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Wednesday, March 9th, 2011
1:30pm (EST)
The market opened lower again which has usually been the case over the past few weeks as oil prices began to climb on worries that some oil refineries are on fire in Libya. There was also news that OPEC would not call an emergency meeting to raise production which fueled speculation. Adding to the drama was a report that showed gasoline and inventories fell much more than forecast last week.
Oil had been lower in overnight trading and was down $1 to $104 and futures were showing a nice open ahead of the bell. Although this morning’s news brought fresh worries, the market has stabilized as oil prices have barely moved.
The Dow traded down to 12,156 but has come off its low and is currently up 11 points to 12,225. The S&P 500 is off by 2 points to 1,320 after trading to a low of 1,312. The Nasdaq is down 15 points to 2,750 after kissing 2,737.
We kind of expected a dull, choppy week for the market and we knew oil prices would play a huge role in what direction we go. Economic news and corporate earnings have been light but there is one stock taking a huge hit after an earnings miss.
We profiled Finisar’s (FNSR, $25.67, down $14.37) earnings in our Weekly Wrap on Sunday and we saw a lot of mixed signals going into the report. Analysts were looking for $0.47 a share on revenue of $258 million. The company beat expectations but offered a terrible outlook as its China business suddenly appears to be dropping off.
We said if shares fell into the $30’s, Finisar might be worth a look but we aren’t so sure after last night’s forecast. In will take a few quarters for this company to see where things really are and it’s a pretty good chance $20 could come into play for the stock.
We should have taken a look at the options because we knew shares would probably move 10% given the current market environment but we weren’t sure which way the stock would move. On one shoulder we had the bulls saying that the market is still going higher and Finisar was going to beat earnings (which they did). On the other shoulder we had the bears saying Tech is weak and we are trying to take the market lower.
So how could we have played Finisar?
Shares were at $40 going into the close yesterday and you could have used both call and put options to play earnings.
A strangle option trade could have been played by purchasing the March 35 puts (FNSR110319P00035000, $9.35, up $8.80) which are up over 1,600% and the March 45 calls (FNSR110319C00045000, $0.05, down $0.65) which are down over 90%.
The put options were going for 55 cents into yesterday’s close or $50 per option contract. If you had purchased 10 March 35 puts it would have cost you $550. The calls options were going for 70 cents ($70 per contract) by the close so 10 contracts of the March 45 call options would have cost you $700.
You total investment would have been $1,250 or $125 if we dummy it down. If you closed the position today you would take in $935 for each put option contract and basically nothing for the call options and you could let them expire worthless.
The bottom line is that you made $935 on every $125 invested. In other words, a $1,250 investment yesterday would have been worth $9,350 today, or nearly a 650% return in less than 24 hours. The good news? There will be more trades like this in the future.
We talk about these types of trades and how to find them in our option trading manual, How to Trade Options on Momentum Stocks, which is getting rave reviews on the internet and from around the world. Although we didn’t officially release a trade on Finisar, some of our subscribers who have purchased our course and watched our videos had some nice success today playing options on this name.
The option trading manual is packed with information that will make you a better options trader and the videos are a great tool to show you how to find these types of trades. You will learn years of information in weeks and months!
We know you have been long-winded today but we wanted to show you the incredible gains that can still be made in choppy markets. If you are seriously interested in getting a copy of the manual but need to make special arrangements, please email us. We have been offering the course at NO CHARGE if you sign-up for a one-year membership to our Daily or Weekly newsletters. The price is going up in April so we want you on board before we do a mass media blitz because we do feel like we have the best options course deal out there.
That’s it for today, we will be back in the morning with our next update.
Tags: FNSR, Nasdaq, strangle option trades
Posted in strangle option trades, Strategies | Comments Off
Friday, February 11th, 2011
9:00am (EST)
Futures were pointing towards a rough outing on Thursday before the bell as the disappointing Tech earnings news we talked about was weighing heavy on the market. However, the bulls remained calm throughout the chaos as they held down support after a better-than-expected jobless claims number and rallied the troops to a mixed win yesterday.
The bulls got another break when news broke shortly after the open that Egyptian President, Hosni Mubarak, was considering resigning, but that has all changed in the last 24 hours (another curveball). Mubarak has transferred his powers to the VP, Omar Suleiman, but this wasn’t enough to please the swelling crowds that continue to protest.
No worries, the bulls shrugged-off the news and managed to push the Nasdaq and S&P higher while the bears settled for a piece of the Dow.
The blue-chips fell 10 points to 12,229 but the Dow never managed a trip into positive territory throughout the session. Still, it was an impressive performance by the bulls.
