Bull Call Calendar – GRMN

Reasoning:
1) Technical indicators are showing sell signals and downward trend.

2) Fundamentals still strong. I don’t see much further downside.

3) Sentiment based on option pricing seems to be swinging to the bulls.

Expectation is for short term bearish movement. When thinking about this trade I wanted to do a married put but looked at how cheap the calls were and the risk reward characteristic was better than the married put. I shorted the call because of the excess premium so close to expiration as well as to optimize my short term bearish expectation. A potential addition to this trade is a few puts to hedge for earnings.

Entry Point:

BTO Jan ‘09 Long Call Strike 22.5 (Synthetic Married put)

STO Oct Short Call Strike 25

NET DEBIT of  $2.95

Exit Points:
Primary Exit (PE): Reduce cost basis to zero. Short term- Let short call expire worthless
Secondary Exit (SE):
Bullish: Roll short call.
Bearish: Roll long call when support is found.

Put Calendar on DIA

Reasoning:
1) Technical indicators are showing sell signals and downward trend.
2) Economic numbers are getting worse every month.

Expectation is for continued bearish movement over time. When thinking about this trade I was actually worried about my short put going ITM. I am doubtful this market will turn around and rally anytime soon. The whole world economy seems to be slowing down and there just is not enough money to inject into this market to create a bottom and restore confidence. At this point the economic numbers need to show signs of upward momentum.

Entry Point:

Nov/June’09 PUT CALENDAR SPREAD for a NET DEBIT of upto $2 @ strike $80.

Exit Points:
Primary Exit (PE): 40% ROI on the spread. (about 700-800 point drop further on the DJIA)
Secondary Exit (SE):
Bullish: Close trade at 50% loss.
Bearish: Roll short put for credit, or if too bearish for rolling, add more puts.

Inverted Collar – GRMN

Reasoning:
1) Market is so out of reason right now its giving free money.

Entry Point:

Sell short 200 shares GRMN @ $37

BTO 2 Nov 35 Call @ $3.60

STO 2 Nov 35 Put @ $3.50

Net Credit $36.90 and I will have either the obligation or right to buy GRMN back at 35 at Nov expiration

Exit Points:
Primary Exit (PE): Hold to assignment. Profit $1.90 per share minus commissions.
Secondary Exit (SE): I don’t know what I don’t know. If the SEC bans shorts on all stocks then this potentially could get ugly. But I would still have the right to exercise my call in that case. Assuming they don’t ban options too….

Bull Put on SLB

Reasoning:
1) Technical indicators are showing buy signals and the recent trend has been in a slight correction/consolidation.
2) Support at about 20 day EMA and this is a stock I would not mind owning shares of. Earnings is coming up on expiration day.

Expectation is for continued bullish movement, with bullish long term expectations based on fundamentals.

Entry Point:

Jul ’07 BULL PUT SPREAD for a NET CREDIT of $1.10 @ strikes 85/80.

Exit Points:
Primary Exit (PE): Let options expire worthless. May need to close short leg of trade before day of earnings if profitable to avoid losing profits.
Secondary Exit (SE):
Bearish: Add or roll long put in preparation to take assignment for collar.

Trading in a Volatile Market

One word perfectly sums up the recent market movements – VOLATILITY.

While the market has been long overdue for a correction and this might very well be the beginning of one, its still to early to decide. Perhaps a few more down days will really get the talking heads out on CNBC saying correction, correction . . .oh well . . . WHO CARES!

As options traders we LOVE volatility. UP or DOWN, as long as the market is moving we can profit, if we apply the right options trade. This week, we’ve found a trade that we think is PERFECT for todays market conditions.

We initially wanted to post a bullish trade on this stock; however, we decided to post a more delta neutral trade (in simple words: a trade where we dont care which way the stock goes) as it would allow us (and yourselves) to sleep peacefully.

First, a quick brief summary on why I’m bullish on ComTech Telecommunications (CMTL). CMTL recently posted GREAT earnings (Up 115.2% to 71 cents per share) w/ a 34% increase in SALES. If that wasnt enough, this company has recently been awarded new contracts totaling about $14.3 MILLION in NEW business. A quick look at the charts will show you, that the action so far has only been SOMEWHAT bullish. I have no idea what investors are waiting for; whatever it is, it wont be long before they realize the potential of this stock and bid shares up accordingly. And before they do, lets go ahead and get in so we can profit from it too, after all thats what trading is all about .

