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Wednesday, August 8th, 2012
12:20pm (EST)
Shares of First Solar (FSLR, $20.91, up $0.31) cleared $20 yesterday and have traded up to $21.69 today. The stock is off its highs but the strangle trade we profiled in our Weekly Wrap on Sunday and in the Daily Tuesday morning for First Solar hit our targets this morning. The trade was up over 130% shortly after the bell which is when you should have cashed out the call options so let’s go over how it went down.
Tuesday’s morning’s DAILY update:
Here were our thoughts in Sunday night’s Weekly Wrap (8/5/12) and the
option prices from Friday’s close (8/3/12):
“This looks like a good opportunity for a straddle or strangle option trade, if there is any follow through or a pullback. Keep an eye on the September 20 calls (FSLR120922C00020000, $0.65, down $0.35) for a quick trade if shares can regain their momentum following Friday’s 5% pullback. If not, watch the September 14 puts (FSLR120922P00014000, $0.70, up $0.15) for a drop back below $15. Together, the calls and puts would form a strangle option trade to whereas First Solar would need to be above $21 or below $13 by mid-September for the trade to have success.”
The September 20 calls (FSLR120922C00020000, $1.40, up $0.75) opened at 66 cents on Monday and zoomed nearly 120% for the day. The September 14 puts (FSLR120922P00014000, $0.40, down $0.30) opened at 59 cents. The total cost of the trade would have been $1.25, or $1,250 for 10 contracts each. The value of both the call and put options are currently at $1.80, or $1,800, which is already a 44% gain in 24 hours.
The object of strangle option trades is to make over 100% or more on one side of the position to cover the cost. Once the call or put gives you a triple-digit gain, you close that side of the trade to lock-in profits.
You would then have a free call or put to play a reverse.
In this case, if you sell the First Solar calls into strength now or on a pop over $20, the puts become house money and have over a month before they expire. If shares move lower and fall below $14 the September 14 puts would then be “in-the-money” which would allow you to profit from both sides of the trade. (END)
Update!
Tuesday’s close: The September 20 calls FSLR120922C00020000, $2.45, up $0.20) closed at $2.25 yesterday. The September 14 puts closed at 25 cents. The total value of the options is $2.50. The entry price on Monday morning at the open was $1.25. The return was at a 100% at yesterday’s close and shares are up today.
The calls traded to a high of $2.88 this morning after opening at 2.67. Let’s say you were able to close them at the open for $2.70. The 10 contracts you sold would have netted you $2,700. The original cost for both the calls and puts was $1,250. This would get the return up to 136% and the September 14 puts (FSLR120922P00014000, $0.25, down $0.15) are still open.
You could also close the put options now to lock-in the return but they are at 20 cents and they are free puts to play any downside until mid-September. It is only $200 and if the put options expire worthless because shares remain above $14, the trade would still return 116%. If shares trade to $13, the puts would then be worth $1 or an extra $1,000 (10 contracts) which would get the return to 196%.
We may use these types of option trades in our next batch of recommendations as we try to offset some of the volatility. We are sorry we didn’t make this an “official” recommendation but we wanted to get everyone comfortable with strangle option trades in case we need to use this strategy going forward.
For those of you who DID take the trade, this will be our last update on the options as we have fielded numerous emails on what to do today.
As far as the market, we are still in a wait-and-see-mood. The indexes traded lower at the open but have rebounded and are pushing greener pastures.
The Dow is up 16 points to 13,184 while the S&P 500 is higher by a a point to 1,402. The Nasdaq is down a half-point to 3,016. The indexes did slip below support which was prior resistance and the close will be interesting today.
Subscribers, check the Members Area for the updates.
Tags: chicken option trade, First Solar option trade, fslr, strangle option trades
Posted in Hot Stocks, strangle option trades, Strategies | Comments Off
Thursday, May 19th, 2011
1:45pm (EST)
The bulls got off to a good start this morning after hearing initial unemployment claims decreased by 29,000 to 409,000 for the week. The news came before the bell and was better than the 420,000 number that had been expected.
The market then came off its highs after hearing Existing Home Sales for April fell nearly 1% to 5 million units. Meanwhile leading economic indicators fell 0.3%, versus expectations for an increase of 0.1%. The Philadelphia Fed’s manufacturing survey was a shocker, coming in at 3.9 and significantly lower than the expected reading of 20.
Despite the mixed economic news, the market is once again pushing its highs for the day.
The Dow is up 44 points to 12,604 while the S&P is higher by 4 points to 1,344. The Nasdaq is showing a 12 point pop and is at 2,827.
