Hot Trading Strategies For A Cold Market

Cheesy Giveaway : Golden Age Cheese

2011-08-11T08:43:00.000-04:00

With the stock market in turmoil. Nothing sounds better than some comfort food... Enter to win the Cheese of the Month club: Cheesy Giveaway : Golden Age Cheese

Two New Cheese Websites

2011-07-04T08:23:00.003-04:00

Happy 4th of July everyone! Two new cheese websites we have rolled out include a site about several cheeses we offer like Cheddar, Cheese Curds, Mozzarella, and Swiss cheese. Find out the history, some recipes, and several other things about each at GotCheese.net. We have also rolled out a new website devoted to Mozzarella curd, and cheddar cheese curds, the website address for this is cheese-curd.com.

Enjoy!

Getting Defensive: 7 Blue Chip Stocks With 7 Buy-Write Option Ideas

2011-03-06T15:01:00.001-05:00

Today I will write about five stocks which I am rotating into that will allow me to get a little more defensive but still participate in this market. As stated in a recent article How to Hedge With Vertical Put Spreads I believe we are long overdue for a slight pull back. But the stocks I will cover today have already corrected and are undervalued in my opinion. In this article I will explain how I am buying into these already beaten up stocks for a bigger discount with options.

I plan on purchasing the shares of blue chip companies and selling covered calls, allowing me to get into these shares cheaper and allowing me to still clip the coupon at least twice. I will be trimming some of the higher beta names out of my portfolio and replacing them with these seven lower beta stocks. This will allow me to participate if the market continues higher, but if the market happens to correct, my portfolio will likely decline less in value.

To continue reading this, view the full article on Seeking Alpha HERE.

Options Trading With My Three Favorite Consumer Discretionary Stocks

2011-02-03T07:41:00.000-05:00

Today I will explain why I plan on getting into three consumer discretionary stocks and how I plan on getting into them. First, I will state that I do expect a bit of a pull back (no more than 5%-7%) as outlined in How to Hedge With Vertical Put Spreads. And second, I will mention that I have taken this into account for the strategies in this article, and two of the three stocks outlined below have already pulled back nicely.

I believe a real recovery is underway and I think the stocks outlined in this article will benefit from this greatly. If we look at the Consumer Discretionary SPDR (XLY) compared to the S&P 500 SPDR (SPY) over the last year, we can see that the Consumer Discretionary SPDR has outperformed the S&P 500 SPDR by almost 9%.

To continue reading this, view the full article on Seeking Alpha HERE.

Return Some Green Betting on the Greenback with This Bullish Option Strategy

2011-01-31T08:00:00.001-05:00

Someone once asked me "how have you made the most money playing in the stock market?" I had to think long and hard because in today's market there's no easy answer like the old days "buy and hold", today it's necessary to constantly research and change positions on the market, as the economic environment and other factors change. After I put some thought into it, I was able to come up with one theme that equated to my most successful runs in the market, that is being a contrarian. First of all I'm a big believer of "the trend is your friend", but when things seem to be extremely overdone, I like jumping to the other side and sticking to my guns.

A good question would be when are things extremely overdone? It's just a feeling that comes naturally to most people. One example would have been when the market was melting down in late 2008 and it seemed every person on TV, article online, and even your neighbor, who has no idea how to play the stock market, was calling for an even deeper correction, this would have been a great time to get long the market. Even though you wouldn't have caught the bottom in late 2008 (came in March of 2009), it was an excellent time to be buying stocks.

To continue reading this, view the full article on Seeking Alpha HERE.

Corning Benefits Most From the Verizon-iPhone Marriage

2011-01-26T07:48:00.000-05:00

Perhaps the worst kept tech secret in history was that the Apple (AAPL) iPhone would be on Verizon (VZ) someday. Now that it has finally been confirmed by both companies, we're seeing examples of classic buy on the rumor and sell on the news. I'm not saying either company is a sell or a short by any means - I actually plan on accumulating shares of both on weakness. In this article, I will shine some light on one company that will certainly benefit from the increased number of iPhones expected to be sold on the Verizon network.

First I will explain why I am choosing this company versus other companies that will benefit from this news. In the spring of 2010, rumors heated up when The Wall Street Journal broke the news that Qualcomm (QCOM) was ramping up production for the long awaited Verizon iPhone and that it would likely be coming in Q1. As we know, that was right on, since the iPhone is set to debut on Verizon in February. The Google Finance chart below shows the performance of Apple (AAPL), Qualcomm (QCOM), and Verizon (VZ) since May 26, 2010.

To continue reading this, view the full article on Seeking Alpha HERE.

How to Hedge With Vertical Put Spreads

2011-01-24T22:00:00.000-05:00

I always say it's better to have insurance before your house burns down rather than try to buy it as it's burning down. This can also be said when talking about purchasing insurance or put options to hedge an equity portfolio.

