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Thursday, November 11th, 2010
12:20pm (EST)
The bears took their best shot at breaking support this morning but the bulls have met the challenge and have held key levels on the major indexes.
The Dow is currently down 91 points to 11,265 after trading to a low of 11,231. We were looking to hold the 11,200 level and we would love to see a close above 11,250.
The S&P is lower by 9 points to 1,209 and has touched a low of 1,204 while the Nasdaq is off by 33 points to 2,545. Both indexes have also held support at 1,200 and 2,500, respectively.
Today’s news is all about Cisco Systems (CSCO, $20.58, down $3.91) which is getting a 16% haircut after giving weak guidance. We have followed the company since the early 1990’s and this is the biggest sell-off we have ever seen in the stock.
We were expecting a 5% move in shares either way after the company reported earnings but we didn’t think shares would move enough to play a straddle or strangle option trade. Man, were we wrong.
These types of option trades are ways to play a stock if you are uncertain which way shares are going to move after an earnings announcement. However, you need a big move in the stock to make the trade profitable, usually 10% or more if you are playing both call and put options.
We started introducing these trades a few months ago because they can easily make you a triple-digit return or at least 10% if the stock moves enough. Earnings announcements move stocks and we talk about this in our trading manual, How to Trade Options on Momentum Stocks. We also show you how to use strangle and straddle option trades, how to figure out your breakeven points, and what your returns could be.
The flavor of choice for Cisco would have been the November options because it is a one-day trade (usually) and there were a couple of ways we could have played this. Cisco was near $25 going into yesterday’s closing bell…
To do a strangle option trade, you could have purchased the Cisco November 23 puts (CSCO101120P00023000, $2.30, up $2.10) for about 20 cents yesterday, or 10 contracts would have cost you $200. These options are worth $2,300 right now as they are up over 1,050%!
The Cisco November 27 calls (CSCO101120C00027000, $0.01, down $0.08) could have been picked up for 10 cents yesterday which means it would have cost you $100 to buy 10 contracts. The options will probably expire worthless. No big deal.
Your total investment would have been $300 and if you closed the puts right now you would have $2,300 in your account. You would let the calls expire worthless because it is unlikely the stock will rebound and jump back to new highs by next Friday. You total return would on this trade would have been 675%. Not bad for less than 24 hours of work.
Although we didn’t take this trade, we think there is another stock that could move 10% or more on Friday. We take a look at it on our Watch List but we will probably stay on the sidelines as we already have enough action with our current trades.
We like the fact the market has held support and has bounced off the lows of the day. We still feel we can go higher and we are targeting the next move up in the market by Thanksgiving which means we may consolidate at these levels for a little bit.
Despite today’s downdraft, our trades are holding up well. Subscribers, check the Members Area for the important updates. We are also selling another option today for our covered call position.
Tags: bear market, binary options, bull market, call option, CSCO, how to trade options, Momentum stocks, option investments, option picks, option trading, options mentoring, options trading service, put option, stock market, stock market options
Posted in Company Commentary, Earnings, strangle option trades | Comments Off
Wednesday, October 20th, 2010
1:30pm (EST)
The market is regaining much of its losses from yesterday, as the major indexes have rebounded strongly and are back into our resistance zones we continue to outline. The bulls are making a run towards the April highs and don’t believe China’s surprise interest rate hike is as serious as the bears we making it out to be and that it will not dampen the global economy.
China’s stock market showed slight gains in overnight trading and futures were pointing towards a slightly higher open which is what we got this morning. The rally started to pick up steam as the dollar started to lose ground again. We mentioned the correlation between a weak dollar and a higher market and that is exactly what you are seeing.
As we prepare to go to go to press, the Dow is higher by 150 points, or 1.4%, and is at 11,129 while the S&P 500 is up 15 points, or 1.3%, to 1,181. The Nasdaq is showing a 29 point pop, or 1.2%, and is at 2,465.
We wanted to spend some time today to talk about our Watch List which is inside our Members Area and our option trading manual. The Watch List is list of stocks we feel are on the verge of a major breakout or breakdown and sometimes when our trades recommendation are full, we will list these stocks as we don’t like to have over 10 open trades recommendations going at one time.
