12:20pm (EST)
The market has traded in a tight range today as Wall Street winds down the books and looks ahead to a long 3-day weekend. The bulls are still holding on to Monday’s huge pop but the action has been choppy since as it seems traders are unwilling to make bets, long or short, until next week/
The Dow is 30 points to 12,499 while the S&P is up a point to 1,321. The Nasdaq is flat and is at 2,839.
We have learned that Facebook (FB, $31.93, down $1.10) will trade options starting next week and we will be looking at them for a possible trade. There will all kinds of exciting possibilities to play the call and puts but with Facebook at $30 there is a chance for a $10 move over the next month or two, depending on who you believe.
Some analysts were quick to pull the trigger BEFORE Facebook’s IPO came out and gave shares a “Buy” rating and a price target north of $40. Other analysts have reaffirmed $40+ targets this week while some have slapped “Sell” ratings on the stock. This morning, there was talk that shares are worth $13- and change while another brokerage firm issued a $9 price target.
Of course, like the IPO, Facebook’s options will trade at a premium and they will be overinflated so we may have to get really creative but there should be a trade based on the unknowns.
Before we roll today, we wanted to cover one more thing.
Last weekend, we ran a promotion that was a sweet deal. We offered our option trading course, How to Trade Options on Momentum Stocks, at no cost (an $895 value) for those of you that upgraded your current membership to a 1-year deal. The course also includes ongoing videos that show you chart work, how to find trades, how to play the market with the right index options when it is trending, and how to do the math on figuring out where a stock needs to be in order for the option to make you money.
Many of you have written all week to ask for the deal which ended last Sunday night.
We understand that many of you wanted to think about it but here is our pitch. Trading is for the long haul and over the past 5 years we have hit on 75% of our trades. We have a 5-year track record that shows all of our trades and each of them can be referenced from our Members Area.
The reason we keep dates and times for all of our trades is so you can go back to study them. You can read our comments and see our chart work on why we went long or short a stock by using call and put options. Although we have been hot for over 6 months, we can and will have a choppy month, or losing streaks. If you a subscriber and are just joining us for that month then obviously your opinion of us might be different from someone who has been with us for years – IF we have a lousy month which is rare.
Our goal is to always find you winning trades but some of the best emails we get are from subscribers who “found” their own trades and made 100% return or more. Our trading course and videos will show you how to do this.
So here is the deal once again and it will be available thru the holiday weekend. After May 28, 2012 we will not run this deal until the end of the year like we normally do. The reason we are doing it mid-year is because we have been saying this is one of the BEST years we have ever seen to trade options. Even if you don’t know how to trade options we will teach you.
Also, if you have purchased a 1-year membership this year, in 2012, and you haven’t received the trading course, email us and we will send one out at no charge (an $895 value).
For those of you on Monthly or Quarterly memberships, if you upgrade to a 1-year membership by this Monday night by midnight, we will include the course at no charge as well. Shipping is also on the house. By upgrading, you will also save money because a monthly membership on a 1-year deal averages out to just $77/ month.
We will also add any extra time from your current membership to the one-year deal. The videos, all current and past are available as soon as you sign-up and we like to do one every month or two depending on market conditions.
If you do the math, this is well over a 50% discount if purchased separately and we are currently sporting a 94-20 win/loss record for the year. We closed out 6 more winning trades this week including +90% on POT, +144% on KLAC, +113% on CSTR, and +119% on the QQQ’s.
You will not need a coupon to get the manual along with the one-year subscription, just upgrade or signup, and we will ship the course to your doorstep over the weekend. You will also have access to the videos, instantly.
Subscription Link
To read more on our trading course, How to Trade Options on Momentum Stocks, go here.
On that note, we have more to talk about in our members Area so let’s get to it to see if we have any last minute changes to make to our current trades.
We will be back Monday night with our Weekly Wrap and Tuesday morning with our Daily as the market is closed on Monday for the holiday. Until then, have a great weekend everyone and make sure you sign-up or upgrade to our 1-year deal by then. Also, tell your friends about us and sign up for our Twitter alerts!
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Men’s Wearhouse (MW) Gets Strangled
Thursday, June 7th, 2012
1:00pm (EST)
Sometimes the best trades can be influenced by what the market is doing and with today’s bounce, which we will talk about in a minute, we were a little defensive on playing an earnings trade this week.
Trading a stock and options on an earnings announcement can be tricky because the bottom line could be good but the future forecast might not be. Companies can meet or beat numbers, disappoint and lower numbers, or miss numbers and predict higher growth down the road.
If you are unsure on what a company might say and you are playing an earnings announcement, there are still ways to double your money but you will need a huge move in the stock.
Here were our thoughts on Tuesday morning (quotes are from Monday’s close) for Men’s Wearhouse (MW, $29.21, down $6.36), a stock we felt certain would take a haircut after confessing their numbers to Wall Street last night. This trade appeared on our Watch List and we profiled a call and put option in case the stock bounced with the overall market:
“Men’s Wearhouse (MW, $35.13, up $0.57)
June 31 puts (MW120616P00031000, $0.55, up $0.10)
June 37 calls (MW120616C00037000, $0.70, down $0.20)
Thoughts: We wouldn’t expect Men’s Wearhouse to be hitting the ball out of the park but they have beaten estimates for 4-straight quarters. This makes the options a risky trade betting on direction. You can see the sharp selloffs and rallies on earning in the past from the chart below.” (END)
Today, shares are down nearly 20% and the June 31 puts are at $2.50 while the June 37 calls are at a nickel.
The total cost to buy both the calls and puts would have been $1.25 on Tuesday. This is known as a “strangle” option trade. Although the calls will likely expire worthless, the puts options are worth $2.50 which means that trade would have made 100%.
These types of option strategies can be golden when shares move double-digit percentage points but a move of less than 10% would have deflated the premiums and the results would have been much different. This is one of the reasons we stayed on the sidelines.
Men’s Wearhouse missed estimates and lowered their forecast going forward.
As far as Bernanke, the Fed Chairman didn’t say much as he talked about the potential problems facing the U.S. economy while side-steeping our exposure to Europe. Big Ben once again reiterated the Fed stood ready with additional “tools” in the shed but offered nothing material.
After a surge at the open, the market’s gains were cut in half as the indexes hit the second layer of resistance and stopped on a dime. The bulls are still pushing and we showed you some charts this morning on what to expect.
As we head to press, the Dow is up 102 points to 12,517 while the S&P is higher by a 6-pack to 1,321. The Nasdaq is showing a 5 point pop and is at 2,849.
Subscribers, check the Members Area for the current trade updates and stay locked-and-loaded for another New Trade in case we see something we like this afternoon.
Tags: Bernanke statements, Men's Wearhouse earnings, put option trading, strangle option strategies
Posted in Earnings, Market Analysis, Market Commentary | Comments Off