With the market up over 25% since early July and the market being quite complacent lately, volatility is relatively cheap making portfolio insurance or put options also relatively cheap. Many have been stating the market is overdue for a pull back, and I also believe a correction could occur whether it be worse than expected economic data in the United States, some bad news out of Europe or Asia, or even another flash crash that spikes fear in the markets, who knows what excuse the market will use to pull back, but it will likely find one soon as we all know trees don't grow to the sky. Another thing to remember is the more we rally before any type of pull back, the worse the pull back will likely be. A 25% move higher in just 6 months is certainly a gift and some of the profits made in the recent months should be set aside to hedge out the next few months, as I stated the greater the rally - the greater the correction is typically.

To continue reading this, view the full article on Seeking Alpha HERE.

Time for a Correction? 5 Hedging Strategies

2011-01-20T07:50:00.000-05:00

As the market has been grinding higher over the past few months, we've heard many bears state that we are overbought and that we're due for a correction. The overbought part was likely true, but no correction was in sight on the back of QE2. I don't like being short when the printing presses are on full steam and I believe a real recovery is underway, but I'll never flinch at taking a profit or even use some of them to put on some hedges... After all, would you buy a house without insurance?

I have spent the majority of Wednesday evening reviewing charts - mainly of indices and sectors, to see where I would like to place my hedges. When I believe we are due for a correction, and only expecting a minor 5-7% one if that, I have no problem putting up to 2%-3% of my entire portfolio value into hedges. Just like it is smart to be diversified when purchasing equities and call options, it is smart to be diversified when shorting and buying put options. In this article I will show you 5 ideas on how I plan on hedging my portfolio and why I believe it is a good idea.

Idea #1: Hedging the S&P 500
Most portfolios have exposure to the S&P 500, so it is worth spending some money on insurance against this index.
(click chart to enlarge)
As we can see from the S&P Index SPDR (SPY) chart above, we had a pretty ugly day on heavier than normal volume Wednesday. You can also see that the RSI or relative strength has been trading in overbought territory since January 3. Typically it is a good time to lighten up or purchase protection when trading in overbought levels like this. We sold off by close to 1% Wednesday and the RSI still is trading at the higher end of the range, 64.59. You can pull up a chart of the VIX or Volatility Index, which trades inversely to the S&P 500, and you will see the VIX was trading near oversold levels in that same time frame. The VIX also had a big 9% spike Wednesday regaining the 20 day moving average, the VIX is another great indicator to get an idea of when to hedge.

S&P Hedging Strategy:
Although volatility is cheap (yes even with the 9% spike Wednesday) I would purchase put spreads versus outright put options on the S&P 500 SPDR (SPY), but I would purchase more time versus if I were just buying puts I would likely choose to purchase less time. Purchasing more time requires me to be proactive as I might have to decide when to trade out of this strategy so the hedge actually works. I would purchase March 127 put options and sell (1 for 1) March 117 put options against them. This strategy would cost me roughly $210 per put spread and would protect me down to just above the 200 day moving average at 117. If the market corrects more significantly and the SPY is trading below 117 on March expiration this strategy would return $1,000 per put spread or a return of 476%. Of course us bulls out there don't want the maximum return from this spread, but it would certainly help pad the portfolio if the market did correct in such a manner.

Idea #2: Hedging the NASDAQ 100
Like the S&P 500, many of us have exposure to big tech names which fall into the NASDAQ 100. One way we can hedge many of our stocks in the NASDAQ is to purchase similar put spreads on the Powershares QQQ Trust (QQQQ).
(click chart to enlarge)
From the chart above, we can see many similar comparisons to that of the S&P SPDR chart. ETF was trading in overbought territory for days, heavier than normal volume to the downside. But the really bearish signal I see from Wednesday's price-action, and signals a potential key reversal, is that the QQQQ managed to open on the highs, which also happens to be higher than Tuesday's high as well as the 52 week high, but gave all of Tuesday's gains back closing below Tuesday's low and on heavier volume. This is called a bearish engulfing candle pattern and cannot be illustrated any better than this.

NASDAQ Hedging Strategy:
Again I would look at using the 20 and 200 day moving average to get an idea on where to purchase and sell put options. I would buy the March 55 put options and sell the March 50 put options. I could get this strategy for roughly $84 per put spread. If the NASDAQ corrected significantly and the QQQQ was below 50 on March options expiration this strategy would return $500 per spread or a return of 595%.

Next I will outline 3 specific sectors using the Sector SPDR ETFS. I have looked at many sectors and believe the three to follow have the greatest risk and could have the most significant correction if we get a pull back.

Idea #3: Hedging the Health Care Sector
This sector had some very ugly price action as well Wednesday. We can see a very similar bearish engulf candle pattern from the chart below of the Health Care Select Sector SPDR (XLV).
(click chart to enlarge)
We can see the ETF opened within pennies of its 52 week high before selling off throughout the day. This ETF also engulfed all of Tuesday's move on greater volume. Not looking too promising for the bulls out there.

Health Care Sector Hedging Strategy:
With this ETF I am going to stay shorter term and purchase at the money February 32 put options for $46 per contract. I am choosing to stay shorter term on this ETF because the volatility stands at a whopping 14.75% (sarcastic) for February, and because I am trading on this signal and because this is sector specific I wouldn't want to overpay for time value.