Many of you know our love for Biotech stocks and we currently have two open option trade recommendations that we have our subscribers in. However, we have been following a few other companies in the sector so we thought we would give you a peak today on our comments:
Amylin Pharmaceuticals (AMLN, $10.18, down $10.31)
November 24 calls (AMLN101120C00024000, $0.01, down $0.49)
November 17 puts (AMLN101120P00017000, $6.85, up $6.15)
November 20 calls (AMLN101120C00020000, $0.02, down $2.03)
November 20 puts (AMLN101120P00020000, $9.85, up $8.25)
Action: We listed the put options today and the November 20 straddle trade because we wanted to show you the power of strangles and straddle option trades once again.
Of course, we did not have these listed, yesterday, because we didn’t expect the FDA news until next week for Amylin’s obesity drug, but we should have, because some readers have emailed and asked why WE didn’t recommend a strangle of straddle option trade for this one even though we knew a big move could be coming.
We have been talking about the companies that are in competition to bring for a weight-loss drug to market and the FDA’s latest rejection shows how high the risk/ reward can be.
In our trading manual, How to Trade Options on Momentum Stocks, we talk about playing the Biotech space and how drug stocks can make huge moves during phase 3 trials. We also show you how to setup your own Watch Lists and teach you how to find strangle and straddle option trades. Included with your course purchase is another manual, Momentum Stocks Watch List, which covers dozens of sectors and over 600 stocks. We tell you which stocks to watch and what drives these sectors higher or lower.
When we issue a trade recommendation, we will tell you why we are doing the trade. With stocks on our Watch List, we know a big move is coming but we aren’t sure which way sometimes.
If we had listed all of these options last week or yesterday, we would have had a successful trade. However, we felt there was a good chance of the drug getting approved by the FDA but they wanted more data. This is the risk we carry with one of our current trades which is why we made it a strangle option trade.
Our point is our option trading manual is a blueprint on how to find successful option trades because we cannot cover thousands of stocks. We do a pretty good at following several hundred stocks but there is news we miss or rumors we don’t hear or research that is unfinished sometimes which is why we have “ideas” on our Watch List.
Folks, this is not a sales pitch to buy our option trading manual, which is the CHEAPEST in the industry, but a suggestion for those of you who really want to learn how to find explosive situations to do your own trades with.
We are offering a free 1-month subscription to our Members Area (if you purchase the material this month) which is always packed with current trades AND stocks on our Watch List that are set to make big moves. Once you read our trading manual and we have you under our wing for a month, you will start to see the market in a different light.
We are also doing training videos for the option trading manual that will cover all of the areas we talk about. We are rolling these out on a weekly basis until we cover everything which is when the price will go up for the cost of the course.
We appreciate those of you who have taken advantage of our special offer and when the videos are done we will package them in a DVD to be included with the course. For those of you who already have the course, we will ship them free when we get them ready and we are creating a special area on the website for them. This is why we have been offering a special introductory rate and a FREE 1-month membership through the end of October.
We seriously hope you take the next 10 days to think about taking your option trading to another level. Trust us, once you learn to find your own trades, there is no better feeling then making 100%, 200%, or even 500% on a trade that you did research on.
Again, we wished we would have made these options and official recommendation and maybe we would have after doing more research over the weekend but the news came out over a week early. The current trade we are in, the company is expecting a FDA decision by October 29.
News could come early and it could be good or bad, but either way, we protected ourselves by playing both sides of the trade while still giving us a chance to make up to 500% or even more on the trade. We are telling you, if the FDA approves the drug of the company we currently following and have our subscribers in the trade can double or even triple from current levels.
It is a $4 stock and we think there is a chance shares could hit $20 or $1.50. The option premiums were cheap and the trade may or may not work out as we have planned but our research shows we are in for an explosive move either way.
We also got some good news on a couple of current trades we recommended as Juniper Networks (JNPR, $32.04, up $1.50) is up 5% after announcing earnings this morning. There were a lot of people betting against this company and shares dropped below $28 in after-hours trading last night but opened higher than yesterday’s close which was a good sign for our call options.
We are on the fence on banking profits on TWO other trades but we wanted to show you there are always opportunities in this market to find option ideas.
We have a lot more to cover in our Members Area but we wanted to show you the power of options and how little it costs to do some of these strategies. We also wanted to remind you that time is running out to hit us up on our special offer.
In fact, we are running a little late today because we were finishing up our research for a NEW TRADE which we have listed and we are going to try to get into it today at our price. Subscribers, check for the important trade updates.