TECHNICALLY, this stock is bullish, so I’m going to bias this trade a just a little bit on the bullish side.

TICKER: CMTL
PLAY: Strangle

ENTRY POINTS: There are 2 options involved in this trade, so please try to execute the trade as a spread instead of legging into it one option at a time. If you do leg into it, then please dont spend any more than $3.35. The current ask price on this spread is $3.25.
BUY Oct’07 $50 LONG CALL
BUY Oct’07 $40 LONG PUT

EXIT POINTS:
Primary Exit: Sell the entire spread for a 30% ROI. In Other words, when we can get a net credit of $4.40 for our spread, we will exit this trade. We expect to hit this ROI in 2 – 3 WEEKS.

Secondary Exit: We will spread trade this position by shorting options against our long options, depending on what the stock is doing in 2 – 3 weeks from now.

As always, please look under the comments section for updates.

Bull Put on RIMM

 

Reasoning:
1) Technical indicators are showing buy signals and the recent trend has been in a range.
2) Support at about 132.5 and this is a stock I would not mind owning shares of. Earnings is out of the way.

Expectation is for continued bullish movement to the 140-145 range with bullish long term expectations based on fundamentals.

Entry Point:

May ’07 BULL PUT SPREAD for a NET CREDIT of $0.70 @ strikes 135/130.

Exit Points:
Primary Exit (PE): Let options expire worthless.
Secondary Exit (SE):
Bearish: Add or roll long put in preparation to take assignment for collar.

The Poor Kids Long Term Trade!

Aaaargh!!! I’ve been trying to find a trade to post on this board for the last 5+ weeks . . .and just couldnt find anything that I REALLY REALLY liked. Earnings season came and is almost gone and not a trade was posted. In my short career as a trader, I’ve learnt that sometimes the best thing to do is NOTHING. And nothing is what we did for the last 5+ weeks. We had a nice setup w/ our first NYX bearish bet, and made 30% in 1 week. Our second trade SUCKED and it expired worthless, but that was a speculative one, so I really hope none of you bet your portfolio’s on it (I know I clearly stated that you dont). Staying in the options game is critical if you wanna be successful at trading (options), far too many people blow out thier portfolios and thier egos when they first get into the game and that is NOT something we wanna do.

For those of you who know me, you know I absolutely love Garmin (TICKER: grmn). I love thier products (GPS) and I love to trade it often. . .Most of the time when a trader (read as: I) trade(s) a stock frequently, it means he is (read as: I’m) BULLISH on that stock (garmin). When it comes to Garmin I know garmin products, I know they are (Garmin) an industry leader when it comes to handheld & navigation GPS and I can predict w/ pretty good accuracy how thier quarter is going to be (some day I’ll tell you why , but until that day comes, relax . . . ).

Garmin is reporting earnings tomorrow (05/02/2007) and I think they are going to have a decent quarter, They will most prob. meet & beat analyst estimates and possibly raise guidance but I dont expect them to have kick butt results like AMAZON (TICKER: amzn) or BAIDU (TICKER: bidu) both companies hit HOME RUNS this past quarter and shareholders rewarded them accordingly (both stocks moved up 20%+ for those of you who arent following)!

I’ve been looking to setup a “long term” position in garmin for a while, and have been sitting on the sidelines simply because I find thier LEAP options to be very pricey. Being the poor trader I am I usually trade in and out of small shorter term positions (profitably) and that is how I’ve traded Garmin! However, I have finally found a nice way to establish a longer term position in Garmin w/ the possibility of a nice 20% (Primary Exit) return in 1 day or 50% (Seconday Exit) in a few months! Either way, it doesnt look like we are goign to lose unless we are (read as: I AM) impatient.

The details of this trade are posted below. Please remember, if you DONT UNDERSTAND a trade, don’t trade it. Remember “Opportunity is INFINITE, and capital is FINITE“, there will always be another trade for another day, but the capital . . . that is LIMITED!

