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Tuesday, February 24th, 2009
I mentioned in the Weekly Wrap on Sunday night that I was watching First Solar (FSLR, $137.68, up $12.84) as a possible trade. I watched the March 150 calls (HJQCJ, $7.40, up $2.50) open at $5.20 and I wanted to jump on them if they got below $5 but their earnings announcement was to tough to call. The water was too dangerous for us to even stick our toes in it.
Not that I didn’t think they would report good earnings, they did as profits doubled for the quarter, but because First Solar is one stock that has a history of mixed results after reporting earnings. As you can see, the stock had a great day, rising over 10%, and the options ended the day for a 50% gain. That was in anticipation of good earnings.
However, First Solar is getting crushed in after-hours trading. The stock is down $18 to $119. If you had held those calls after the close, you could be in big trouble if things stay the same when the opening bell rings on Wednesday. This is preciously why I stayed away from the trade. Yeah, a straddle or strangle option trade may have worked but I just didn’t “feel” the trade. There will come a time to trade First Solar but lets wait until the dust settles with this one.
Also, with the Dow rising all day and really taking off when Bernanke spoke, it was a no-brainer to close the Dow Jones Industrial Average Index (DJX, $73.51, up $2.36) trade. I have been warning of a “snap-back” rally and although it wasn’t a huge one, the Dow still managed a 3% gain. Those kind of gains in a stock or ETF can have an adverse effect if you are in an option trade and the stock is going the wrong way on you.
Having said that, we had stops in place for the trade at $3.85 on the March 75 puts (DJXOW, $4.10, down $1.15). The stop could have been raised or the trade should have been closed altogether as the rise in the Dow was becoming apparent. The puts opened at $5.10 and you could have protected your profits at $4.50 or higher. The trade was profiled at $3.10.
The March 74 puts (DJXOV, $3.00, down $1.80) had a stop of $3.25 and were profiled last Wednesday as well at $2.75. These put options opened at $4.25 and hit a high of $4.40. If you got out at $4.00 or better, you got a 50% return.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Dow Jones Industrial Average Index, First Solar 4Q earnings
Posted in Earnings, Option Trades | No Comments »
Tuesday, February 24th, 2009
The Dow took another step closer to falling below 7,000 yesterday as bears took control of the market shortly after the opening bell. The market started off in positive territory following word the government may help Citigroup (C, $2.14, up $0.09) but the rally was short-lived. The Dow dropped 250 points, or 3.4%, to finish at 7,114. The last time the Dow traded below the 7,000 mark was in October 1997.
The S&P 500 dropped 27 points, or 3.5%, to close at 743 while the Nasdaq tanked 53 points, or 3.7%, and ended at 1,387.
Wow.
And you thought it couldn’t get any worse, right? Despite the market’s woes, we still managed to have a heck of a Monday.
Research In Motion (RIMM, $37.42, down $1.73) continued its selloff as the stock lost another 4%. The 52-week low for RIMM is $35 and the stock is giving all the signs that it wants to go lower. It remains to be seen if support will hold but we already have two huge winners with a couple of put options that were profiled last Wednesday.
The March 40 puts (RUPOH, $4.70, up $1.00) were profiled at $2.15 and hit a high of $4.75 on Monday. The return on the trade is nearly 120%. The 25% gain now allows you to set a stop of $4.30 on the trade if you didn’t close it yesterday. A stop of $4.30 gets you a 100% return. The March 35 puts (RUPOG, $2.10, up $0.50) were recommended at 85 cents and stops can be set at $1.90. The trade is up nearly 150%.
I had mentioned if the RIMM put options traded back to 100% returns to sell them on Monday. We got more than that and then some. The stops are set at 100% return so make sure you set them.
The Dow Jones Industrial Average Index (DJX, $71.15, down $2.51) also did very well. The March 75 puts (DJXOW, $5.25, up $1.40) and the March 74 puts (DJXOV, $4.80, up $1.30) surged as the day wore on. Both trades are now up 70%+…stops are set at $3.85 on the March 75’s and $3.25 on the March 74 puts.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Citigroup, Dow Jones Industrial Average Index, Research in Motion
Posted in Oil | No Comments »
Monday, February 23rd, 2009
General Electric (GE, $8.90, down $0.48) continues to set new 52-week lows after falling below $10 last week. Wow. It is really hard to believe this stock is in the single digits. The stock is getting so cheap to where it can be actually be traded but option traders are still loading up on the puts.