Tags: Amylin Pharmaceuticals (AMLN), option trading course
Posted in BioTech, strangle option trades, Strategies | Comments Off
Wednesday, October 6th, 2010
12:25pm (EST) (REVISED)
The market has been flat for much of the day after this morning’s ADP report. The bulls can claim a small victory if things remain the same but everything could come down to Friday’s unemployment report as to which direction this market is headed for the rest of October.
The Dow is up 22 points to 10,967 while the S&P 500 is flat at 1,160. The Nasdaq is lower by 12 points and is at 2,387.
With the market trading near breakeven, we thought it would be a good time to talk about a trade we have going out today.
We have been successful on 2 out of 3 strangle trades since we started (with the other still open) them a month ago and we wished we would have been using these option trades for the last four months. In directional markets, it’s easy to play calls and puts. In 2008, puts worked like magic, while in 2009, calls options brought home the bacon.
In choppy and volatile markets, straddles and strangle option trades can really help you stay afloat but our policy was to keep it simple because some people really can’t comprehend how these strategies work. With that said, we think we have the perfect candidate to make a 50% return on your investment in 4 weeks or less and we walk you step-by-step on this trade.
The stock is around $19 and if it moves to $21 or $17, or 10%, you can make over 40% on your money. With volatility picking up, we think it offers the perfect risk/ reward trade and it is cheap to do. The company announces earnings NEXT week so we want to get into the trade before the crowd does.
One contract of a call and put option would cost you $70, or 10 contracts (which we recommend) will cost you $700. If we are right on this trade then a 40% return would get you up to $1,000, or more. If the call or put options make it $2, which means the stock is at $16 or $22, then you will make a 186% ROI. In other words, your Return On your Investment on a $700 trade would mean $2,000 in your account if the stock moves 15% in four weeks or less.
Subscribers, check for the updates and NEW TRADE!!!
Tags: explain the concept of options, momentum options trading, option picks, option trading blog, option trading course, option trading courses, straddle option trades, strangle option trades, triple-digit options returns
Posted in strangle option trades, Strategies | Comments Off
Friday, October 1st, 2010
1:20pm (EST)
October has gotten off to a good start as the bulls have used this morning’s positive economic data to once again push the market near its resistant levels. The gains in September were impressive but here is one thing to keep in mind as we head into October.
We mentioned the fantastic September numbers for the major averages this morning but August was a horrible month for the market as the Dow fell 5%. In July, the index was up 7% and in June, down 4%. For May, the index tanked 8%.
October should produce a move of 5%-10% given the overall trend but we are right at resistance from the April highs. There are a number of cases we can make for being bullish but there are also a number of reasons we can give you to be bearish. None of this matter because all we want now is a trend.
In option trading, we use call and put options to play the trend and sometimes those trends are choppy or are hard to read as the market tests support and resistance levels. However, what is different this time is that we are in the perfect storm for a double-digit percentage move in October.
The jury is still out on if the market will break to the upside but if it does it could be dramatic as the bulls are betting on solid 3Q earnings, positive November election results, and the famous Santa Claus rally. The bears will be banking on high-profile companies coming in with earnings misses, higher unemployment, a bubble in gold or other currencies, and the fact that October has seen some of the worst crashes in stock market history.
We have been through 20 Octobers and they tend to be pretty volatile.
We are once again seeing that today.
The market started off strong on better-than-expected economic numbers but one, the ISM monster, put a halt to the bulls rally. The Institute for Supply Management said its manufacturing index for September was 54.4, down from 56.3 in August. A reading above 50 still indicates growth but the bears saw weakness and attacked.
The Dow is currently up 38 points to 10,826 while the S&P 500 is showing a 3 point pop and is at 1,144. The Nasdaq is even at 2,368.
One stock we want to talk about before we leave this morning is Green Mountain Coffee Roasters (GMCR, $28.01, down $3.18). It may help explain how we really think our option trading course will help you find your own trades.
On Wednesday, we talked about playing the GMCR October 30 puts (GMCR101016P00030000, $2.75, up $1.85) which had closed at 8 cents on Tuesday after a SEC revealed the company could be cooking its books. These options opened on Wednesday at 80 cents when the stock dropped from $37 to under $32 and we said there would be good chance you could make a quick 50% plus. Today, you would be up over 200%.
