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Wednesday, May 13th, 2009
9:15am (EST)
Here is a quick rundown of what we have going on:
Barrick Gold (ABX, $35.10, up $1.46)
May 30 calls (ABXEF, $5.10, up $1.40)
Entry Price: $1.35 (4/21/09)
Exit Price: $5.00 (5/12/09)
Return: 270%
We started closing out positions yesterday and most of you should have gotten at least $5 for the call options as Barrick Gold stayed long and strong all day. Again, the May option chain expires this Friday.
Blackstone Group (BX, $12.67, up $0.03)
May 10 calls (BXEB, $2.80, down $0.25)
Entry Price: $0.65 (3/25/09)
Exit Price: $2.75 (5/12/09)
Return: 323%
June 15 calls (BKFC, $0.50 up $0.05)
Entry Price: $0.60 (5/8/09)
Exit Price: open
Return: -17%
January 2010 10 calls (KJLAB, $4.00, down $0.20)
Entry Price: $1.75 (3/25/09)
Exit Price: open
Return: 129%
The May call options opened at $2.75 and hit a high of $2.90 yesterday when I suggested closing the trade. As far as the January and June options, should the stock fall below $12, close the June trade and half of the January trade if the call options fall below $3.50. The stop of $3.50 books the 100% return.
ExxonMobil (XOM, $70.82, up $1.55).
May 70 calls (XOMEN, $1.20, up $0.55)
Entry Price: $0.65 (5/11/09)
Exit Target: $1.30 or set stops at $1.00
Return: 85%
June 75 calls (XOMFO, $0.81, up $0.15)
Entry Price: $0.63 (5/11/09)
Exit Price: open
Return: 29%
If you got into the May options then you are playing with fire. I liked the June options because they bought us more time but I have gotten a few emails asking how how I think the May options can go. I would like to target $1.30 for them and maybe they get there today but when you get nearly a double, they should have been sold yesterday. If anything, set a stop of $1.00-$1.10 to protect your profits. As far as the June calls, we have plenty of time for this trade to gain even more momentum.
Oil is picking up steam as it climbed to nearly $60 a barrel this morning in Asia. The rise is due to an “unexpected” fall in U.S. crude inventories which I suggested were stable in the Weekly Wrap. With Memorial Day approaching, demand may be picking up.
The American Petroleum Institute commented that oil supplies fell 3.2 million barrels to 371 million last week. The fat cats on Wall Street had expected a gain of about 1.5 million barrels.
Wells Fargo (WFC, $25.70, down $0.83)
June 30 calls (FHUFD, $1.00, down $0.35)
June 23 puts (WFCRI, $1.45, up $0.20)
Entry Price: $1.20 for the calls and $1.30 for the puts
Wells Fargo was all over the map yesterday, trading as high as $27 and as low as $24. Just the type of action we like to see…
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold, Blackstone Group, ExxonMobil, Wells Fargo
Posted in Gold, Hot Stocks, Option Trades | No Comments »
Tuesday, May 12th, 2009
1:00pm (EST)
On April 21st, I mentioned Barrick Gold (ABX, $34.85, up $1.21) and how the safety of gold could be coming into play. I profiled a couple of gold trades at the time but I didn’t want to chase them because they were having a good day. But it was a sign of things to come.
Barrick Gold was trading for $29 that day but really started to pick up steam last week. I had mentioned the May 30 calls (ABXEF, $4.70, up $1.00) as a possible play and they were going for $1.35 at the time. When the call options fell back to $1.00, it provided another cheap out-of-the-money trade. Even if you jumped in at $1.35, the trade has been a monster.
The May option chain expire this Friday so if you are in the trade, start shutting it down. You want to close these options before they expire, otherwise, since they are deep in-the-money they may get exercised.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold
Posted in Gold, Option Trades | No Comments »
Tuesday, April 21st, 2009
9:00am (EST)
Futures are actually positive this morning as I prepare this post for Tuesday’s Tidbits (my time is 1:30am now…). Pretty amazing since we got a 300-point drop on the Dow yesterday.
A few updates. Amazon.com (AMZN, $77.57, down $0.48) dipped to a low of $76.83 on Monday and we were trying to get into the May 90 calls (ZQNER, $1.59, up $0.21) for $1.30 or better. The calls opened at $1.43, hit a high of $1.83 and never got below $1.41. If you got in below $1.50, set stops at 75 cents. I’m not sure if the calls get back down to our target price of $1.30 because Amazon.com looked strong yesterday. The company reports Thursday and if you didn’t get in on Monday, do not chase or start new positions.
