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Trade Updates – Tuesday, December 1, 2009
1:10pm (EST)
CURRENT TRADES
DryShips (DRYS, $6.28, up $0.16)
Entry Price: $6.21 (11/30/09)
Exit Target: $7.21
Return: 2%
Stop Limit: $5.21
Action: The upgrade in the steel sector should keep dry-bulk shipping rates steady. The stock is making a nice move today, up 2.6%.
TiVo (TIVO, $9.96, up $0.06)
February 12.50 calls (TUKBV, $0.77, up $0.02)
Entry Price: $0.75 (11/30/09)
Exit Target: $1.50
Return: 0%
Stop Limit: None
Action: The calls traded as high as 85 cents this morning as shares of TiVo traded over $10 earlier this morning. The most active options are the February 10 calls (TUKBB, $1.55) which have traded nearly 1,500 contracts today. Continue to hold.
American International Group (AIG, $31.73, up $3.33)
December 25 puts (AIGXY, $0.62, down $0.66)
Entry Price: $0.97 (11/30/09)
Exit Target: closed half at $1.48 on 11/30, half at $1.05 today
Return: 30%
Stop (Limit): $0.75
Action: We knew the open would be tricky and it is often a nightmare for new option traders. We told you AIG was up in pre-market trading and that if you had an stop order placed it would probably get hit. Our stop was 75 cents but we were trying to get out at higher prices.
The puts traded to a low 66 cents when the opening bell sounded but were at $1.00-$1.05 about 5 minutes after the open. The other half should have been closed as we said we were trying out at higher prices.
The stock has been strong all day and is at session highs as we prepare to send this update out. The 75 cents stop still represented a 10% profit but we were able to squeeze 30% out of the trade.
Many of you wrote us last night and said you closed the entire trade for 40%-50% profits. Sweet, you are learning.
We are still in a trader’s market and it will be important for us to take quicker profits. There will be another trade for AIG and we are tempted to jump back in here at these levels. However, we will wait for things to settle down a bit. We need to see where AIG closes and if it runs back up to $35.
If shares rally to $35-$36, we may look at some January put options.
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9:10am (EST)
CURRENT TRADE
DryShips (DRYS, $6.12, down $0.07)
Entry Price: $6.21 (11/30/09)
Exit Target: $7.21
Return: -1%
Stop Limit: $5.21
Action: Hold.
TiVo (TIVO, $9.90, down $0.08)
February 12.50 calls (TUKBV, $0.75, unchanged)
Entry Price: $0.75 (11/30/09)
Exit Target: $1.50
Return: 0%
Stop Limit: None
Action: Volume was brisk yesterday in these call options as nearly 6,800 contracts traded hands. They were by far the most active in the options chain and the calls dipped to a low of 68 cents.
TiVo fought back in the afternoon session and the current “Ask” for the option is 85 cents. There may be resistance at $10 for a bit but once we break through this level we can see a pop back to $11+. Also, any favorable court ruling between now and February will be a huge bonus.
American International Group (AIG, $28.40, down $4.90)
December 25 puts (AIGXY, $1.28, up $1.07)
Entry Price: $0.97 (11/30/09)
Exit Target: $2.00
Return: 42% (closed half at $1.48)
Stop (Limit): $0.75 (on other half)
Action: We jumped on the AIG gravy train a little late but most of you wrote us last night and thanked us for the quick trade. The puts traded to a high of $1.52 yesterday and we sent out an alert shortly after 3pm yesterday.
We have set a stop of 75 cents on the other half.
We would like to see more weakness in AIG today which is why we left a some on the table. However, we are also aware that shares could rebound a little following yesterday’s steep selloff and that we might not make as much of a return compared to if we had closed the entire trade. Some of you did close the entire trade which is great.
In pre-market trading, the stock is up $1.80 to $30.20 so these put options will open lower this morning. Here is the tricky part.
The stop is 75 cents but since we sold half at $1.48 we have a little wiggle room. You can make this a “loose” stop and if the put options open higher than 75 cents then you can close the other half for a small profit.
If the options open lower than 75 cents then we may have to wait until AFTER the open to see if we can get better prices. We know many of you can’t watch the opening bell but we would not place sell orders on the other half. We will update the position at 1pm.
