Position Updates

Closed out CSTR calls at 11.20 for almost a 200% gain.  Holding onto the stock.
Closed out PWER puts for 0.40 for a 50% loss.
Holding onto the PWER calls.  They are trading at 1.35 at present, since stock has given up a dollar since open.  Plan to hold those since I liked the earnings and the growth news.  Let's see where we go after the morning frenzy is over.  The external news to watch out for would be if the Republicans take back the house in the elections, what happens to the Solar stocks?

Update:  Looks like the right play was to sell the PWER calls at the open and hold onto the puts.  Stock has now given up all its gains.  If you sold your calls at the open, congrats.

After Hour update

MicroSoft blew out earnings and stock was up strong after hours.  That may translate into a strong opening tomorrow, especially for tech stocks.

CoinStar blew out earnings and stock was up almost 15% after hours to 53 and change on huge volume.

PWER blew out earnings and stock was up almost 14% after hours to 13 and change.


Two home runs for the home team.  Happy Trading.

CoinStar

CSTR is one of those stocks that I like.  Management seems to know what they are doing and they have some high profit businesses (coinstar machines and RedBox dvd rentals).  Earnings are coming out after close today.  Options are pretty expensive - so I decided to play the long side only (risky) - Dec 46 calls for about 3.80 each. and opened a long position in stock at 46.22

New Strangle Play - PWER

Solar stocks have a bright horizon if the US continues to invest in alternate technology.  One of the stocks reporting earnings today after close is Power-One (PWER).  A strangle play on it is Dec 12 calls (trading around 1.00 on the ask) and Dec 10 puts (Trading for around 0.85).  I already own FSLR but sold covered calls on it earlier, so my potential gains on that stock are limited.  I am opening new strangle positions in PWER.

FORM Option Update

The call options for April 10 at currently bid at 0.95 and ask at 1.15.  So there is already a gain of 50% or better.  However, I think I am going to hold on for a while.  I have a lot of time (6 months) on this.  So I'll see how my will power holds out.  There is a shot that the stock may reach 15 by then.

New position Update - CAT, OVTI, NTGR

You know me.  I tell you to stay focused and careful, and then sell a lot of my holdings, but yet, I can not seem to stay out of the market.  When 90%+ of your trades are profitable, you must continue to trade and take advantage.

So I thought I'd take a long flier on Caterpillar.  The chart looks good.  CAT doesn't report earnings until Jan, but its sitting at the cusp of breakout from a long cup and handle formation.  My main concern here is the large amount of calls sharing the position with me at the Nov 80 point which will act as overhead resistance, but can also serve as the catalyst to propel higher if the stock successfully moves beyond the 80 mark.  But if the stock hits 80, I may cash in and take whatever gains I have by then (which needs to be soon).  The calls were trading around 1.26 at time of purchase (CAT is down now so they should be cheaper).

The second position I entered today is a long call position in OVTI - OmniVision Technologies.  The stock is trading in the neighborhood of 26 dollars and I bought the Dec 26 calls for 2.35.  OVTI reported good earnings and the stock busted out a base (cup and handle) on strong volume.  Let's see how this plays out.

Update 10:30 AM

NTGR (NetGear) broke out of a base and looks like might have a shot at hitting 35 soon.  Opened a call position in Nov 32 calls for about 0.85 each.

BID - Update - New Position - FORM

I closed out 1/2 of my position in BID Dec calls for 5.30.  The calls had a cost of 2.15 - so a 100% profit.  I will continue to monitor the stock today and decide whether to take the profits on the rest of the position or see if I can make it to the target of $50 per share at which point the calls will be worth $10.   The other option would be to close out the current $40 calls and buy the $45 calls for around 2.20 or so.

FORM is a stock that is getting hammered today. But the weekly indicators are not showing that the selling can continue for long.  So I am going to take a chance.  Buying April '11 - $10 calls for 0.60 (Bid is 0.55 and ask is 0.70 but my bid at 0.60 executed almost instantly).  I know, this is kind of long term for me - I usually can't hold onto any position for 6 months - but this is one of my long shot gambles.  Lets see how it plays out.

New position - HPQ options

Reentering long on HPQ Dec 45 calls at 0.71
Stock looks like it has broken the downtrend line but it might take a while to turnaround.
So decided to enter with cheaper options with a bit more time than front month options.
If stock gets to 45 by the Nov 20th or so, we can easily see a doubler here.