In our manual we talk about these types of situations and we knew which option to play as we said shares could fall below $30. The October put options were a way to play “cheap, “out-of-the-money” options on a stock that is breaking down.
SEC investigations aren’t good and we talk about this in the trading manual so we also listed the GMCR November 30 puts (GMCR101120P00031000, $4.00, up $1.80) on our Watch List when they were at 90 cents Wednesday afternoon. Our Watch List ideas are trades we have in our mind but when our portfolio has over 10 recommendations, we don’t like to issue new ones until those run their course. However, if you use our Watch List like many of our subscribers do, then you would be up 344% in two days and you would be ready for one heck of a weekend.
We believe in money management and risk allocation so we never go overboard on any one trade idea. We explain some of this as well and this is why we have a Watch List.
The point is, when the news hit, we knew which options to play and why. We also knew our entry and exit targets and this is what we want to teach YOU.
Another trade idea you could have played could have been an earnings trade on Gymboree (GYMB, $49.00, up $7.46) which is up 18% today after posting good numbers. Earnings happen every 3 months so there will always be trades and once you get the manual you will know how to find them.
If you would have bought the GYMB October 45 calls (GYMB101016C00045000, $4.40, up $4.15) straight up, betting on a good earnings report, then you would be up 1,660% today as you could have bought 10 contracts yesterday before the market closed for $250. Today, they would be worth $4,400.
If you weren’t sure if the company was going to beat earnings then you could have used the puts as protection and still made money. This is known as a strangle or straddle option trade and instead of making 1,600%, you make 500%.
These types of trades will be hot in the coming months as earnings season kicks off in TWO weeks and our trading manual could not have come out at a better time.
In fact, we are so excited to be teaching you how to find trades that we have included a bonus. If you buy the trading manual this weekend, we will add a FREE one-month membership ($129 value) to our newsletter with your purchase. We will profile quite a few trades on our Watch List and we will also be making a few official recommendations along the way. Deadline ends Sunday at midnight.
We will be back Sunday afternoon with the Weekly Wrap so make sure you check back with us for the latest and greatest as the bulls and bears plan on continued volatility over the next few weeks.
Posted in Earnings, strangle option trades, Strategies | Comments Off
Wednesday, September 22nd, 2010
Adobe Systems (ADBE) Hits New Lows
1:05pm (EST)
The market is once again in a tight trading range as the bulls struggle to push through resistance while the bears are holding on for dear life. The Fed didn’t announce specific steps in its statements yesterday, but Wall Street walked away thinking the central bank had its back. The Fed said the economy is still recovering but at a sluggish pace and would probably step up its bond-purchasing program in the future, if needed.
This would normally be taken as good news but as we push the top end of the current trading range, the bulls look tired. That, or they are resting after a huge run in September. The next catalyst that should drive the market higher or lower will be 3Q earnings which will start in October. We have already seen a few high profile companies warn or lower expectations so we are expecting a mixed season.
With that backdrop and still the uncertainty of global events, it is quite possible the market retreats and stays in this current trading range. We know there are a lot of bulls out there and we can still join the party, but, our feelings are this market is headed lower.
Let’s take a look at the Dow’s moves over the last 4 months and the overall trading range:
The Dow ended April slightly above 11,000 and finished May down 8% as the index closed at 10,136 by the end of the month.
In June, the Dow rallied from those lows to hit a high of 10,627 in three weeks – a gain of 5% – before dropping nearly 1,000 points, or 8%, in 7 sessions to end the month at 9,774. Overall, June showed a 4% loss.
On the first day of July, the Dow hit a low of 9,596 and proceeded to rally to a high of 10,600 by the end of the month before finishing at 10,465. The bounce was in the 7%-9% range.
August was brutal as the index traded back down to the bottom of the current trading range and flirted with the 9,900 level, a loss of 5%, before finishing the month slightly above the 10,000 level for a 4% loss.
Here it is September, and the Dow is knocking, on 10’8′s door which translates into a gain of 8% for the month. Given this backdrop, it’s hard not to imagine the market moving 5%-10% over the next 4 weeks. It just doesn’t appear to be to the upside though.
Either way, we are positioned nicely for a move as we expect the volatility to continue for the remainder of the year.