Idea #4 Hedging the Energy Sector
This sector is by far one of the best performing sectors since the most recent market bottom, which leads me to believe it may have the biggest correction if we get an overall market correction.
(click chart to enlarge)
As we can see from the Energy Select Sector ETF (XLE) above, it opened on the 52 week high and sunk like a stone all day engulfing Tuesday's entire move higher, all on greater volume. This again is very ugly price action and would signal me to sell energy stocks or purchase put protection. This is one of very few ETF's that traded above 70 on the RSI for more than 3 days.

Energy Sector Hedging Strategy:
I would also plan on purchasing shorter tem puts on this ETF, because this is sector specific and would think based on the ugly price action and recent overbought levels, it is due to correct sooner rather than later. I am structuring my bet on this ETF a bit differently than the last few. As you can see from the chart of the XLE above, the stock left a couple of gaps on the way up, and I believe those have a high probability of being filled if we get a pull back. I would purchase puts below the 20 day moving average at minor support near 68, and I would sell puts near 60. Therefore I would put on a February 68/60 put spread. This would cost me roughly $75 per spread. This strategy is a bit more bearish and factors in quite a significant correction, but selling the 60 puts versus the 61 or 62 puts didn't make too much of a difference compared to potential returns, especially because that lower gap which would need to be filled around 59.94. If this ETF sold off and closed at or below 60 on February options expiration this strategy would return $800 per spread or 1,067%.

Idea #5 Hedging the Materials Sector:
This sector was perhaps the ugliest of the day Wednesday. Many of the largest holdings in the Materials Select Sector ETF (XLB) such as Monsanto (MON) and Freeport-Mcmoran (FCX) have had unbelievable runs lately and need to take a breather.
(click chart to enlarge)
This ETF had an extremely ugly potential reversal day Wednesday . The ETF opened near the high and 52 week high and sold off the entire day on very large volume engulfing all of the previous two days moves higher. This stock also fell below the 20 day moving average for the first time since mid November. This again is a potential key reversal day to watch and would be a signal to sell material stocks or put on some hedges.

Material Sector Hedging Strategy:
As we can from the minor pull back in mid November the ETF broke below the 20 day but then bounced off of the 50 day moving average and continued a nice uptrend. You will also see Fibonacci retracement levels drawn on the chart which are also key levels to watch. The Fibonacci levels come in very close to the moving averages on the chart, but I will use both to structure my put spread. Again I would choose the February contracts to keep this hedge shorter term. I would purchase my first put near the 50 day moving average at 37 and sell put options near 34. If it broke below the 50% retracement, I would want to roll out into the next month and purchase another put spread (perhaps the 34/30) as the stock would likely head lower. This strategy would cost roughly $45 per spread and would return $300 per spread or 667% if this ETF closed at or below 34 per share on February options expiration.

The ideas outlined above are bearish strategies and should not be considered if you think the ETF will continue higher or have a very minor correction in the near future. However if you feel the ETF could correct in the near future, these strategies could help protect your portfolio. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books. These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

I currently do not own any strategies mentioned above, but may open them in the next few days.

Options Market Findings: January 18, 2011

2011-01-18T23:44:00.002-05:00

Today we have a continued Bull and a BIG Bear. One strategist looks like they're going to keep their bet on CB Richard Ellis Group (CBG) rolling out of the January 20 calls and into the February 22 calls. Over 9k January 20 call contracts traded on open interest of 9,223, and 9,019 of the February 22 calls went out against open interest of 22. This indicated to me the strategist is taking a large portion of risk off the table, but keeping the bullish bet intact. The net credit received from this strategy would be about $1.15 per share. Going back on my option chart it looks as if the strategist opened this strategy on December 16 for just under $1 per share. Now the strategist is almost 50 cents in the money and playing with the houses money. Not a bad deal at all!

The BIG Bear bet we have on January 18 was on the Dow Jones Transportation ETF (IYT). Over 12k contracts traded for the March 90 puts on open interest of 228. It looks like multiple institutional size blocks were taken out throughout the day, with the majority of them being purchased near the ask price. This could be a hedge but it would be a very expensive one if that. It looks more like someone is betting on a correction and thinks this sector may perform the worst. I will likely follow this trade for a hedge myself, as this type of conviction is worth following.

Banking on Citigroup to Outperform: A Bullish Option Strategy

2011-01-18T10:01:00.003-05:00

As stated in my last article 3 Dow Stocks to Buy-Write Now I believe financials will outperform the market in the early part of this year. The most attractive financial stock to me is Citigroup (C). I believe Citigroup will outperform both the market and the very popular Financial Sector SPDR ETF (XLF). Below you will see a chart from Google Finance comparing many of the largest financial stocks as well as the Financial Sector SPDR ETF (XLF)...

To continue reading this, view the full article on Seeking Alpha HERE.

3 Dow Stocks to Buy-Write Now

2011-01-17T12:50:00.000-05:00

In this post I will outline three Dow stocks which are attractive at the current levels and will explain why I would choose to buy-write them. The buy write option strategy is the simplest option strategy it is simply purchasing at least 100 shares of a particular stock and then sell one option contract against it (standard contracts in multiples of one hundred so you could sell 5 contracts against 500 shares of stock). This strategy is a way of creating income and for those already holding the stocks with a nice gain it is also a form of hedging or protecting to the downside by taking a little profit off the table. The downside is that it locks your shares up and if the stock catches fire you may be called away and miss out a ton of upside.