Wall Street had a warm welcome for its latest initial public offering (IPO) as LinkedIn (LNKD, $104.00, up $59.00) made its official debut by ringing the opening bell on the New York Stock Exchange this morning. As you can see, the offering was well accepted as shares have nearly doubled in their first few hours of trading as investors are snapping up shares of the online networking company.
Due to strong demand, LinkedIn’s pricing for the IPO was raised to $45 a share following Wednesday’s close which was well above the initial target of $32 to $35 a share. A current prices, LinkedIn has a market value of nearly $10 billion, the highest for a U.S. Internet company since Google (GOOG, $533.41, up $3.60) went public nearly 7 years ago.
Of course, there are no options available on LinkedIn, yet, but this is a name we will be trading down the road. The volatility will likely continue for a few months and when the options list, we will let you know.
Our current trades are getting some nice pops today so let’s get to the action. Subscribers, check the Members Area for the updates.
Tags: call options, high beta stocks, Hot stocks, LinkedIn IPO, LNKD IPO, momentum options, Momentum stocks, NASDAQ:LNDK, option tips, options, options trading course, stock market options, strangle option trades, weekly options
Posted in Hot Stocks, IPOs | Comments Off
Thursday, May 19th, 2011
9:00am (EST)
The bulls continued their bounce off Tuesday’s lows despite a sluggish start to power their way back above key support levels on Wednesday.
The Dow added 80 points, or 0.7%, to close at 12,560. The index made a steady climb back above the 12,500 level and will look to challenge 12,700-12,800 by week’s end. The bears are targeting 12,350.
The S&P 500 advanced 12 points, or 0.8%, to finish at 1,340. The 1,350 area will need to be cleared if the bulls want to test 1,375 again while 1,325-1,300 is serving as short-term support.
The Nasdaq led the charge higher by surging 32 points, or 1.1%, to settle at 2,815. Tech made a strong move back above 2,800 after holding support on Monday and Tuesday.
SodaStream International (SODA, $53.99, up $10.26) had an outstanding day as shares surged nearly 24% after the company announced better-than-expected earnings. Revenues increased 50% to $64 million and here were our thoughts 6 months ago (quotes from that day):
From November 5, 2010:
“We wanted to profile one stock this morning before we hit the Members Area which could be worth watching going forward. SodaStream International (SODA, $30.00, up $5.88), which makes home beverage carbonation systems, surged 25% yesterday after an initial public offering (IPO) on Wednesday.
The company raised $110 million in its debut by selling 5.5 million shares which were priced at $20 a share and the top end of its estimated range. The underwriters have a 30-day option to buy up to an additional 800,000 shares to cover any excess demand which could raise another $20 million.
We aren’t 100% sure if this stock is the next Green Mountain Coffee Roasters (GMCR, $33.88, down $0.41), which revolutionized the coffee industry with its k-cups and made our life easier, but there are some similarities.
SodaStream’s home beverage carbonation system allows you to convert tap water into carbonated soft drinks and sparkling water. Green Mountain made coffee making easy selling the machines that their simple k-cups go in. SodaStream (also) sells the machines and the mix which is “a smarter way to enjoy soda” according to the company’s slogan.
You can choose from 4 different home soda makers that range in price from $79.95-$199.95. The refills cost $4.99 and can make 12 liters of soda, or 33 cans. The machines are being sold in thousands of stores and if they are selling well, the stock could be headed for further gains.” (END)
Well, although we predicted higher prices for SodaStream, we blew it on the options. We did an update a few weeks ago on SodaStream for our Weekly Wrap and said the options were thinly traded. Open interest has been low, until yesterday, which can cause wide bid/ask prices. We mentioned both of these issues in our update.
Although the company’s earnings announcement didn’t show up on our radar until after the fact, there was a trade that would have returned a windfall overnight.
Shares were just under $44 going into Tuesday’s close and a 10% move, which we like to factor in for our earnings trades, would have pushed SodaStream up towards $50.
This would have led us to look at the 50 call strike prices for May and June although the May options expire this Friday. Both options did really well.
The May 50 calls (SODA110521C00050000, $4.00, up $3.60) were going for 40 cents and surged 900% yesterday. Open interest was under 1,000 contracts going into Wednesday but traded nearly 3,000 contracts. The June 50 calls (SODA110618C00050000, $6.20, up $4.10) traded nearly 1,000 contracts versus 3 times open interest.
As you can see, the power of options is incredible. A $400 trade on 10 contracts was worth $4,000 in less than 24 hours. Now you know why we spend countless doing research.