There is a lot more to talk about but before we leave we wanted to give an update on Adobe Systems (ADBE, $26.27, down $6.67) which is down 20% today. The put options we played opened right at $6, or 550%, from our profiled entry price while the calls will probably expire worthless. This is a non-issue as the trade will lock in a guaranteed 200% return as we told our subscribers to lock in profits on half and to set a hard stop on the other half to lock in profits.
We went to bed last night feeling good about this trade and as we mentioned, we should have been using these trades for 4 months but our policy was not to include them. We believe with coaching and daily updates that all of you will be a pro at trading these types of strategies with no problems at all. And the best part is that target triple-digits returns as well.
We will continue to use these trades as long as we stay range bound but we also think there will be the homerun trades we are accustomed to seeing – ones that return 500%, 800% or even 1,000% as we head into the Fall season and the rest of 2010.
Once again, our targets for the top of this range are Dpw 10,800; S&P 500 1,150; and Nasdaq 2,350. As we head to press, the Dow is down 38 points to 10,722 while the S&P 500 is off by 6 points to 1,133. The Nasdaq is lower by 22 points to 2,327. The back half of the week is setting up to be explosive…
Tags: ADBE, explain the concept of options, momentum options trading, option picks, option trading blog
Posted in strangle option trades, Strategies | Comments Off
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Cisco Systems (CSCO) Strangle Trade Returns 675%
Thursday, November 11th, 2010
12:20pm (EST)
The bears took their best shot at breaking support this morning but the bulls have met the challenge and have held key levels on the major indexes.
The Dow is currently down 91 points to 11,265 after trading to a low of 11,231. We were looking to hold the 11,200 level and we would love to see a close above 11,250.
The S&P is lower by 9 points to 1,209 and has touched a low of 1,204 while the Nasdaq is off by 33 points to 2,545. Both indexes have also held support at 1,200 and 2,500, respectively.
Today’s news is all about Cisco Systems (CSCO, $20.58, down $3.91) which is getting a 16% haircut after giving weak guidance. We have followed the company since the early 1990’s and this is the biggest sell-off we have ever seen in the stock.
We were expecting a 5% move in shares either way after the company reported earnings but we didn’t think shares would move enough to play a straddle or strangle option trade. Man, were we wrong.
These types of option trades are ways to play a stock if you are uncertain which way shares are going to move after an earnings announcement. However, you need a big move in the stock to make the trade profitable, usually 10% or more if you are playing both call and put options.
We started introducing these trades a few months ago because they can easily make you a triple-digit return or at least 10% if the stock moves enough. Earnings announcements move stocks and we talk about this in our trading manual, How to Trade Options on Momentum Stocks. We also show you how to use strangle and straddle option trades, how to figure out your breakeven points, and what your returns could be.
The flavor of choice for Cisco would have been the November options because it is a one-day trade (usually) and there were a couple of ways we could have played this. Cisco was near $25 going into yesterday’s closing bell…
To do a strangle option trade, you could have purchased the Cisco November 23 puts (CSCO101120P00023000, $2.30, up $2.10) for about 20 cents yesterday, or 10 contracts would have cost you $200. These options are worth $2,300 right now as they are up over 1,050%!
The Cisco November 27 calls (CSCO101120C00027000, $0.01, down $0.08) could have been picked up for 10 cents yesterday which means it would have cost you $100 to buy 10 contracts. The options will probably expire worthless. No big deal.
Your total investment would have been $300 and if you closed the puts right now you would have $2,300 in your account. You would let the calls expire worthless because it is unlikely the stock will rebound and jump back to new highs by next Friday. You total return would on this trade would have been 675%. Not bad for less than 24 hours of work.
Although we didn’t take this trade, we think there is another stock that could move 10% or more on Friday. We take a look at it on our Watch List but we will probably stay on the sidelines as we already have enough action with our current trades.
We like the fact the market has held support and has bounced off the lows of the day. We still feel we can go higher and we are targeting the next move up in the market by Thanksgiving which means we may consolidate at these levels for a little bit.
Despite today’s downdraft, our trades are holding up well. Subscribers, check the Members Area for the important updates. We are also selling another option today for our covered call position.
Tags: bear market, binary options, bull market, call option, CSCO, how to trade options, Momentum stocks, option investments, option picks, option trading, options mentoring, options trading service, put option, stock market, stock market options
Posted in Company Commentary, Earnings, strangle option trades | Comments Off