The first stock I find attractive from the Dow Jones Industrial average is Boeing (BA). I feel this stock is undervalued based on the future of the company and the dividend they pay. The last dividend of 42 cents was paid on November 3, 2010, so it should yield another two dividend payments by May options expiration - therefore I would likely look to write shares of Boeing out no later than May expiration. I could write the May 75 calls against shares of Boeing for about $2.00 per share bringing my cost down about 2.67% to $68 per share...

To continue reading this, view the full article on Seeking Alpha by clicking HERE.

Corning a Buy on Apple Verizon Marriage

2011-01-13T22:44:00.002-05:00

I am getting long Corning (GLW) on the back of this deal. I believe demand for the Apple (AAPL) iPhone will pass even the most bullish estimates once it's selling on Verizon (VZ). Both Verizon and Apple have rallied greatly as well as Qualcomm (QCOM) in anticipation for this announcement, as this was a poorly kept secret.

This deal is also good for glass maker Corning Incorporated (GLW) which has been trapped in a tight range between 15-19 the last year. It looks as if the stock is finally trying to break out. I am long January 20 calls, as well as February 22 calls but I am looking longer term. I believe May 22/25 call spreads look very attractive at this point and plan on purchasing some for my portfolio on any weakness. For more information in how to trade these strategies check out my options ebook.

New GoldenAgeCheese.com Sitemap

2010-12-01T10:08:00.003-05:00

Hedging with Butterfly Put Spreads

2010-11-20T17:15:00.001-05:00

In times of a declining market and rising volatility, it can be hard to dish out the higher costs of put option premiums. One way to do this more cost effectively is to purchase something called a butterfly put spread. The good is that these spreads will cost you much less (especially in times of rising volatility) than purchasing just put options, however the bad is that these limit the potential gains (or protection) AND if the market or equity drops too much in value you could still lose your premium paid just as if the the market or equity didn't drop enough for the spread to pay off. I will give you an example in this article using a major index ETF. This article is for educational purpose only I am not recommending buying or selling anything mentioned.

Hedging an entire portfolio with out of the money butterfly put spreads:

The market is up over 15% since late August, so it may be worth looking at buying some protection. First I will have to develop targets: how much I am willing to lose before my protection kicks in, how much I want to hedge, and the time period I want to hedge for. The more and longer that I choose to hedge, the greater the cost.

Let's say I can stomach losing 5% from the current market levels and I think the market is due for a 15% pull back from current levels over the next 2 months. I would then use these targets to develop my option strategy.

Step 1: Using the very popular, very liquid S&P 500 SPDR ETF (SPY) I would purchase the January 114 put options. Note how I got the 114 strike put option. I stated I can withstand declines of 5% from current market levels (at the time of this writing SPY is at 120.29), so a 5% decline from here would put the SPY at roughly 114.

Step 2: I would then sell TWO contracts for every ONE purchased of the SPY January 102 put options. Note how I got the 102 strike put options. I stated I expect a total decline of 15% from the current levels near 120 on the SPY which comes out to 102.

Step 3: I would then purchase the January 90 put options. Note how I got the 90 strike put options. This is just the difference of the contracts in step one and two subtracted from contract in step two. In this case the difference is 12 so we take 12 and subtract it from 102 which gives us 90.

As of current market data each spread can be purchased for $108. If I were to just purchase put options it would cost $173. If the market in fact sells off this would give me protection from roughly 1,140 down to 1,020 on the S&P 500. The maximum profit from this spread would occur if the SPY closed at 102 per share on January options expiration. This would return $1200 per spread or a return of 1,111%. The most that can be lost from this spread is the premium paid of $108, and would result if the SPY closed at or above 114 per share or at or below 90 per share on January options expiration. The two break even points would be the SPY at 112.92 and 91.08 on January options expiration. Commissions were not factored in the calculations above.

This completes the butterfly put spread. Note for safety and saving on transaction costs it should not be done as shown above in three different steps. Most brokerages today have a butterfly put spread order entry form. If they do not I suggest using a two part put spread approach which every brokerage should certainly have. Using put spreads I would first get long the 114/102 put spread, and then get short the 102/90 put spread. This is the exact same spread and should only be entered if brokerages do not offer butterfly put spreads. To learn more about options in general or to get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books. If one has a more tech heavy portfolio it may be a better idea to structure a butterfly put spread using the PowerShares QQQ ETF (QQQQ). If small cap stocks are a holding in the portfolio one should also consider opening butterfly put spreads on the iShares Russell 2000 Index ETF (IWM).