The S&P 500 advanced a point to 1,321 while the Nasdaq ended at 2,790, up a point as well. We were especially surprised by Tech as we were watching the recovery in the first 30 minutes and to finish in the green was incredible.
That was yesterday.
Although our game plan didn’t go exactly as we wanted this week, we still accomplished the same mission by closing a few trades for winners as we head into next week. Again, we don’t think the bulls stampede is over but we are nervous about February option expiration week. However, Egypt is squarely back in the picture again after the runaround Mubarak pulled. Dude is trying to stay in control of the country until September which is 6 months away. Yeah.
Meanwhile, this could get ugly and with the weekend here, investors seem to be dumping stocks before the open.
We said the S&P would rally to 1,300 in early January and the “fluff” would be up to 1,325, possibly 1,350. Many of the pros were calling for a “pullback” then because 1,300 had been strong resistance. We came within a stone’s throw of breaking 1,325 on Tuesday when the index hit a high of 1324.87. The “fluff” we had factored in was the Tech earnings that didn’t happen on Wednesday after the bell that was going to get us to 1,350.
We don’t mention this to pat ourselves on the back. These targets are where we had penciled in a pullback anyway and it was setting up beautifully going in to next week. It just came two days early. The reason we are telling you this is because we have a lot of people who have purchased our option trading course, How to Trade Options on Momentum Stocks, and this is our way of “teaching’ charting.
Our point is we have been flawless on calling this bull market run but as option traders we always hope for the best and prepare for the worst. That may sound strange but the market owes us nothing so we try to do a lot of homework to stay ahead of both the bulls and bears. We are old school, we plan for everything.
We are going to try to do our “monthly” video for the market this weekend (or next) for those of you who have purchased our trading course. These videos go hand in hand with our option trading manual and we want to show you exactly where the bears went and how far the bulls have come back over the past couple of years. We may take a look at earnings for next week or the week after. This part of the video shows you how to find companies that are reporting earnings which helps you plan for trades. You can then use our manual to figure out straddles and strangles trades which use both call and put options and can make anywhere from 10% to 100%. No kidding and they provide you a safety net.
We have profiled two strangle option trades this week outside our Members Area because we wanted to show you how they work. Although we haven’t needed to use straddles or strangles trades in four months, we might going forward, so you will need to learn how they work.
We learned a lot last year about trading ranges and we had a hard time introducing these trades to our subscribers because some investors just don’t understand them. However, they can calm the waters and make 50%-100% on trades when things are sketchy or you know a big move in a stock or the market is coming.
We aren’t ready to start profiling a rack of these types of trades just yet because we have penciled in April for a continued rally but that could change if support doesn’t hold. The world changes every day and the Egypt headlines are a perfect example but we are expecting support to hold. Again, the bears will have several layers to crack through until they change the TREND.
We feel pretty good about our current trades because we have a nice mixture of longer-term plays with some protection in some sectors that could rise on a market pullback. However, all signs are saying next week could be rocky. If so, we might do some quick “day trading” with put options.
In the meantime, we have added a number of exciting trades on our Watch List, both calls and puts, as we prepare for the market’s move over the next 2-3 months. Futures look like this: Dow (-34); S&P 500 (-4); Nasdaq 100 (-5).
Subscribers, check the Members Area for the updates and we will review support levels at 1pm.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, financial options advice, momentum options, Momentum stocks, option mentoring, option signals, option trading, options broker, options newsletter, put options, stock broker, strangle option trade, winning option trades
Posted in Market Analysis, Market Commentary, strangle option trades, Strategies | Comments Off
Thursday, February 3rd, 2011
1:30pm (EST)
The market is following yesterday’s pattern of trading in a tight range although the bias has been to the downside. There is still some nervousness over Egypt as the protests have escalated and turned more violent. This situation still bears watching and will weigh on the market as the political instability could potentially spread to other countries. On the plus side, were are hearing some banks are trying to open in Egypt by Sunday and when the country decides to go back to work, the market could soar.
We mentioned Green Mountain Coffee Roasters (GMCR, $38.37, up $5.41) this morning and a strangle option trade on our Watch List we had profiled. There were two reasons we liked this trade. One was that the stock had been in a “trading range” of $34 to $38 for months and we knew their earnings announcement could be the possible catalyst for a major breakout or breakdown.
We were expecting shares to make a run at $40 and we initially thought of going long the Green Mountain March 36 calls (GMCR110319C00036000, $3.75, up $2.45) which closed at $1.30 yesterday. A 10 contract trade would have cost you $1,300 before Wednesday’s close and would have netted you nearly a 190% return as a straight-up play.
