfolio which could start January at 10-0.
Economic news was fantastic as Initial Claims fell to 352,000 versus expectations for 384,000 while Continuing Claims were 3.43 million versus forecasts for 3.6 million. Elsewhere, Consumer Prices were unchanged which was below calls for an increase of 0.1%. The core reading, excluding food and energy, matched the hype and was up 0.1%. And finally, from the crib, Housing Starts dropped for the month of December, coming in at 657,000 versus expectations for 680,000 while Building Permits matched forecasts.
Google (GOOG, $636.00, up $3.09) will confess their quarterly numbers after the bell and shares have a history of making huge moves after they announce earnings. Of course, this is option expiration week and the January options are still in play so let’s take a look at the stock and some of the options.
The last time the company reported their quarterly results (mid-October 2011), shares surged $32-and change from $559 to $591, on better-than-expected numbers. The high that day was $599. In July 2011, Google also beat estimates and zoomed from $529 to $597 and kissed a high of $600.
A 10% move in Google would equate to a 63-point move in the stock and we could see that on an earnings miss to the downside. However, the upside may not be quite as huge if it is not a blowout quarter and could only be 5% or less which is still $30 but is it enough to create a possible strangle option trade?
The Google January 700 calls (GOOG120121C00700000, $1.10, down $0.20) and the January 575 puts (GOOG120121P00575000, $0.90, down $0.70) would cost $2 together and are a possibility but the stock would need to be at $702 or $573 for us to break even. At $704, or $571, the trade would double but again, the options expire tomorrow.
This is NOT an official option trade recommendation but we wanted to show you how strangle option trades work since we have a ton of new subscribers. The risk/ reward on this trade doesn’t look great and it may be better off to SELL these options but that is another strategy altogether and one we certainly don’t recommend on a $600+ stock.
We will take a look at these options again on Friday to see where they are at and we would like to see a blowout quarter which would help the Tech sector keep its momentum.
As we head to press, the Dow is up 14 points to 12,593 while the S&P 500 is higher by 5 points to 1,313. The Nasdaq is showing a pop of 20 points to 2,790.
As usual, we have a number of open trades and there is a lot to talk about so let’s go see where we are at. Microsoft and IBM and Intel also report after the bell so tomorrow could be explosive for either the bulls or bears depending how things go. Subscribers, check the Members Area for the updates.
Tags: goog earnings, momentum options, Momentum stocks, stock option picks
Posted in Earnings, Market Analysis, strangle option trades, Strategies | Comments Off
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RIMM Surprises, Bears Push Second Wave
Friday, September 28th, 2012
1:00pm (EST)
The bears are pushing the second wave of support as we head into the second half of trading, the weekend, and October. Futures were flat before the European markets opened and got progressively worse before the opening bell here at home.
Earnings and economic news are in focus today and things got ugly after the release of the Chicago PMI. The index fell below 50 to 49.7 versus forecasts for a print of 53, or unchanged from a month ago. This was the lowest reading since September 2009.
Shares of Research In Motion (RIMM, $7.78, up $0.64) are popping higher today after the company reported a narrower-than-expected loss for the quarter. RIMM posted a loss of 27 cents a share on revenue of $2.9 billion. The suit-and-ties were looking for red ink of 47 cents a share on sales of $2.5 billion.
This now makes 3-straight quarter the company has reported a loss but its cash reserves were actually up. Many analysts believed RIMM was burning through its cash reserves as it readies its BlackBerry10 for release in early 2013.
We actually looked at the stock last week for our Weekly Wrap portfolio as a covered call trade but we were a little unsure on what kind of numbers they would report and wanted to listen to RIMM’s conference call. Then again, we weren’t really concerned with their numbers because we penciled-in another loss but we do believe their intellectual properties have some value.
We looked at a possible option trade or two yesterday before our midday update and there were a number of ways we could have played RIMM’s earnings. Of course, this is after the fact but these strategies will help you down the road with other possible setups.
The RIMM October 8 calls (RIMM121020C00008000, $0.45, up $0.07) closed yesterday at 38 cents and traded to a high of 71 cents at the open this morning. The October 6 puts (RIMM121020P00006000, $0.05, down $0.20) ended the session at 25 cents.
With shares at $7 heading into yesterday’s close, a 10% move, or 70 cents, would not have been enough to get either of these options “in-the-money”. The strangle option trade, or “chicken trade”, could have been used if you were unsure on the direction shares might trade after the announcement. We then penciled-in a 15% move which would have moved shares more than a buck and shares did reach a peak of $8.20 but we decided to sit on the sidelines.
We will keep the stock on our Watch List as a possible long, or short, idea but RIMM still hasn’t proved anything and losses are expected to continue into the next quarter.
Although we may have missed on RIMM, we have been hot since mid-August as we have ran our recent streak to 17-out-of-19 winners. This includes 4 triple-digit returns of:
+193% on WellPoint (WLP) put options in 9 days
+113% on Monster Beverage (MNST) put options 8 days
+160% on Green Mountain Coffee Roasters (GMCR) call options in 24 hours
+100% on JC Penney (JCP) put options in 15 days
We plan to be aggressive during earnings season because we have had a tremendous year despite a choppy June and July. Our Closed Trades for 2012 are now at 132-43 for a 75% win rate for all of our trade recommendations. This includes our Weekly Wrap publication that is 24-0 for the year.
We have a lot to cover as we want to get to our current trades so that’s it for today.
The Dow is down 47 points to 13,439 while the S&P 500 is off by 6 points to 1,441. The Nasdaq is lower by 13 points to 3,123.
September was a sweet month for us and we will be back to go over the numbers on Sunday night with our Weekly Wrap and on Monday with our Daily update. We will also take a peak at historical October’s over the years to see what could be in store for us next month if the bulls fail to hold support. Until then, have a great weekend everyone!
Tags: chicken option trade, RIMM earnings, RIMM weekly options, strangle option trade
Posted in Earnings, Market Analysis, Market Commentary, strangle option trades | Comments Off