Market outlook 10-26-2010

With Halloween fast approaching, the traders are out in bear costumes today and practicing their growling.  The markets are down, although they have recovered a bit from their session lows.  With the market patterns signaling a pullback, I am hesitant to enter new positions.  I did, however, enter a new long position in Ford (F).  They reported good earnings and continue to perform well.  Even though the short term indicators are not confirming an up move soon, the long term trend is turning positive, and I decided to get back into the stock at this time.  

On a side note, my BID options are up 100%, but greed is winning out and I am holding out for more gains at this time.

Position updates

While I was out of town, Chipotle earnings came out (CMG) and the stock jumped 23 dollars in a day.  What a miss for me since it has been my favorite stock (and restaurant) for a long time.  I will look for another opportunity to enter the market.  I had recently exited my position due to market conditions.  I also closed out my IBM call options (Dec 45) for 1.50.  The net strangle result was even for me.  I will look for the right opportunity to reenter IBM long position.

Thinking about selling 1/2 my position in BID.  The options have almost doubled in price.  So thinking about locking in profit on 1/2 the position and letting the rest of it run.  I have the Dec 40 calls on BID.  But have not yet decided.  The daily chart looks pretty strong.  And I just might be inclined to let it run a bit longer.

Market update

As I said earlier, the market has reached the point where a pull back was imminent - since we were at the point of a previous high.  Either we will make a double top here or pull back and form a handle to the cup and handle formation.   China raised interest rates unexpectedly, which apparently was the excuse the sellers were looking for to seize control.  I just closed my HPQ options position (since it was profitable) to lock in gains.  But it is a pretty bad day for bulls.  I definitely think more selling is in the wings.  Normally you will see three down days when a pullback occurs (assuming its just a pullback).   Continue to monitor the situation closely and don't let all your profits evaporate.

RIG Update

Closing out long position in RIG stock.  Taking around a 3% gain in the position. Will consider closing the options later (which have gone from a 30% gain to a 20% loss overnight).

And, Of course, Goldman Sachs takes off today after my options expired.  

IBM Strangle Update

IBM Dec 40 puts are around 5.50 or so.  Closing out the position for puts.  Holding onto the calls for now.

Afterthoughts:  Now I do think that IBM price would lean towards 133 area, but I still sold my puts ?  Why?  (Minimize dollar exposure ?  I recovered $5.50 of the almost $7 investment and expect the stock to go back up again so holding onto the calls for now).  - Once I figure out my own psychology, maybe I can become a better trader...

IBM - AAPL update

After hours IBM is down about 5.5 and Apple is down about 20.

New position - Sothesby - BID

Chart for BID looks really good.  Taking a position by purchasing Dec 40 calls.  Calls are bid at 2.05 and ask at 2.20 (I got in at 2.15).  Stock has finished a cup and handle formation in weekly - and in daily with pullback.  Will watch this closely.  Stock has a shot to get to 50 if momentum continues.

Market

As the DOW approaches a previous high, we could either make a double top or this could be the point where we pull back and form the handle of a cup and handle formation.  Either way, I am getting pretty nervous and sitting with a finger on the mouse button just a click away from being in cash.  Unless IBM has a blowout quarter, we could see a pullback after earnings.  A major miss by a big player can put the brakes on the market.  Be careful in your trading.

FSLR Update

Sold Nov 150 covered calls on FSLR for 7.00 each.

HIG contemplation

I am really confused about holding onto the HIG position.  The upside down head and shoulder pattern in the daily chart appears to be holding with support found at the neckline.  At the same time, some of my trusted indicators are not confirming a continuation in the uptrend (although I suspect it will hold).  The position is holding about a 30% gain so far. I am thinking about closing the position and taking the gain and minimize my stress level (there is something to be said about that).  Bid is around 2.97 at this time.

Update:  Closed out the HIG position even though the long term profit potential is high.  Will continue to monitor and reenter as appropriate.

IBM Strangle

Opening a new strangle on IBM.  The stock looks like it may be getting a bit extended after breaking out of a long base.  (So overall bias is bullish - if you were to hold a longer term position, it would be to the long side).  Just to give me a bit more time (and the premium difference wasn't too much), I have decided to open Dec 145 calls and Dec 140 puts.  If the stock drops at earnings, I can cash out the puts and hold onto the calls since I don't think the base breakout would fail. IBM calls are trading around 3.00 (Dec 145) and the Dec 140 puts are around 3.95 at this time.  It is quite possible for the stock to pull back to 134 or so in the near term.