Dendreon (DNDN, $19.52, up $1.53) continues to do well after an upgrade to “Buy” from an analyst with a price target of $25. Is it me or is everyone starting to jump on the Dendreon Bandwagon? That could be both good and bad and we will have to see if the trade becomes “too crowded”. In the Weekly Wrap Sunday night, I mentioned a $25 “target” so now we have company a day later. Welcome aboard “Lazard” (the brokerage firm who upgraded the shares) but the train left at $7, bro…
I don’t want to get anyone too excited but there are some traders out there guessing the stock could be worth as much as $75 a share based on sales of $3 billion or more. Whoa, Nelly! As we get closer to next Tuesday which is when we get the devil in the details, this thing could already be in the $20′s. The last thing I said was that if the data is so unbelievably good, then there is a chance we go higher than $25. The other thing to consider is the current short squeeze.
Dendreon has nearly 100 million shares outstanding and 20 million of those shares are currently sold short. I go into more detail in the trading manual on how this works but basically 20% of the “float” is short and at current calculations it would take 8 days for the shorts to cover their position based on the average daily volume.
The potential for a major “short squeeze” could come into play and this, my friends, could be the mama of all short squeezes. When short sellers get busted betting on a price drop with borrowed stock there is sometimes a mad dash to find shares in the open market. If everybody is trying to get in because of a “good news” event and short sellers are trying to buy back the stock to replace the ones they have borrowed, you have a recipe for an explosive price move.
Does anyone remember when Volkswagen zoomed over 300% in 5 days back in October 2008? That was a result of a short squeeze. Actually, the stock was up five-fold from when the short squeeze started until the time it ended. I’m not saying Dendreon will follow those footsteps but I thought it would be good story to tell this morning. Especially after there was one analyst who put a $1 share price on the stock before the news broke last week. That analyst had written a note to his “clients” with a “Sell” rating and was issued just hours before the stock was halted on Monday. Within 48 hours, the “Sell” rating and $1 price target on the stock was lifted and replaced with a “Hold” and a N/A target.
NetApp (NTAP, $17.79, up $0.20) also performed well on the heels of it being the next takeover target. The May 17.50 calls (NULEW, $1.40, up $0.30) and the May 20 calls (NULED, $0.60, down $0.30) gained some ground and both positions are up from our entry level prices. The 17.50′s are up 25% and the 20′s are up 50%. If the market continues to sell-off, protect your profits.
Okay. Here comes the curve balls. We could get stopped out of the IBM (IBM, $100.43, down $0.84) and ValueClick (VCLK, $9.28, down $0.74) trades today and keep a close eye on Olin (OLN, $14.78, down $1.19). I listened to the IBM conference call (and so can you) and was impressed with their guidance going forward. This company is going to earn $10-$11 a share in 2010, and $9.20 this year. In other words, they are talking the talk and as of late, they had been walking the walk. The stock is up 20% YTD and any pullback below $100 could find buyers. If we can get out of the woods with the stock closing at $98-$99 on Tuesday, we might be okay.
As far as our put options, the Yahoo (YHOO, $13.66, down $0.73) position started off on a good note. We set a limit price of $1.10 for the May 14 puts (YHQQP, $1.31, up $0.27) which was hit shortly after the market opened. Yahoo will report after the closing bell today.
Since we are talking about put options, I keep mentioning 800 as major support for the S&P 500 and yesterday’s 37 point drop has the index at 832. It looks like the bears were buying the May 800 puts (SPXQT, $18.80, up $9.20) which opened at $12.00 Monday morning. The May 750 puts (SPZQJ, $8.00, up $4.00) opened at $4.80 and traded 20,000 contracts. The May 700 puts (SPZQT, $3.50, up $1.80) opened at $2.15 and traded over 25,000 contracts.
I didn’t mentioned these yesterday but when you see down days like the one we had yesterday then take advantage of it. It was one of those days where you could almost feel the pulse of the market and one where you knew it could be a nasty day. The opposite is true on bullish days.
The trading manual I’m working will show you how to find trades like this and how to add them on your Watch List. Once you learn the flow of the market and how things work then you will be able to find these trades on your own. And isn’t that the whole purpose of learning to trade? Once you see money moving out of a sector, use your Watch Lists to find out where it is going.
For instance, the gold stocks did well on Monday and might be worth watching. Barrick Gold (ABX, $29.07, up $1.54) jumped nearly 6% while Goldcorp (GG, $28.20, up $1.19) gained over 4%. Barrick could be the stronger play and bulls were buying the May 30 calls (ABXEF, $1.35, up $0.50) right from the jump for 85 cents when they opened. The options gained nearly 60% for the day but don’t chase these either. Gold closed at $887.50/ ounce.