We were also smiling when we heard Jim Cramer nearly quote us word-for-word when he said SodaStream could be the next Green Mountain Coffee Roasters.
Well, it’s something we already knew because SodaStream basically copied GMCR’s business model except they did it with soda. Brilliant!
We have a lot to cover in our Members Area today and futures are pointing towards a higher open. Dow futures are up 50 points, S&P futures are up 5 points, and the Nasdaq futures are up 8 points. Subscribers, check for the updates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, NASDAQ: SODA, option tips, options, options trading course, SODA, stock market options, strangle option trades, weekly options
Posted in Hot Stocks, Market Commentary | Comments Off
Wednesday, May 18th, 2011
1:00pm (EST)
Vivus (VVUS, $8.40, up $0.32) is back in the spotlight but this time it’s not for news concerning its diet drug, Qnexa. We have mentioned the battle between Vivus and others to be the first company to get a diet pill approved but Vivus also has plans to get into the erectile dysfunction (ED) market.
The company announced positive results from a pivotal phase 3 clinical trial for Avanafil which helps with erectile dysfunction. The study met all primary endpoints and indicated that successful intercourse was achieved as early as 15 minutes.
We have been mentioning Vivus since early 2008 when shares were near $5 and we have maintained Vivus is the best speculative play on the obesity market. Since then, we have also been bringing you regular updates on their good wood drug, Avanafil, and have said that they have a stronger pipeline than Arena Pharmaceuticals (ARNA, $1.29, up $0.01) and Orexigen Therapeutics (OREX, $2.96, up $0.02) – the other two players trying to gain approval for a diet drug.
While Pfizer (PFE, $21.07, down $0.07), which hit a 52-week high yesterday, remains the 800-pound gorilla in the ED space, Vivus should find a niche with its fast-acting action pill. The market for erectile dysfunction grew nearly 5% in 2009 and roughly 7% in 2010 to over $5 billion in sales so there is room for Vivus to make some decent profits if the drug does hit the market.
Vivus has a market cap of only $665 million and we doubt Avanafil will be a billion dollar a year drug for them. However, Qnexa could easily be a billion dollar a year drug which makes Vivus a great acquisition candidate while shares are cheap. If the company can get through the FDA’s hurdles for their diet drug, then Vivus will easily trade to the upper teens on any positive developments.
Vivus is a current trade in both our Weekly Wrap and Daily publications.
As far as the market, the action is favoring the bulls today who have a slight lead as we head into the second half of trading. The Dow is up 37 points to 12,516 while the S&P is higher by 7 points to 1,336. The Nasdaq is showing a 19 point pop and is at 2,802.
The bulls are looking to take back key support levels so the close should be interesting. We will be back in the morning with a full update. Subscribers, check the Members Area for the current trades comments. Also, we have added a possible earnings trade or two for you to look at today although we will probably stay on the sidelines.
Special Notice: We may also release a NEW TRADE for our Weekly Wrap later this afternoon. We have 3 positions that might get “called away” on Friday for profits ranging from 10%-35% so we are looking to replace them with some new candidates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, Vivus, Vivus Phase 3 results, VVUS, weekly options
Posted in BioTech | Comments Off
Wednesday, May 18th, 2011
9:05am (EST)
The market went on another wild ride on Tuesday as the battle between the bulls and bears heats up. We mentioned last week the market could experience some extra volatility due to options expiration week which is this Friday for the May contracts.
The bears started the session with an early lead which easily led to a break below our near-term targets by our afternoon update. However, we said there could be a bounce as buyers started to come in at the lows which helped fuel the rebound into the close.
A weaker dollar and some strength from the Financial sector helped the bulls camp but Tech was the most impressive as it bounced back to finish in the green. We mentioned yesterday that moving averages (MA’s) can get “stretched” which is happening with the Nasdaq and S&P after they fell through their 50-day MA’s yesterday. Major support and resistance levels can be tricky to read which is why you have to factor in other variables.
If the bears had pushed just a little harder, perhaps, we would be having a different conversation. However, they let the bulls get up off the canvas so it’s time to review what the action meant for the rest of the week.
The Dow dropped 69 points and closed at 12,479 and below our near-term support level. We said there was further support down to 12,350 and the index fell to 12,378 intraday. A break below 12,350 triggers 12,200 but you might as well pencil in Dow 12,000 because investors will start jumping ship if this level doesn’t hold. If 12,500 is cleared, resistance will be at 12,700-12,800.
The S&P slipped less than a point to settle at 1,328. The index traded to a low of 1,318 after breaking 1,325 but closed above this level by the bell. Support is at 1,300 with resistance remaining at 1,345-1,350.