Strangle Candidates

First congratulation on playing the Google Strangle to Iman.  Its up another $13 this morning.  I would consider taking profits soon as you are up 3-4 fold.

A similar opportunity could be present today in AAPL (Apple) - earnings after close today, and on Thursday with AMZN (Amazon).  I just think these options are very expensive, but they are expensive because they can move explosively.

A really big mover is ISRG that reports tomorrow.  That stock can easily move 50 dollars in a day.  But the options are very expensive as well.

Caution: A lot of stocks are showing peaking indicators, so its important that you hedge your bets with puts (especially in a strangle situation since its easy to become euphoric and stop buying the puts).

RIG is up nicely again today and continues its uptrend.  If you remember, we purchased RIG calls at 1.4x then sold them at 2.50 then bought them back at 1.8x something.  They are already back up around 2.30 for a nice gain but I am going to let them run a bit longer.

New position in RIG

Opening a new position in RIG (Transocean) Nov 70 call options  (currently bid at 1.71 and 1.74 ask).  Yes, there are the same options I bought earlier in the week for 1.48 and sold for 2.50.  Even though the stock is at a potential resistance point, I think its worth making a play here, so I am going to take the plunge. 

Close YUM if you have not yet done so

Close out your YUM calls today.  Options expire today.  The trade ended up in a profit if you happened to stick it out.  I did not want to chance it and closed it earlier for a small loss.  But I made it up in the RIG trade.

Updates

Market pulling back as expected.

FSLR up sharply on higher volume.  We have already done twice the normal daily volume.  It is currently off its high of 145.  If the market recovers a bit, the stock should continue to perform.

RIG is also up at the moment (and so is YUM).  Maybe I pulled out of YUM a bit early.

Update:  Just checked on my positions and looks like my sell order on RIG calls executed and sold at 2.50 per contract.  That is a $1.02 profit on a 1.48 contract over 2 days.  59% return over 2 days.  Not too bad.  RIG has now reached a 50% retraction point from the pullback.  Can it keep going or will it falter here?  Watch closely.  I am still long the stock in RIG.

Market outlook

I sure don't like the chart patterns of a lot of stocks today.  We have a lot of hammer candle patterns on higher volume.  That means that the market may be in for a pullback.  My caution flags are starting to flash again.  It could just be that with option expiration approaching, there will be more volatility.  I wanted to reenter the VIX calls again today but got side tracked. 

New Position in First Solar (FSLR)

FSLR looks like it has pulled back to a support point.  I am opening a new long position in First Solar.  The stock is trading around 137 at the moment.  Price target is 175 over the next 8 to 16 weeks.

My only concern is the broad market itself.  But for the time being, the market continues to go up so I will continue to go along for the ride while watching it very closely for signs of weakness.  What is making me nervous is that we are approaching a previous high for the DOW that can offer resistance.

YUM

Consider closing out the YUM calls - They are slightly above a dollar at this point with 2 days to expiration.  It is possible that the stock could go up more but it could as easily pull back until expiration.  You can minimize the loss at this point by exiting the call position in the strangle.  There will be no more updates on YUM. 

Update:  I closed out my calls at 1.05.

Reentering RIG

Buying some stock in RIG (TransOcean) at 64.84- Govt lifts ban on deep water drilling - gives momentum to stock price (Almost entered it yesterday but didn't like the market action).  Also looking at entering Nov 70 calls at 1.48 or so.

I am still cautiously optimistic.  Enter positions only if you can watch them.  Positive momentum to market but top may be near. 

Closing out F calls

Selling F Dec 12 calls.  Bought for around 1.35, selling for around 2.06.  65% return.

Closing out LogiTech calls

Selling LogiTech Dec 17.50 calls for 1.20 (bought at 0.85).  About a 45% gain.

Portfolio updates

Yum looks like on a steady small uptrend.  We might get all our money for the strangle out of it yet.  Still holding on.  If it makes it to about 48.30 or so, the breakeven point on the strangle will be reached.

I think I am closing out my VIX options.  The market seems too bullish at this time.

Update:  Closed the VIX option at 3 for a fairly big loss, but the market is showing a lot of strength.  Maybe it will even try to hit its previous peak.  If yes, that would be the time to try again.