Enough talk, herez the trade . . . WOOHOOOOO! GOOO GARMIN!!!! (Can you feel the stoke? )

TICKER: GRMN

PLAY: Poor Kids Calendar Strangle

Reasoning:

1. GRMN announces earnings tomorrow, and I expect there to be MOVEMENT (preferably to the downside).
2. Even if, there is no movement, we can cheaply adjust this trade and profit from it eventually. (Please set aside about $4.00, for adjustment)
3. In the best case scenario, we will be out of this trade by tomorrow (20 – 30% chance of this happening). If not, then we’ll have the advantage of the LONG TERM position in Garmin that I’ve always wanted to establish.

Entry Points:
There are 3 options involved in this trade, and the trade should be executed at once. IF you arent able to execute the entire trade at once, please do not put a debit of anymore than $6.20 into this trade (in other words, when you have established your position in this trade, you should only have spent $6.20 + Commisions OR LESS).

1) BUY the Jan’08 $55 LONG CALL
2) SELL the Jan’08 $65 LONG CALL
3) BUY the Jun’07 $55 LONG PUT

Remember, dont put any more than $6.20 into this trade and keep about $4.00 for adjustment).

Exit Points:

Primay Exit:
Sell the entire spread for a 20% ROI.

Seconday Exit:
We’ll look to sell the winning leg, and adjust the losing leg as required.

ICE Covered Call

Reasoning:
1) Technical indicators are showing buy signals and looks like a cup and handle is forming.
2) Fundamentals are strong with this company thus long term expectation is bullish.

Entry Point:

Long stock plus May 145 short call for a NET DEBIT of 129.05.

Exit Points:
Primary Exit (PE): Covered Call expires worthless, short another call. Repeat until fundamentals change. Secondary Exit (SE):
Bullish: Will look to roll short call up and out.
Bearish: Convert to collar.

How to predict when a stock is about to ROLL OVER n DIE . . .

Predicting the directional movement of a stock is a sure way to blow out your portfolio and experience a ton of emotional distress. Ofcourse, there are the occassional home runs that you’ll hear everyone talk about where they are able to claim 200% gains in a matter of days or hours; however, NO ONE can do it consistently.

Yet, we (I) try to do it over and over and OVER again! In my short career as a trader, I’ve been burnt many times trying to do this and I fear I’ll continue to try. But everytime I try, I learn what to do and what NOT to do . . .

1. Only bet $$ that you are willing to lose.
2. If you do get lucky make sure you sell HALF at a 100% gain so your capital is OFF the table, and now you are riding on the “Houses” money.
3. Dont bet randomly; looks for signs of a PEAK or a TROUGH using the charts. Some people will call you a chartist or a gambler, let them. . . The charts help spot a trend . . . and in this trades case, they’ve helped me spot the breaking of a trend.

So w/out further delay, here is our next “speculative” trade. Remember this is a speculative trade unlike our initial NYX play. Only bet $$ that you are willing to lose.

TICKER: LAMR

PLAY: PUT

Reasoning:

1. LAMR trades at a PE of 158. The avg. stock on the S&P trades @ a PE of 17.5.
2. Earnings announcement on the 22nd Feb, 2007 caused a significant UP move in early trading. These gains quickly reversed as the day progressed. The stock opened @ $66.77, traded as high as $71.14 but ended the day at $67.51. When a stock closes towards the LOW of the day after having tried to move up almost 6%, it indicates selling pressure.
3. Technically, the charts r showing that an EXPLOSIVE move is imminent in either direction. Our guess is that this move will be towards the downside.

Entry Point:

Buy the April $60 PUTS upto $1.35. They are currently trading between $1.05 – $1.15 w/ money you are willing to lose.

Exit Points:
Primary Exit (PE): We will sell half @ 100% Gains if we are lucky enough to get to that target. Put a Trailing STOP to the remainder.
Secondary Exit (SE): Set a MENTAL STOP LOSS @ $0.55.

PUT CALENDAR ON SNDK

Reasoning:
1) Technical indicators are showing sell signals and downward trend.
2) Support recently broken with earnings.

Expectation is for continued bearish movement over time.

Entry Point:

March/June’07 PUT CALENDAR SPREAD for a NET DEBIT of upto $2 @ strike $37.50.

Exit Points:
Primary Exit (PE): 20% ROI on the spread.
Secondary Exit (SE):
Bullish: Will look to roll up short put and/or add call calendar
Bearish: Roll short put for credit or if too bearish for rolling, take assignment on short put and convert to collar.