The March 7.50 puts (GEWOU, $0.55, up $0.10) have been pretty active as over 28,000 contracts have traded so far this morning. The put options opened at 30 cents, down 14 cents from Friday’s close as GE’s share price was higher to start the day. However, that has all changed as the Dow has given back all of its gains and is currently down about 80 points to 7,284.
You could buy the puts at current prices and look to exit them at 75 cents with a stop of 25 cents. Very high risk/ high reward trade…
The Dow Jones Industrial Average Index (DJX, $73.08, down $0.58) trades are still worth holding for the time being. The March 75 puts (DJXOW, $4.10, up $0.25) and the March 74 puts (DJXOV, $3.70, up $0.20) continue to do well as the Dow has dipped into negative territory. Consider placing stops at $3.85 on the March 75′s and $3.25 on the March 74 puts.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Dow Jones Industrial Average Index, General Electric
Posted in Option Trades | No Comments »
Friday, February 20th, 2009
Gold has topped $1,000 an ounce this morning, rising $23.80, or 2.4%, to $1,000.30. The last time gold topped $1,000 was last March when the price reached a record $1,033.90 an ounce. Gold is up nearly 50% from its low of $681 in October and that $1,033 record appears likely to be broken.
The Spider Gold Shares (GLD, $97.77, up $2.00) continue to make a run towards $100 which has meant good things for our call options. The March 99 calls (GLDCU, $3.60, up $0.90) were profiled at $2.05 on February 2 and the March 100 calls (GLDCV, $3.15, up $0.65) were entered at $1.90.
Research in Motion (RIMM, $40.20, down $1.89) fell below $40 earlier in the session. On Wednesday, I mentioned RIMM could be headed back into the $30′s and we now have some decent profits on the put options I profiled.
The March 40 puts (RUPOH, $3.10, up $0.75) were profiled at $2.15 and have hit a high of $3.50 this morning. The March 35 puts (RUPOG, $1.33, up $0.40) were profiled at 85 cents. Let’s see how the rest of the day unfolds before we close this one out. I really don’t trust them over the weekend but they may be worth holding.
The Dow Jones Industrial Average Index (DJX, 73.65, down 1.01) trade is also working well for us. We entered the March 75 puts (DJXOW, $3.85, up $0.45) at $3.10 on Wednesday and the March 74 puts (DJXOV, $3.50, up $0.50) at $2.75. The Dow continues to weaken and we could be headed below 7,300.
I’m thinking of closing the Bank of Amercia (BAC, $3.39, down $0.54) trades for a loss. With the possibility of nationalization hanging in the balance, BofA could be headed even lower. The two call options, the March 6 calls (BYOCF, $0.25, down $0.05) and the March 7 calls (BYOCG, $0.17, down $0.02) were entered at 90 cents and 60 cents, respectively, on 2/12. There is plenty of time left for the calls to bounce back but we may be better off closing them today.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Add new tag, Bank of Amercia, Dow Jones Industrial Average Index, Research in Motion, Spider Gold Shares
Posted in Option Trades | No Comments »
Wednesday, February 18th, 2009
The Dow started the morning off in positive territory and has been up and down ever since after waiting to hear details on how Obama’s $75 billion mortgage relief plan is going to work. The plan is designed to help stabilize the housing market and reduce foreclosures and comes on the heels of the just announced housing numbers.
A report earlier this morning said construction of homes and apartments dropped by 17% in January to a record low annual rate. Applications for building permits also fell to a record low of 4.8%.
The uncertainty has provided a good opportunity to get into the Dow Jones Industrial Average Index (DJX, 75.69, up 0.16) March 75 puts (DJXOW, $3.40, unchanged) which opened at $3.10. We were trying to get in under $3.50 and the puts have traded as low as $3.05 this morning. The March 74 puts (DJXOV, $3.25, up $0.35) opened at $2.75 and our entry target was $3.00 or better.
Set stop losses at half your entry price and look to exit at 50% or better.
Rick Rouse
Rick@OptionsMentoring.com
Tags: Add new tag, Dow Jones Industrial Average Index
Posted in Market Analysis, Option Trades | No Comments »
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