I intend to get out of YUM next week.  Options will expire on Friday.  So keep an eye on it and exit at your best chance.  Even if you take a small hit, capital preservation is the name of the game.  Remember, you can make the money work somewhere else and you will not bat a 100%.  This is my first strangle that has behaved this way with little to no movement.

Yum Earnings

Sales up in China, dropping in US.  Not much movement after hours.  Remember to watch at the open to decide what to do.   Detailed earnings info is here http://finance.yahoo.com/news/Yum-Brands-post-7-percent-apf-243514892.html
This is playing out as the worst strangle scenario so far (looking at premarket movement).  Stock up a little. I think I am going to hold onto these options for a while and not sell them at the open.  But this may not be a bad time to close and take your lumps.  We still have 10 days to expiration so we do have some time to see how this plays out and in which direction the stock moves.  But the big move I was expecting did not happen.  YUM did not miss estimates or beat them.  They were right in line and that has resulted in no move at all so far.

YUM Update

The stock is up strong ahead of the earnings (after close today).  The call options are at the money as the stock hovers around 47 and worth slightly over a dollar.  I couldn't resist and added additional puts for Oct 45 since they were down to 0.31  - So now I have 3 Oct 47 calls and 6 Oct 45 puts.  Let's see what the earnings report brings...

On a side note, CMG is up strongly today.  (I knew I didn't want to close out my CMG position, but I did).  Also, NewMont Mining (NEM - Gold mining stock) has broken out of a long base.  I am contemplating entering a long position there.

New position in F

Ford got an upgrade today.  It is my favorite auto stock at the moment anyway.  So I decided to get back into it with a purchase of Dec 12 calls at 1.35.  That is a premium of about 0.55 per share (since the stock is trading around 12.80). 

New position

I have never before experimented with VIX calls / puts.  Today I am dipping a toe in the waters to get a little feeling for how to play these.  I opened a new call option in the VIX for Nov 25 calls at 4.80 per share (so it cost 480 for one contract).  Not sure how long I will stick with the position because the weekly chart of the DOW is still bullish (in my opinion).  However, market and stock drops generally continue for about 3 days when they occur (3 black candles - in a candle chart).   If the market drops for a couple more days (and that is a big IF), I could cash out on any profits I might have since the fear (and VIX) will spike.

The reason I say I am experimenting is that the options on the VIX are really expensive, and I believe that you will need a big move in order to significantly profit for a move (like the flash crash).  And then you might have to have a pre existing order or be in front of your computer to take advantage.  Let's see how this plays out.

Volatility of a stock

Iman asked a question that I thought merits its own post.

Q.  Is there anything that would essentially calculate the VIX for an individual stock that is easily obtainable?

A.  The VIX is really the volatility for the "S&P 500" index.  The volatility of a stock is measured by the Beta of a stock.  If you go to finance.yahoo.com, put in the ticker symbol (E.g. CMG) and then look at the key statistics, you will see the stock beta on the right side (1.06 for CMG).  If you look at ISRG, its beta is 1.84.  So ISRG is more volatile than CMG in relation to market moves.  The beta gives you an indication of the volatility of the stock in relation to the market and generally the options for high beta stocks will be more expensive than low beta stocks.  A beta of a 1.8 signifies that ISRG is 1.8 times more volatile than the general market.  A beta of 1 means that the stock is no more volatile than the general market.

Closing all long positions

I am closing out a lot of my long positions and going to cash to lock in my profits.  I really don't like the VIX - we could be in for a drop (or maybe not) - I really had a hard time to push the sell button on Chipotle (CMG).  Yet, I had to lock in the 10% gain.  I can always get back in.  The market itself doesn't look that weak.  Just that a lot of leading stocks are over bought.  The VIX is spiking today.  I didn't get up in time this morning to buy the call options as I had indicated on Friday.  So now I have to decide whether to jump in on that position or not.

 I think I will hold onto the following positions for now.
BCSI,  NFLX

VIX - what is ahead?

Gentlemen, I don't like the chart of VIX at this point.  Looks like we may be ready for a spike in the VIX soon.  The VIX will spike as the market drops, so be very careful on your long positions since a market drop will take down a lot of stocks.  After a great September, maybe we will see the October result in a market drop...  I have seen a weeks worth of profits in NFLX erode in just two days.  Maybe its time to take profits and watch from the sidelines again.   One way to protect your portfolio (or to try a make a gain) would be to buy call options on the VIX.  You can find some info on VIX options here http://www.cboe.com/micro/vix/vixoptions.aspx