We also added the Green Mountain March 30 puts (GMCR110319P00030000, $0.25, down $1.15) as insurance in case we decided we wanted protection. These options would have cost you $1.40 going into the close or $1,400 for 10 contracts. If you only bought puts yesterday then you are feeling some pain as they are down over 80%.
If you bought both contracts (calls and put options) your cost was $2,700. At current prices your return is 48% as the calls are worth $3.75 and the puts are worth $0.25. Of course, there is a big difference in all three strategies but the strangle option trade was the “safest”.
We have recommended these types of trades in the past and the beauty of them is that sometimes you can make money on BOTH sides of the option. For instance, if Green Mountain reversed course on a major, negative headline and shares fell near $30 then the put options might make a comeback.
Of course, Green Mountain shares have the potential momentum to power much higher after breaking out of its trading range.
If you are serious about learning more on how to find and profit from these types of trades then we urge you to consider one of the fasting-growing options trading courses on the market today, How to Trade Options on Momentum Stocks. If you have further questions, email us. We will offer you an incredible deal.
Although the market is trading slightly lower, we feel like the bulls are telling us they are going to hold support and push us higher. We are running a little late today because we wanted to listen to Ben Bernanke, who started speaking at 1pm, to make sure he didn’t blow the bulls’ current rally. He just finished up and the market is still flat. All good.
Currently, the Dow is down 2 points to 12,040 while the S&P is off by a point to 1,302. The Nasdaq is down less than a point at 2,748. Subscribers, check the Members Area for the trade updates.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, financial options advice, momentum options, Momentum stocks, option mentoring, option signals, option trading, options broker, options newsletter, put options, stock broker, strangle option trade, winning option trades
Posted in Earnings, strangle option trades | Comments Off
Thursday, February 3rd, 2011
9:00am (EST)
The market traded in a tight range on Wednesday but we pretty much had penciled in a flat day before the open after Tuesday’s big pop. We were looking for the major indexes to hold support, which was resistance, in terms of the technical picture and that we got.
The Dow traded to a low of 12,018 and spent much of the session on both sides of the ledger but the bulls managed to hold down the 12,000 level. The index was able to squeeze out a 2 point gain and closed at 12,041 and traded up to 12,057 intraday. We are still on track for 12,300-12,350 over the near-term as long as our new “support” level holds.
The S&P ended in the red, falling 3 points to 1,304 but also held its new support level of 1,300. Although the bulls spent all day with three fingers in the air, through rough waters, they didn’t go under and held onto the raft. We are still looking for a print of 1,325.
The Nasdaq showed some strength but finished in negative territory after reaching a high of 2,758. The index slipped a little over a point and settled at 2,749. As long as Tech holds 2,675-2,700 then the bulls still have a shot a 3,000.
We mentioned yesterday we were watching a few earnings announcements after the close and we were all over Green Mountain Coffee Roasters (GMCR, $32.96, down $0.29) in our Weekly Wrap. We broke the stock down like a rented mule and said they would beat earnings in our opening paragraph but we were a deer in headlights when came time to doing an option trade.
We had the stock and call options on our Watch List and we were bullish on shares making a run at $40. However, Green Mountains’ past accounting issues made it hard for us to trust the stock as a straight-up earnings trade.
We also added some put options on Monday and we were thinking of doing a strangle option trade but we thought why bother with the bulls breaking through resistance.
Strangle option trades are also known as “chicken trades” and they can make you 10%-20% if the stock moves 10%. They are considered “safe” option trades if you are unsure of a stock’s direction or what might happen after an earnings announcement. If shares stay flat then you may lose a little of the premiums you paid for the options but overall these strategies can be pretty solid if you use them right.
If the stock manages a bigger move, say 15%-20%, then the strangle option trade might make you 50%. You could also use a 2-to-1 ratio to leverage the trade more to one side but it adds more risk.
To make this long story short, Green Mountain ended up beating Wall Street’s expectations and shares zoomed in after-hours last night. The stock was up 17%, or $5.58, to $38.54. We may cover the options we have on our Watch List to provide you with a better visual in our 1pm update and although the trade wasn’t an official recommendation, some of our option course subscribers are learning how to use these types of trades to enhance their overall returns for their portfolios.
We received quite a few thank you notes from teaching this in our options trading manual, How to Trade Options on Momentum Stocks, last night/ this morning and we could feel their excitement. Folks, if you are serious about finding your own trades and learning how the market works, then we urge you to read more on what our option course has to offer.