The Nasdaq added a point to finish at 2,783. The index went out at its highs for the day after kissing a low of 2,759 but, more importantly, held the 2,750 level. Resistance is at 2,800-2,825.
Futures are slightly higher as we head to press which should lead to a green open.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, option tips, options trading course, stock market options, strangle option trades, weekly options
Posted in Market Commentary | Comments Off
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SodaStream (SODA) Surges on Earnings Beat
Thursday, May 19th, 2011
9:00am (EST)
The bulls continued their bounce off Tuesday’s lows despite a sluggish start to power their way back above key support levels on Wednesday.
The Dow added 80 points, or 0.7%, to close at 12,560. The index made a steady climb back above the 12,500 level and will look to challenge 12,700-12,800 by week’s end. The bears are targeting 12,350.
The S&P 500 advanced 12 points, or 0.8%, to finish at 1,340. The 1,350 area will need to be cleared if the bulls want to test 1,375 again while 1,325-1,300 is serving as short-term support.
The Nasdaq led the charge higher by surging 32 points, or 1.1%, to settle at 2,815. Tech made a strong move back above 2,800 after holding support on Monday and Tuesday.
SodaStream International (SODA, $53.99, up $10.26) had an outstanding day as shares surged nearly 24% after the company announced better-than-expected earnings. Revenues increased 50% to $64 million and here were our thoughts 6 months ago (quotes from that day):
From November 5, 2010:
“We wanted to profile one stock this morning before we hit the Members Area which could be worth watching going forward. SodaStream International (SODA, $30.00, up $5.88), which makes home beverage carbonation systems, surged 25% yesterday after an initial public offering (IPO) on Wednesday.
The company raised $110 million in its debut by selling 5.5 million shares which were priced at $20 a share and the top end of its estimated range. The underwriters have a 30-day option to buy up to an additional 800,000 shares to cover any excess demand which could raise another $20 million.
We aren’t 100% sure if this stock is the next Green Mountain Coffee Roasters (GMCR, $33.88, down $0.41), which revolutionized the coffee industry with its k-cups and made our life easier, but there are some similarities.
SodaStream’s home beverage carbonation system allows you to convert tap water into carbonated soft drinks and sparkling water. Green Mountain made coffee making easy selling the machines that their simple k-cups go in. SodaStream (also) sells the machines and the mix which is “a smarter way to enjoy soda” according to the company’s slogan.
You can choose from 4 different home soda makers that range in price from $79.95-$199.95. The refills cost $4.99 and can make 12 liters of soda, or 33 cans. The machines are being sold in thousands of stores and if they are selling well, the stock could be headed for further gains.” (END)
Well, although we predicted higher prices for SodaStream, we blew it on the options. We did an update a few weeks ago on SodaStream for our Weekly Wrap and said the options were thinly traded. Open interest has been low, until yesterday, which can cause wide bid/ask prices. We mentioned both of these issues in our update.
Although the company’s earnings announcement didn’t show up on our radar until after the fact, there was a trade that would have returned a windfall overnight.
Shares were just under $44 going into Tuesday’s close and a 10% move, which we like to factor in for our earnings trades, would have pushed SodaStream up towards $50.
This would have led us to look at the 50 call strike prices for May and June although the May options expire this Friday. Both options did really well.
The May 50 calls (SODA110521C00050000, $4.00, up $3.60) were going for 40 cents and surged 900% yesterday. Open interest was under 1,000 contracts going into Wednesday but traded nearly 3,000 contracts. The June 50 calls (SODA110618C00050000, $6.20, up $4.10) traded nearly 1,000 contracts versus 3 times open interest.
As you can see, the power of options is incredible. A $400 trade on 10 contracts was worth $4,000 in less than 24 hours. Now you know why we spend countless doing research.
We were also smiling when we heard Jim Cramer nearly quote us word-for-word when he said SodaStream could be the next Green Mountain Coffee Roasters.
Well, it’s something we already knew because SodaStream basically copied GMCR’s business model except they did it with soda. Brilliant!
We have a lot to cover in our Members Area today and futures are pointing towards a higher open. Dow futures are up 50 points, S&P futures are up 5 points, and the Nasdaq futures are up 8 points. Subscribers, check for the updates.
Tags: call options, high beta stocks, Hot stocks, momentum options, Momentum stocks, NASDAQ: SODA, option tips, options, options trading course, SODA, stock market options, strangle option trades, weekly options
Posted in Hot Stocks, Market Commentary | Comments Off