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long SPY December 115 Put Options

Google Strategy Update

2010-09-24T22:42:00.001-04:00

Hey guys, hope all is well. I wanted to update you all on that Google option strategy I did last week. I took my money off the table Friday with a nice profit. I still have some call spreads open which are now free and I have limit order in to sell them for $2,400 and $2,600 which I believe will be tough to get this week unless Google buries the upper strike price. I believe I want to get out before earnings just because I feel more comfortable and even though I may kick myself for leaving $500 on the table, it's a lot better than kicking myself for having them expire worthless! Anyway, I wanted to share my family companies cheese blog with you all. Lots of cool (cheesy) stuff there so check out my cheese blog.

Time for Google to Run: How I'm Playing It

2010-09-20T07:13:00.003-04:00

Trading at just 21X earnings and projected earnings growth of 14% in 2011, Google has become an oversold value stock. With Google (GOOG) pinning to 490 on options expiration Friday, it confirmed a nice breakout and could be a potential trend reversal for the search giant. As an options trader these pattern breakouts are key when choosing my strategies. Following the marked up chart of Google below, I will highlight some key points which led me to put on a bullish option strategy.

(Click chart to enlarge)

Why I am bullish: From the chart above you can see Google broke a major down triangle on September 13 (blue lines). This breakout projects Google back up between 520 and 550 per share. However that is just the beginning... You can also see from this chart above a very choppy inverse head and shoulders pattern with the neckline coming in around 510 per share (yellow dotted line). This 510 level is a key resistance area and if it can break above that (as the triangle breakout suggests) the stock could run back up and test its recent high near 590 per share.

How I am playing it: I am playing quite conservative by purchasing October Call Spreads. I plan on purchasing October 510 calls (the neckline breakout point) and selling the October 540 calls against them. I can get into each spread for a net debit of around $550 which doesn't seem too expensive considering an earnings report falls in that time frame. The reason I'm not purchasing just October calls is because I don't want to purchase too much volatility with the Google earnings announcement falling before expiration (selling an upper call against the lower call will help offset this). The reason I'm not purchasing November calls or call spreads because I don't want to purchase too much time in case Google sells off. If significant profits can be taken, I may choose to close my position before earnings.

Number Crunch: The most that can be lost from each 510/540 call spread is $550 (plus commissions) and will result if Google closes at or below 510 per share on October expiration. The break even point from this spread is shares of Google at 515.50 (less commissions) per share on October expiration, anything above that price until 540 per share will result in unrealized profit. If Google closes at or above 540 per share on October options expiration it will return the maximum of $3,000 per spread or 545%.

As stated, I believe Google is oversold and will use any dips after earnings or in the near future to accumulate shares for my investment account. I still think in order to get some real momentum behind this stock, Google needs to purchase shares back of the company, do a stock split, or declare a dividend... I would be a fan of all three.

The ideas outlined above are bullish strategies and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Still Bullish on QCOM, but Taking Some Profits

2010-09-10T07:34:00.002-04:00

Today I am looking at closing out my October in the money call options on Qualcomm (QCOM) but purchasing longer dated call spreads... I purchased the October $37 call options for $1.19 before they reported earnings and popped. I am not looking at closing all of the contracts for a slight premium and rolling into January 41 strike calls but on half of the contracts writing the January 47.50 strike calls against them. This was I have some serious upside potential but I am taking all of my money off the table plus a couple hundred bucks. I still see some room to the upside on Qualcomm which is why I am choosing to create spreads on only half of my January option position, the other half I will either take profits or convert into either diagonal call spreads or vertical call spreads on continued strength in the underlying. To read more about these types of spreads check out my option ebooks here.

An Alternate Investment: Domain Name Investing

2010-09-01T19:56:00.002-04:00

I am just writing a quick post to inform everybody on domain name investing. If you have a catchy name or idea you can register a .com name for $11 a year. I just purchased the domain name BetterCheddar.com for my cheese company and I plan on having it forward directly to my site shortly. I paid a nice premium for this domain so you never know who will want to buy your domain names or ideas if you register them today! I registered a catchy name in 2008, BellaMozzarella.com which is Italian for beautiful Mozzarella. This page forwards directly to our Mozzarella Cheese page and I am still very happy with the purchase. If you ever have a good idea I encourage you to spend the $11 to register the domain name, because thousands of companies and individuals search catchy domain names for their business or if you happen to register someones business name before it is their name you could really hit a home run. I just thought I know this is a blog for stock, futures, and options but I figured I would throw a curve ball in to my redaers and inform them of an alternate investment.

Anticipating Another BIG Move - A Look at Doji Candlesticks

2010-08-05T22:42:00.003-04:00

Once again I find myself writing about another anticipated big move. Once again we Doji'd on the S&P 500 index, this one being the highest quality Doji we've seen in a long time. The S&P 500 traded in a decent range Thursday, but managed to close just 3 hundredths of a point or 0.03 points above the open. This price action means a big move is expected and likely. The bad thing about doji's is that we cannot predict which way the move will be (bullish or bearish). I am guessing the way we move depends on the unemployment number released at 8:30 AM EST Friday. I would assume, if we get a better than expected unemployment situation number Friday it will be bullish, and the opposite holds true (bearish move) if we get a worse than expected unemployment number... However crazier things have happened. The chart below is a prime example of a doji on the S&p 500 index.

