To FedEx or Not to FedEx

I think FedEx may present a good opportunity.   I think 93 to 95 to the upside and 75 to the downside are potential targets.  The question is whether that can happen in one day or should this be played with Oct options (which almost doubles the break even point to around 7 and change rather than 3 and change - but it does give us almost 30 more days for the scenario to play out).  Still pondering what to do... Got all of tomorrow to decide since earnings will be announced on Thursday morning before the open (I generally take that as a bullish sign.  It would be interesting to see if there is a correlation between reporting earnings before open and having a good report vs reporting after market close and maybe not as good a report).

LLTC position update

Even though I expect LLTC to go up tomorrow, with expiration only 3 days away, I closed out my long LLTC September 30 calls for 1.20.  My cost basis was 0.65 cents each so that trade resulted in a 90%+ profit. 

New oppotunity

FedEx reports earnings on Thursday.  If this event is to be played (I haven't quite decided yet), the 85 calls/puts will be the play.  The question is whether the move will be big enough to offset the losses on the other side.   At least a 4 dollar move will be needed in either direction to break even or make a small profit.  I will post later, if I do decide that the trade is worth entering (It might be since traders might be looking to FedEx to be the economic barometer, and the FedEx results are expected to support or contradict the hopes of an economic recovery).  The expected earnings are almost 100%+ higher than same period last year. 

Back to the analysis I go...

BBY Strangle update

BBY beat earnings handily and updated their full year outlook.  Shares are up pre Market to around 37.25 (up 7.5%).  I will close out the calls for a 100% plus profit on the entire strangle at market open.

Update - 8:31 AM.   Sold the calls for 2.43  for over a 100% profit on the entire position.  The puts are worthless at this time.  Not bad for a 2-3 day play.

Stock updates

LLTC took a big drop today wiping out all my gains.  That's a direct result of greed when I refused to take a 100% gain and was looking towards a 300% profit potential  (I need to remind myself of the old saying "a bird in hand is better than 2 in the bush" more often).

So I decided to play a long strangle just now.  Best Buy chart is looking decent with a potential flag pattern.  If the earnings on Tuesday (9/14) surprise, we could see a nice move.  However, to hedge my bets, I purchased  Sep 35 calls for 0.55 and Sep 33 puts for 0.71.   A big move in either direction could net me some cash (hopefully more than the 1.26 I laid out.  Options expire on 9/18 so this is a very short term play on expected volatility. 

A Long Strangle is when you open a long position in both a Call option and a Put option with different strike prices but the same expiration dates.  This is similar to a Straddle but the Call option typically has a higher strike than the Put Option.
The maximum risk is limited to the total premium paid for both the Call and Put option premiums.
Maximum profit is unlimited on the call side.  The maximum profit on the put side is from breakeven to $0.
The break even point is the total debit of both the long Put and long Call premiums, or the Call strike plus the total debit and the Put strike minus the total debit.

So this would pay off if a fairly large move happens as a result of the earnings announcement for Best Buy.  If the stock moves up or down rapidly, profits can be made.  The worst scenario is that the price does not move in response to the earnings announcement making both the call and the put almost worthless.

I also opened a new position in RIG by purchasing Oct 60 calls for 3.30.  The stock has moved strongly last couple of days and shows good momentum.  Would love to get a double in a week or so and get out.

Happy trading and good luck.

Market outlook

Sorry I haven't posted in a few days, but I didn't have a chance to look at the market late last week.  Market is looking fairly good at the moment.  My buys of Goldman Sachs (GS) and Chipotle Mexican Grill (CMG) are nicely profitable.  However, since I wasn't watching the market, I failed to sell the LLTC options for a 100% gain and now the calls are back around where I bought them (slightly higher).

I really like CMG's chart.  It has broken out of a cup and handle formation in the weekly chart.  If the market cooperates, we could see 200 before long (next 3-4 months).  The stock is trading around 165. 

In general, I would not be surprised to see the DOW visit 10,600 in the next few days (maybe even this week).  Let's see how the day plays out.

PS:  I shouldn't have to state that September (historically) is the worst month for stock returns, with October having some of the largest drops on record.  So be careful when playing the market and keep a close eye on your holdings.

Market rally 09-01-2010

Market is off to a nice start this morning - all indicators are pointing to a way oversold condition.  Expect big gains over the next few days regardless of the overall trend.  The 10,000 psychologically important level held again.  With so much money on the sideline (and everyone very bearish), a rally could turn explosive and we can see large gains if the hedge funds start moving money back into equities.

Update: Opened a new position in Chipotle this morning (CMG). Trying to decide whether to do the same with ISRG.  Also opened a new call position in LLTC - Sep 30 calls.