Footnote: I was stunned when I heard that stocks can down in value up to 200% and 300%. Yeah, at first, I didn’t get it either. I was watching one of the business channels early Monday morning to get a feel for the global markets to see how the U.S. market might open. One of the commentators said that while some of the banks stocks have gained 200% or more, “we have to remember that some of them have also fallen 200% and 300%”.
To clear the air, the most a stock can lose is 100% of its value. Obviously, that dude didn’t stay at a Holiday Inn Express before going on the show.
Futures are sharply lower as we head towards the opening bell..
Rick Rouse
Rick@OptionsMentoring.com
Tags: Amazon.com, Barrick Gold, Dendreon, Goldcorp, IBM, NetApp
Posted in Company Commentary, Earnings, Option Trades | No Comments »
Friday, January 23rd, 2009
The market is trading lower this morning and the Vegas over/under is 8000 for the Dow. I got 50 cents on the under. The index slid nearly 200 points at the open but has cut that in half trade which puts us at 8009. There are a few bright spots in the market but the overall mood is that the bears won this week and the bulls are going home for the weekend to regroup.
The bank stocks are killing any momentum the bulls gather as Capital One Financial (COF, $19.06, down $2.87) joins the latest list to report lousy earnings. The company had to write-off another billion for bad loans and posted a worse-than-expected loss for the quarter. Looks like the default rate for people who can’t pay their credit cards is rising…not a good sign. And just how inflated were the put options for COF you ask? The February 20 puts (COFND, $2.85, up $0.20) are only up 7% on the news while the stock is down 11%.
In other words, the price for the COF put options were so inflated and it was almost a given that the options would quickly be in-the-money when COF reported earnings. I’ll give you a perfect example of how this works and why anyone who bought these options overpaid.
Home Depot (HD, $21.85, down $0.12) is currently trading where COF closed at yesterday. The Home Depot February 20 puts (HDND, $0.71, up $0.02) are trading at 70 cents and if Home Depot were to suddenly fall 10%, these options would double. We teach you how to look for these type of things in our training course and videos…
Geron (GERN, $8.03, up $2.82) is getting a huge pop today and is up 50% on news that they got the go ahead to start human trials using stem cells intended to treat severe spinal cord injuries. The February 7.50 calls (GQDBU, $1.40, up $1.30) is up a whopping 1300% on the news. Don’t get caught in the hype, it will be years before anything material comes from this.
Intuitive Surgical (ISRG, $94.61, down $1.40) traded as low as $87 this morning and has made a nice recovery. The February 90 puts (AXQNR, $3.80, down $1.30) hit a high of $7.20 but have been hammered on the stock’s quick rebound. This shows just how much you have to manage your positions in this market. We were out at $6.50 and while you could have squeezed the trade for a few more points at the open, it just wasn’t worth it as you can see.
And as fate would have it…The gold trades were good to us for two days but the honeymoon is today. I planned a “three-day” marriage which turned into 2 days and we got some nice returns. However, Barrick Gold (ABX, $39.03, up $3.45) and Goldcorp (GG, $28.95, up $2.32) are having monster days.
The Goldcorp February 32.50 calls (GGBZ, $1.10, up $0.50) were profiled at 40 cents and the Barrick Gold February 40 calls (ABXBH, $2.65, up $1.40) could have been picked up for 90 cents as both are up nearly 200% from those entry prices. If you ignored my bonehead advice (sly grin) and held on for another day, you made another 100%. When I blogged “Gold Back On Radar” Wednesday morning, I knew something good was going to happen with gold this week.
Here were my thoughts:
“Over the last couple of years, gold has had a pretty good run from late January until the end of February. In November 2008, gold had dipped to around $750 an ounce and we jumped on the train for the way back up. We set stops and were out in less than a week.
Look, I’m not sure if gold is ready to challenge $900 but the move in gold is hard to ignore with many of the banks and the currency markets still unsettled. I don’t trust Newmont but Goldcorp and Barrick Gold are a possibility.” –
Man, I love it when history repeats itself. Gold is up $43 to $903/ oz. and looks to be knocking on $900′s door. If you haven’t gotten off the bus, Gus, close the trades though. Or at least half the trade. It would be hard not to take 200% off the table with the weekend coming up.
Anyway, I’ll be back this weekend with the Weekly Wrap and a few thoughts on Genentech (DNA, $83.10, up $1.40).