Yea so, what's the big deal if we don't know which way it is going to move? This is true, however this is ideal for an option strangle or straddle position which is exactly what I was opening near the close of trade Thursday. Using the weekly options (newer and still testing) I purchased both the 113 strike call and put options on the S&P 500 SPDR (SPY). Each straddle ran me about $130 which means a move of 1% or greater in the S&P 500 index should make this position profitable. The worst case is if the SPY closes at exactly 113 (unlikely) I would lose 100% of the premium paid or $130 for each straddle I opened. If the market opens up flat I may decide to add to this straddle as the market should have a large swing based on Thursday's price action. If you would like to learn more about trading stock options and different strategies used to make money in any market check out my stock option trading ebooks here.

How I'm Playing the Risk Trade

2010-07-24T10:32:00.002-04:00

Three stocks which did very well for my portfolio this past week were: Qualcomm (QCOM), American Express (AXP), and Trina Solar (TSL). I will continue to hold the majority of my long positions (as this entire market moves as a whole these days) until I see the risk trade come off the table. Copper trading above $3.10 and holding is a signal that the risk trade is coming back for the time being. I'd like to see copper futures settle above $3.22 and then $3.40. I've moved my stops to $3.08 now and this position has been working very well for me! For a less risky investor or someone who cannot trade futures check out Freeport-Mcmoran (FCX), Cliffs Natural Resources (CLF), and the most diversified way to play the Metals & Mining SPDR (XME).

I have purchased December 50 strike call options and will look to turn the position into a vertical call spread. I will decide to write upper calls against my lower calls as I'll be watching the ETF near close everyday and monitor the price action. It is also worth noting I may look to write nearer term strikes out on strength; such as the August 56 or September 58, etc... on strength in the XME. To learn how to create similar option strategies and for information on options in general check out my Options Trading Books.

Risk Trade Coming Back

2010-07-21T07:56:00.002-04:00

That inverted hammer pattern on copper futures worked like a charm. However we must break through the $3.10 resistance level with two consecutive closes above it. If it does I'm watching material stock names including Cliffs Natural Resources (CLF), Freeport-Mcmoran (FCX) and the the metal and mining SPDR ETF (XME). Stops in on copper futures at $2.99

Big Call Option Bet on Telecommunications Sector Index Fund (IYZ)

2010-07-20T23:39:00.003-04:00

Tuesday, very heavy volume traded for the September 20 calls on (IYZ). Most traded near the bid price of $35 (0.35) so it could be slightly more bearish. 15,000 contracts traded on an open interest of zero. I actually liked the price-action on Sprint (S), so I will be watching that out of the group. I also will be watching price-action on AT&T (T) and Verizon (VZ) the next few days.

Expecting an Above Average Move Part 2

2010-07-15T08:03:00.001-04:00

Last week I wrote about an expected above average move on the S&P 500 index. The open and close price were different by just 3 pennies which indicated a very strong doji. Yesterday the S&P 500 index opened and closed within 44 cents which is still considered a doji, just not as strong. I am expecting an above average move today (>1%). I may take a shot at strangling the S&P 500 ETF (SPY) at open. I would look at purchasing the 110 calls and the 109 puts, or if it opens near 110 I may take a shot at a straddle.

Time for Another Bounce? Three Stocks I'll Be Watching Today

2010-07-08T07:45:00.003-04:00

Morning traders, I'd like to see a follow through of yesterday's price-action. If we get a move higher today, I think we could bounce back as high as 1150 on the S&P 500. Watch 106.77 on the SPY as it is a gap we need to fill. If we fill it and start heading lower, I think we could sell off. However if we fill it and keep rallying we could be heading as high as 1100 very short term. Three stocks on my watch list today are: Teva Pharmaceutical (TEVA) which put in a nice doji, Sourcefire (FIRE) which put in a very nice hammer, and Gafisa (GFA) which broke out yesterday and the chart predicts it back as high as 16 a share.

Doji Confirmed! SPY Option Straddles Paid Off Big!

2010-07-07T20:32:00.001-04:00

As stated this morning I expected a major move in the equity markets based on Tuesday's price action - I just didn't know the direction. As stated I was looking at opening option straddle positions on the widely traded S&P 500 SPDR (SPY). An option straddle is ideal for this type of situation.

Many use straddles before big events such as earnings, but be careful as the volatility will collapse following earnings and if the stock moves less than the derivative market is anticipating (which happens more times than you may think) you could lose much of the premium paid. To learn about straddles check out my Advanced Option E-book! But getting back to today's trade, once the market volatility came in from the initial spike at open, I took a slightly bullish bias and straddled the SPY by purchasing the 104 weekly put options and the 104 weekly call options. These new weekly options are ideal for this type of trade (closed at the end of day) as the premiums paid are very small. I am glad to say I closed my position at roughly 3:55 PM banking a very nice one day gain! Happy trading!