There is a lot more we want to talk about but we are anxious to get our subscribers into the Members Area. Futures are pointing towards a lower open: Dow (-18), S&P 500 (-3), Nasdaq 100 (-7). We will be back at 1pm.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, financial options advice, momentum options, Momentum stocks, option mentoring, option signals, option trading, options broker, options newsletter, put options, stock broker, strangle option trade, winning option trades
Posted in Earnings, strangle option trades | Comments Off
Thursday, December 9th, 2010
12:40pm (EST)
The market is trading in a tight range today with much of the action staying on the north side and favoring the bulls. Down south, the bears have made a little noise but better-than-expected economic news has helped the bulls as they make another attempt to break and hold resistance.
The Labor Department said jobless claims fell 17,000 for the week to 421,000. The number was the second-lowest level for the year and beat expectations of a drop to 429,000. The four-week average of claims, a less-volatile measure, dropped for the fifth straight week to 427,500.
Wholesale trade inventories for October were up 1.9%, month over month, which was stronger-than-expected and more than double the 0.7% rise that had been penciled in.
Turning to earnings, Lululemon Athletica (LULU, $66.20, up $10.50) is up nearly 20% and at new 52-week highs after beating Wall Street’s expectations. The company reported a profit of $25.7 million, or $0.36 a share, versus $14.1 million, or $0.20 a share, in the year ago period. Revenue surged double-nickels (55%) to $176 million from $113 million from last year’s levels.
The suit-and-ties were expecting a profit of $0.25 a share on revenue of $160 million.
Back in September, we talked about a strangle option trade for Lulu and profiled the results of an October trade that would have made 52%. These trades are also known as “chicken” trades and can be used if you are unsure on which way the stock will go after the earnings announcement. To be profitable, you need a move of 10%, or more, in the stock.
Here were our words on three months ago on September 10, after the stock jumped over 10% (quotes from that day):
“We were watching the October 30 puts (LULU101016P00030000, $0.20, down $0.50) and the October 40 calls (LULU101016C00040000, $2.15, up $1.30) and before the close yesterday these two options would have cost you a total of $1.55. The put options were at 70 cents while the call options were at 85 cents before they shut the lights off yesterday in the option pits.
A 10 contract trade would have cost you $1,550 and today the total position would be worth $2.35, or $2,350. The calls are at $2.15 and the the puts are at 20 cents which gets us this total. Folks, this is a return of 52% in less than a day. Not bad.” (END)
Fast-forward to today.
Shares were at $55 going into the close yesterday so you could have used the LULU December 60 calls (LULU101218C00060000, $5.40, up $4.50) which were going for 90 cents yesterday and the LULU December 50 puts (LULU101218P00050000, $0.05, down $0.60) which were at 65 cents going into the close.
The calls have surged 500% while the puts have fallen over 90%. The total cost of the trade would have been $1.55, or $1,550, for 10 option contracts of each. At current prices, the trade is now at $5.40, or $5,400, for a total return of 250%! However ,the big difference this time versus last is the stock moved 20% instead of 10% which for the options was also a big difference. Either way, a 50% or 250% return for being a chicken? Sign us up!
We should have listed them on our Watch List but, honestly, our portfolio is so full of good news right now we didn’t have room.
In the past, we didn’t profile a lot of strangle or straddle option trades but we should of used more of them this year. We have traditionally been a directional based option trading newsletter but market conditions change and so should your strategies.
A lot of investors feel uncomfortable putting on these types of trades and we haven’t felt the need to hedge because we called for this bullish run at the start of October. Since then, we have been recommending nothing but call options. That will change, and when it does, we may have to use these types of trades as we head into 2011.
The market has been trending higher since mid-September and while we are bullish, we also know there will be a time to become bearish.
With that said, we do have a couple of stocks we are keeping an eye on over the next few weeks that are on our Watch List. We have listed a possible strangle trade for each but we are still in the profiling stages. As we get closer to their earnings announcement, we expect to pull the trigger on a trade or two that could top the LULU trades we have outlined.
We expect both stocks to move at least 10% and last time out, one of them moved over 20% after their earnings announcement.
We are trying to end the year on big bang and we want you with us before we close out the year and head into 2011. We are excited about the endless possibilities we think we are going to see next year and we want you to be a part of it.
As we head to press, the action is still flat and has been boring since the quick pop at the open. The Dow is down 28 points 11,344 while the S&P is up a point to 1,228. The Nasdaq is up by 3 points to 2,611. Subscribers, check the Members Area for the updates.
Tags: bear market, binary options, bull market, call option, how to trade options, LULU, Momentum stocks, NASDAQ: LULU, option investments, option picks, option trading, options mentoring, options trading service, put option, stock market, stock market options
Posted in Earnings, strangle option trades | Comments Off
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Who’s on First?