If you want to be added to the mailing list for the Weekly Wrap or are interested in really learning how to trade options, shoot me an email.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Barrick Gold, Capital One Financial, Genentech, Geron, Goldcorp, Home Depot, Intuitive Surgical
Posted in Financial Stocks, Gold, Hot Stocks, Market Analysis, Option Trades, Strategies | No Comments »
Thursday, January 22nd, 2009
The Dow is back at 8000, down 228 points, as the financial stocks are weighing heavy on the market once again. The financial stocks are averaging 20%-50% moves this week on a daily basis and as options traders, this is the stuff we live for. The sector continues to experience wild volatility which also spreads to the market. Remember what I said on Sunday night in the Weekly Newsletter…
“The market’s volatility wasn’t as great as the volatility we saw in September and October but make no doubt, it is still there. As option traders that is great news because options have a better chance of ending up “in-the-money” in a high-volatility market than they do in a more stable market. However, you still have to be careful because high volatility can lead to the overpricing of options.”
Having said that, let’s take a look at some of the option trades that we still have open.
Apple (AAPL, $88.29, up $5.46) is having a banner day, up 6%, and traded as high as $89.85 earlier in the session. The February 90 calls (QAABR, $4.30, up $1.40) opened at $5.10 and I said if Apple’s after-hours gains held from last night, then the calls should trade at $4-$5. If you haven’t sold them, do so now. The calls were profiled at $2.25 and it would be foolish not to take all of your gains off the table.
Intuitive Surgical (ISRG, $93.72, down $3.28) is at fresh 52-week lows as the stock has traded as low as $91.57 this morning. The company reports earnings after the bell and here is another chance to “manage” the trade before earnings come out. The February 90 puts (AXQNR, $6.35, up $1.65) were profiled at $4.50 and have traded as high as $6.70. If you sell 70% of your position, you take all of the risk out and could play ISRG even lower. OR, you can close the trade and make 50%.
The gold trades I mentioned were up again this morning and are falling back a little. Remember, I said this was a “three-day” marriage which quickly turned into 2 days. Barrick Gold (ABX, $36.25, down $0.36) and Goldcorp (GG, $26.99, down $0.13) are negative after trading in positive territory.
The Goldcorp February 32.50 calls (GGBZ, $0.40, down $0.30) traded as high as 75 cents this morning which was nearly a double from the 40 cent entry price. The Barrick Gold February 40 calls (ABXBH, $1.40, unchanged) could have been picked up for 90 cents and traded as high as $1.55 earlier in the session. Even at current prices, you’re up 50%. Close the trades.
I have mentioned the Dow’s trading pattern over the past few issues of the Weekly Newsletter and if you haven’t signed up for the newsletter, then send me an email. We’ll get you on the list. It’s free so what do you have to lose? With the current envoronment, you need to stay informed with what is happening with the market.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Apple, Barrick Gold, Goldcorp, Intuitive Surgical
Posted in Option Trades | No Comments »
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Tuesday's Tidbits
Tuesday, April 21st, 2009
9:00am (EST)
Futures are actually positive this morning as I prepare this post for Tuesday’s Tidbits (my time is 1:30am now…). Pretty amazing since we got a 300-point drop on the Dow yesterday.
A few updates. Amazon.com (AMZN, $77.57, down $0.48) dipped to a low of $76.83 on Monday and we were trying to get into the May 90 calls (ZQNER, $1.59, up $0.21) for $1.30 or better. The calls opened at $1.43, hit a high of $1.83 and never got below $1.41. If you got in below $1.50, set stops at 75 cents. I’m not sure if the calls get back down to our target price of $1.30 because Amazon.com looked strong yesterday. The company reports Thursday and if you didn’t get in on Monday, do not chase or start new positions.
Dendreon (DNDN, $19.52, up $1.53) continues to do well after an upgrade to “Buy” from an analyst with a price target of $25. Is it me or is everyone starting to jump on the Dendreon Bandwagon? That could be both good and bad and we will have to see if the trade becomes “too crowded”. In the Weekly Wrap Sunday night, I mentioned a $25 “target” so now we have company a day later. Welcome aboard “Lazard” (the brokerage firm who upgraded the shares) but the train left at $7, bro…
I don’t want to get anyone too excited but there are some traders out there guessing the stock could be worth as much as $75 a share based on sales of $3 billion or more. Whoa, Nelly! As we get closer to next Tuesday which is when we get the devil in the details, this thing could already be in the $20′s. The last thing I said was that if the data is so unbelievably good, then there is a chance we go higher than $25. The other thing to consider is the current short squeeze.