S&P 500 Chart Predicts a Major Move

2010-07-07T07:36:00.002-04:00

Happy lucky 7's day (7/7)! I'm expecting a big move in the major indices today as the S&P 500 had a doji candle pattern yesterday. Doji candle patterns do not predict the direction of the move, they just predict the magnitude. The S&P 500 index closed 0.03 below the open price which is a major doji on an index of 1,000 plus! Last time I noticed a doji was on the S&P 500 ETF (SPY) was on May 19 and that was followed with a huge move the following day. I now see a major doji on the actual index so time will tell if it works again. I'll look at opening straddles on both the S&P 500 and the Powershares QQQ at open today. The chart below is the of the S&P 500 and you can see the doji candle pattern we had on July 6, 2010.

Click chart to enlarge

Held Some Major Support on the S&P 500

2010-06-30T00:51:00.003-04:00

Traders, we held 1040 as you probably know from all of the talking heads on TV. Tomorrow should be interesting and should let us know if we will get any bounce higher. I believe we can bounce as high as 1130-1150 on the S&P 500 before we know where we could be going. A break and close on heavier volume below 1040 is bearish, and a break and close above 1130 on heavier volume is bullish.

Into Copper Futures with a Tight Stop Loss

2010-06-28T07:36:00.001-04:00

Copper futures continue to look good to me. Setting stops at $3.05 with open profit take. Also looking at Freeport-McMoRan Copper & Gold Inc. (FCX) and the SPDR S&P Metals and Mining ETF (XME).

CBOE Should Benefit from Weekly Options

2010-06-26T10:50:00.002-04:00

First it started with the major ETF's such as the SPY, and QQQQ, but as of yesterday they have weekly options on very heavily traded individual stocks like Bank of America (BAC) and Citigroup (C). There is a ton of money to be made if you can trade these weekly options in this range bound market (from 1040 to 1130). With all of that being said, I strongly believe the newly listed HOT IPO Chicago Board Options Exchange (CBOE) will benefit from it...

Russell Reconstitution 2010 Entire List of Changes

2010-06-26T10:41:00.003-04:00

Hey guys sorry it's been a while since I've posted anything. I have been extremely busy. Here is a (long) list of companies which were rebalanced during the Russell Reconstitution yesterday. I have split the list into two categories; additions and deletions from the index. If you were wondering about the huge volume spike on these names, this will explain it.

