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8:45am (EST)
Dendreon (DNDN, $6.37, down $0.21) has held above $6 all week after hitting a high of $7.35 on Monday despite numerous “sell” recommendations on the stock. This has killed all of the momentum as talking heads continue to talk negative about the move the stock has made.
By now, the entire world knows Dendreon will talk about its results at the end of the month concerning its drug Provenge, and this is what punished our April 10 calls (UKODB, $0.25, down $0.08). The problem here is that we are running out of time for the April contracts because they expire next Friday, April 17th. The May 7.50 calls (UKOEU, $2.32, down $0.03) have held up rather well so I’m not worried about them.
We entered the April 10’s on March 20th at 40 cents. These calls traded as high as $1.05 last Friday and 90 cents on Monday which were more than a double. I thought Dendreon would have held up better with so much riding on Provenge but the negative “sell” ratings have kept a lid on the shares. At current prices, the position would be closed with a 38% loss. As much as I hate to, we need to close the April calls TODAY. I just don’t think we get a $4 move in Dendreon by next Friday and I’d rather cut my losses instead of losing 100%. We normally target 100% returns and cut losses at 50% for the trades in the blog. I was being stubborn and was going to ride this one out…but I’m sticking to my trading rules and closing the position.
The May 7.50’s were entered at $1.50 and are currently up 57%. I had a larger position in them than I did with the April calls so overall, I’m in the green. There is a slight chance Dendreon says something about Provenge that could propel the stock higher but I’m managing the position to avoid a loss.
We might not get the big, huge returns we were looking for but I still think the stock will trade above $10 by the time the month of May rolls around. If so, the May 7.50’s would still be worth $2.50. It is still a risky trade because we could close everything down and walk away with a profit right now but I’ve been upfront with everyone on the risks involved with this trade.
If you did get into the April options, don’t be scared to sell them. You can always roll the position over into the August 10 calls (UKOHB, $2.10, down $0.05). However, you can wait until next week to pick these up. The August calls will provide us with plenty of time to play Dendreon to the upside. If Dendreon says something really positive by the end of the month, there’s is a chance the FDA could fast-track approval of the drug.
Elsewhere, watch ValueClick (VCLK, $9.44, up $0.54). The stock has been in a strong uptrend and recently broke major resistance at $9. The April 10 calls (QCSDB, $0.15, up $0.05) could be active next week as bulls try to push the stock over $10. The safer play would be the May 10 calls (QCSEB, $0.70, up $0.10) but both will do well if the shares make it over $10. There was also a block of 300 contracts that passed through the tape on the September 12.50 calls (QCSIV, $0.80, unchanged) which also could be a great speculative play.
The Interactive Advertising Bureau recently released some encouraging figures by saying the Internet advertising industry has grown to $23 billion by the end of 2008 (for the US). Wall Street has been worried about the decline in the growth rates but this was the news that has lit a fire under some of these stocks in the sector.
One other interesting note…NetApp (NTAP, $16.63, up $1.66) had some huge option volume yesterday. The stock was up 10% but the April 17.50 calls (NULDW, $0.50, up $0.42) were up 525% as they moved closer to being in-the-money. Nearly 22,000 contracts traded. The May 17.50 calls (NULEW, $1.17, up $0.87) were up 290% and traded 21,000 contracts. The company is making noise as a merger candidate and some investors are even buying the May 20 calls (NULED, $0.48, up $0.38) as 8,000 contracts switched hands. You could roll the dice on the 20’s but the stock is right at its 50-day moving average.
Oh yeah, the Toyota Motors (TM, $75.68, up $2.45) trade was killed at the alter. The April 70 puts (TMPW, $0.70, down $0.55) never had a chance. The only trade we have open is the Dendreon May 7.5 calls going into the weekend and the two aforementioned plays for those willing to participate. It’s been a choppy week but we have been able to make some solid gains with the Celgene (CELG, $40.68, up $0.20) and Las Vegas Sands (LVS, $4.02, down $0.01) trades. Celgene returned many of you between 100%-250% while the Las Vegas Sands trade was a double (100%+).
For the year, the blog has covered 85 option trades with 67 winners and 18 losers. I’ve been keeping track of the option plays I mention in the blog and we should be posting those results soon. When you see the dates for the positions, all you have to do is archive the blog to follow the trade. This will be a good tool to use to help you understand why we got into a trade, why it was successful or why it wasn’t. I also have last year’s results which will be posted as well. Next week will be the one-year anniversary of the blog and many thanks go out to all of you who read me.
The market is closed on Friday and I may not post again today so enjoy the Easter weekend. Be sure to check back here Sunday night or check your inbox for the Weekly Wrap. I’ve got some exciting plays lined up for next week as the bulk of the earnings season gets underway. If you haven’t signed up for the newsletter, enter your email address up on the right of this page. Thanks and if you have any questions or comments, send them to me.
I smell a huge rally today and if the bulls can get us back over 8,000 for the Dow, they could be ready to run next week.
Rick Rouse
Rick@OptionsMentoring.com
RIMM Rocks, Palm Rolls
Friday, December 18th, 2009
9:10am (EST)
Futures are pointing towards a higher open this morning following yesterday’s selloff. The Dow ended Thursday with a 132 point drop and settled at 10,308 while the S&P 500 fell 13 and finished at 1,096.
Today is a quadruple witching day which means contracts for stock index futures, stock index options, stock options and single stock futures all expire today. It is what is known as “Quadruple Witching” day on Wall Street and it can be extreme volatility depending on the current market environment.
We mentioned yesterday that we expected the market to power higher today but given the lack of volatility over the past couple of months, we don’t believe we that will be the case today.
We had a number of companies report earnings after the bell last night and Wall Street seems to like what they heard. Research In Motion (RIMM, $63.46, down $1.21) is over $70 in pre-market trading after reporting strong earnings that beat analysts’ expectations. The company reported earnings of $1.10 a share versus estimates of $1.04. Revenue came in at $3.92 billion which was ahead of the $3.78 billion the Street was calling for.
Oracle (ORCL, $22.88, down $0.24) also came in with better-than-expected results while Palm (PALM, $11.72, up $0.11) however, reported a wider loss than expected as their smart-phone sales declined. Palm is back below $11 in pre-market trading.
Elsewhere, Celgene (CELG, $50.62, down $1.16) is up 9% in early trading to $55 after a late-stage study show its drug, Revlimid, significantly slowed the progression of sickness in patients following a type of stem cell treatment.
We have much more to talk about this morning in the Members Area so let’s get to it. As we head to press, the Dow futures are up 22 points.
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Posted in Company Commentary, Earnings, Hot Stocks | Comments Off