Friday, February 11th, 2011
9:00am (EST)
Futures were pointing towards a rough outing on Thursday before the bell as the disappointing Tech earnings news we talked about was weighing heavy on the market. However, the bulls remained calm throughout the chaos as they held down support after a better-than-expected jobless claims number and rallied the troops to a mixed win yesterday.
The bulls got another break when news broke shortly after the open that Egyptian President, Hosni Mubarak, was considering resigning, but that has all changed in the last 24 hours (another curveball). Mubarak has transferred his powers to the VP, Omar Suleiman, but this wasn’t enough to please the swelling crowds that continue to protest.
No worries, the bulls shrugged-off the news and managed to push the Nasdaq and S&P higher while the bears settled for a piece of the Dow.
The blue-chips fell 10 points to 12,229 but the Dow never managed a trip into positive territory throughout the session. Still, it was an impressive performance by the bulls.
The S&P 500 advanced a point to 1,321 while the Nasdaq ended at 2,790, up a point as well. We were especially surprised by Tech as we were watching the recovery in the first 30 minutes and to finish in the green was incredible.
That was yesterday.
Although our game plan didn’t go exactly as we wanted this week, we still accomplished the same mission by closing a few trades for winners as we head into next week. Again, we don’t think the bulls stampede is over but we are nervous about February option expiration week. However, Egypt is squarely back in the picture again after the runaround Mubarak pulled. Dude is trying to stay in control of the country until September which is 6 months away. Yeah.
Meanwhile, this could get ugly and with the weekend here, investors seem to be dumping stocks before the open.
We said the S&P would rally to 1,300 in early January and the “fluff” would be up to 1,325, possibly 1,350. Many of the pros were calling for a “pullback” then because 1,300 had been strong resistance. We came within a stone’s throw of breaking 1,325 on Tuesday when the index hit a high of 1324.87. The “fluff” we had factored in was the Tech earnings that didn’t happen on Wednesday after the bell that was going to get us to 1,350.
We don’t mention this to pat ourselves on the back. These targets are where we had penciled in a pullback anyway and it was setting up beautifully going in to next week. It just came two days early. The reason we are telling you this is because we have a lot of people who have purchased our option trading course, How to Trade Options on Momentum Stocks, and this is our way of “teaching’ charting.
Our point is we have been flawless on calling this bull market run but as option traders we always hope for the best and prepare for the worst. That may sound strange but the market owes us nothing so we try to do a lot of homework to stay ahead of both the bulls and bears. We are old school, we plan for everything.
We are going to try to do our “monthly” video for the market this weekend (or next) for those of you who have purchased our trading course. These videos go hand in hand with our option trading manual and we want to show you exactly where the bears went and how far the bulls have come back over the past couple of years. We may take a look at earnings for next week or the week after. This part of the video shows you how to find companies that are reporting earnings which helps you plan for trades. You can then use our manual to figure out straddles and strangles trades which use both call and put options and can make anywhere from 10% to 100%. No kidding and they provide you a safety net.
We have profiled two strangle option trades this week outside our Members Area because we wanted to show you how they work. Although we haven’t needed to use straddles or strangles trades in four months, we might going forward, so you will need to learn how they work.
We learned a lot last year about trading ranges and we had a hard time introducing these trades to our subscribers because some investors just don’t understand them. However, they can calm the waters and make 50%-100% on trades when things are sketchy or you know a big move in a stock or the market is coming.
We aren’t ready to start profiling a rack of these types of trades just yet because we have penciled in April for a continued rally but that could change if support doesn’t hold. The world changes every day and the Egypt headlines are a perfect example but we are expecting support to hold. Again, the bears will have several layers to crack through until they change the TREND.
We feel pretty good about our current trades because we have a nice mixture of longer-term plays with some protection in some sectors that could rise on a market pullback. However, all signs are saying next week could be rocky. If so, we might do some quick “day trading” with put options.
In the meantime, we have added a number of exciting trades on our Watch List, both calls and puts, as we prepare for the market’s move over the next 2-3 months. Futures look like this: Dow (-34); S&P 500 (-4); Nasdaq 100 (-5).
Subscribers, check the Members Area for the updates and we will review support levels at 1pm.
Tags: best option trader, best trading signals, call options, chicken trade, Covered Calls, financial options advice, momentum options, Momentum stocks, option mentoring, option signals, option trading, options broker, options newsletter, put options, stock broker, strangle option trade, winning option trades
Posted in Market Analysis, Market Commentary, strangle option trades, Strategies | Comments Off