Dendreon has nearly 100 million shares outstanding and 20 million of those shares are currently sold short. I go into more detail in the trading manual on how this works but basically 20% of the “float” is short and at current calculations it would take 8 days for the shorts to cover their position based on the average daily volume.
The potential for a major “short squeeze” could come into play and this, my friends, could be the mama of all short squeezes. When short sellers get busted betting on a price drop with borrowed stock there is sometimes a mad dash to find shares in the open market. If everybody is trying to get in because of a “good news” event and short sellers are trying to buy back the stock to replace the ones they have borrowed, you have a recipe for an explosive price move.
Does anyone remember when Volkswagen zoomed over 300% in 5 days back in October 2008? That was a result of a short squeeze. Actually, the stock was up five-fold from when the short squeeze started until the time it ended. I’m not saying Dendreon will follow those footsteps but I thought it would be good story to tell this morning. Especially after there was one analyst who put a $1 share price on the stock before the news broke last week. That analyst had written a note to his “clients” with a “Sell” rating and was issued just hours before the stock was halted on Monday. Within 48 hours, the “Sell” rating and $1 price target on the stock was lifted and replaced with a “Hold” and a N/A target.
NetApp (NTAP, $17.79, up $0.20) also performed well on the heels of it being the next takeover target. The May 17.50 calls (NULEW, $1.40, up $0.30) and the May 20 calls (NULED, $0.60, down $0.30) gained some ground and both positions are up from our entry level prices. The 17.50′s are up 25% and the 20′s are up 50%. If the market continues to sell-off, protect your profits.
Okay. Here comes the curve balls. We could get stopped out of the IBM (IBM, $100.43, down $0.84) and ValueClick (VCLK, $9.28, down $0.74) trades today and keep a close eye on Olin (OLN, $14.78, down $1.19). I listened to the IBM conference call (and so can you) and was impressed with their guidance going forward. This company is going to earn $10-$11 a share in 2010, and $9.20 this year. In other words, they are talking the talk and as of late, they had been walking the walk. The stock is up 20% YTD and any pullback below $100 could find buyers. If we can get out of the woods with the stock closing at $98-$99 on Tuesday, we might be okay.
As far as our put options, the Yahoo (YHOO, $13.66, down $0.73) position started off on a good note. We set a limit price of $1.10 for the May 14 puts (YHQQP, $1.31, up $0.27) which was hit shortly after the market opened. Yahoo will report after the closing bell today.
Since we are talking about put options, I keep mentioning 800 as major support for the S&P 500 and yesterday’s 37 point drop has the index at 832. It looks like the bears were buying the May 800 puts (SPXQT, $18.80, up $9.20) which opened at $12.00 Monday morning. The May 750 puts (SPZQJ, $8.00, up $4.00) opened at $4.80 and traded 20,000 contracts. The May 700 puts (SPZQT, $3.50, up $1.80) opened at $2.15 and traded over 25,000 contracts.
I didn’t mentioned these yesterday but when you see down days like the one we had yesterday then take advantage of it. It was one of those days where you could almost feel the pulse of the market and one where you knew it could be a nasty day. The opposite is true on bullish days.
The trading manual I’m working will show you how to find trades like this and how to add them on your Watch List. Once you learn the flow of the market and how things work then you will be able to find these trades on your own. And isn’t that the whole purpose of learning to trade? Once you see money moving out of a sector, use your Watch Lists to find out where it is going.
For instance, the gold stocks did well on Monday and might be worth watching. Barrick Gold (ABX, $29.07, up $1.54) jumped nearly 6% while Goldcorp (GG, $28.20, up $1.19) gained over 4%. Barrick could be the stronger play and bulls were buying the May 30 calls (ABXEF, $1.35, up $0.50) right from the jump for 85 cents when they opened. The options gained nearly 60% for the day but don’t chase these either. Gold closed at $887.50/ ounce.
Footnote: I was stunned when I heard that stocks can down in value up to 200% and 300%. Yeah, at first, I didn’t get it either. I was watching one of the business channels early Monday morning to get a feel for the global markets to see how the U.S. market might open. One of the commentators said that while some of the banks stocks have gained 200% or more, “we have to remember that some of them have also fallen 200% and 300%”.
To clear the air, the most a stock can lose is 100% of its value. Obviously, that dude didn’t stay at a Holiday Inn Express before going on the show.
Futures are sharply lower as we head towards the opening bell..
Rick Rouse
Rick@OptionsMentoring.com
Tags: Amazon.com, Barrick Gold, Dendreon, Goldcorp, IBM, NetApp
Posted in Company Commentary, Earnings, Option Trades | No Comments »