Added to the Index

Company	Symbol	Sector

1ST UNITED BANCORP INC	FUBC	Financial Services
A H BELO CORP	AHC	Consumer Discretionary
ABRAXAS PETE CORP	AXAS	Energy
ACCENTURE PLC IRELAND	ACN	Producer Durables
ACCRETIVE HEALTH INC	AH	Health Care
ACE LTD	ACE	Financial Services
ALCON INC	ACL	Health Care
ALEXZA PHARMACEUTICALS	ALXA	Health Care
ALIMERA SCIENCES INC	ALIM	Health Care
ALPHA & OMEGA SEMICON	AOSL	Technology
AMERICAN DG ENERGY INC	ADGE	Utilities
AMERICAN OIL & GAS INC	AEZ	Energy
ANTARES PHARMA INC	AIS	Health Care
ANTHERA PHARMACEUTICALS	ANTH	Health Care
AOXING PHARMACEUTICAL CO	AXN	Health Care
APPLIED ENERGETICS INC	AERG	Producer Durables
ARCTIC CAT INC	ACAT	Consumer Discretionary
ARLINGTON ASSET INVT	AI	Financial Services
ARTHROCARE CORP	ARTC	Health Care
ASPEN TECHNOLOGY INC	AZPN	Technology
ASPENBIO PHARMA INC	APPY	Health Care
ASTA FDG INC	ASFI	Financial Services
AVAGO TECHNOLOGIES LTD	AVGO	Technology
AVEO PHARMACEUTICALS INC	AVEO	Health Care
AXCELIS TECHNOLOGIES INC	ACLS	Technology
AXT INC	AXTI	Technology
BALLANTYNE STRONG INC	BTN	Producer Durables
BALTIC TRADING LIMITED	BALT	Producer Durables
BARRY R G CORP OHIO	DFZ	Consumer Discretionary
BEASLEY BROADCAST GROUP	BBGI	Consumer Discretionary
BELL MICROPRODUCTS INC	BELM	Technology
BERKSHIRE HATHAWAY INC	BRK.B	Financial Services
BIOSANTE PHARMACEUTICALS	BPAX	Health Care
BIOTIME INC	BTIM	Health Care
BOFI HLDG INC	BOFI	Financial Services
BON-TON STORES INC	BONT	Consumer Discretionary
BRIDGFORD FOODS CORP	BRID	Consumer Staples
CALIPER LIFE SCIENCES	CALP	Health Care
CALIX INC	CALX	Technology
CALLON PETROLEUM CO	CPE	Energy
CAMAC ENERGY INC	CAK	Energy
CAMBIUM LEARNING GRP INC	ABCD	Consumer Discretionary
CAPITAL GOLD CORP	CGC	Materials & Processing
CAPSTONE TURBINE CORP	CPST	Energy
CASELLA WASTE SYSTEMS	CWST	Consumer Discretionary
CASUAL MALE RETAIL GROUP	CMRG	Consumer Discretionary
CDC CORP	CHINA	Technology
CENTER FINANCIAL CORP	CLFC	Financial Services
CERUS CORP	CERS	Health Care
CHATHAM LODGING TR	CLDT	Financial Services
CHICAGO BRIDGE & IRON	CBI	Producer Durables
CIT GROUP INC	CIT	Financial Services
CNH GLOBAL N V	CNH	Producer Durables
CODEXIS INC	CDXS	Health Care
COLEMAN CABLE INC	CCIX	Producer Durables
COMBINATORX INC	CRXX	Health Care
COMMERCIAL VEH GROUP INC	CVGI	Producer Durables
COMPX INTERNATIONAL	CIX	Materials & Processing
CONEXANT SYSTEMS INC	CNXT	Technology
CONVIO INC	CNVO	Technology
COOPER INDUSTRIES PLC	CBE	Producer Durables
CORCEPT THERAPEUTICS INC	CORT	Health Care
CORE LABORATORIES N V	CLB	Energy
COVIDIEN PLC	COV	Health Care
CULP INC	CFI	Materials & Processing
CUMULUS MEDIA INC	CMLS	Consumer Discretionary
CYTRX CORP	CYTR	Health Care
DELTA APPAREL INC	DLA	Consumer Discretionary
DEX ONE CORP	DEXO	Consumer Discretionary
DIGIMARC CORPORATION	DMRC	Technology
DISCOVERY COMMUNICATNS	DISCA	Consumer Discretionary
DOUGLAS DYNAMICS INC	PLOW	Producer Durables
DYNAVAX TECHNOLOGIES	DVAX	Health Care
DYNAVOX INC	DVOX	Technology
EMPIRE RESORTS INC	NYNY	Consumer Discretionary
ENCORE BANCSHARES INC	EBTX	Financial Services
ENERGY PARTNERS LTD	EPL	Energy
ENERGY XXI (BERMUDA) LTD	EXXI	Energy
ENTERCOM COMMUNICATIONS	ETM	Consumer Discretionary
ENTRAVISION COMM	EVC	Consumer Discretionary
EURAND N V	EURX	Health Care
EVOLUTION PETROLEUM CORP	EPM	Energy
EXACT SCIENCES CORP	EXAS	Health Care
EXCEL MARITIME CARRIERS	EXM	Producer Durables
EXCEL TR INC	EXL	Financial Services
EXPRESS INC	EXPR	Consumer Discretionary
FEDERAL AGRIC MTG CO	AGM	Financial Services
FIBERTOWER CORP	FTWR	Utilities
FINANCIAL ENGINES INC	FNGN	Financial Services
FINISAR CORP	FNSR	Technology
FIRST INTST BANCSYSTEM	FIBK	Financial Services
FIVE STAR QUALITY CARE	FVE	Health Care
FSI INTL INC	FSII	Technology
GASTAR EXPL LTD	GST	Energy
GENERAL GROWTH PPTYS INC	GGP	Financial Services
GEORGIA GULF CORP	GGC	Materials & Processing
GERBER SCIENTIFIC INC	GRB	Producer Durables
GERDAU AMERISTEEL CORP	GNA	Materials & Processing
GEROVA FINANCIAL GROUP	GFC	Financial Services
GLOBAL GEOPHYSICAL SVCS	GGS	Energy
GLOBALSTAR INC	GSAT	Utilities
GLOBE SPECIALTY METALS	GSM	Materials & Processing
GOLDEN STAR RES LTD CDA	GSS	Materials & Processing
GOLUB CAP BDC INC	GBDC	Financial Services
GRAY TELEVISION INC	GTN	Consumer Discretionary
GREEN BANKSHARES INC	GRNB	Financial Services
GUIDANCE SOFTWARE INC	GUID	Technology
HALLADOR ENERGY CO	HNRG	Energy
HANMI FINANCIAL CORP	HAFC	Financial Services
HEALTHTRONICS INC	HTRN	Health Care
HFF INC	HF	Financial Services
HOKU CORPORATION	HOKU	Energy
HOUSTON AMERICAN ENERGY	HUSA	Energy
HUDSON HIGHLAND GROUP	HHGP	Producer Durables
HUDSON VALLEY HOLDING	HUVL	Financial Services
HUTCHINSON TECHNOLOGY	HTCH	Technology
HYPERCOM CORP	HYC	Technology
ICO GLOBAL COMM HLDGS	ICOG	Utilities
IDT CORP	IDT	Utilities
IKANOS COMMUNICATIONS	IKAN	Technology
INGERSOLL-RAND PLC	IR	Producer Durables
INHIBITEX INC	INHX	Health Care
INOVIO PHARMACEUTICALS	INO	Health Care
INTEGRATED SILICON S	ISSI	Technology
IRIDIUM COMMUNICATIONS	IRDM	Utilities
JAGUAR MNG INC	JAG	Materials & Processing
JAMBA INC	JMBA	Consumer Discretionary
JAZZ PHARMACEUTICALS INC	JAZZ	Health Care
JOES JEANS INC	JOEZ	Consumer Discretionary
JOHNSON OUTDOORS INC	JOUT	Consumer Discretionary
KEITHLEY INSTRS INC	KEI	Producer Durables
KENNEDY-WILSON HLDGS INC	KW	Financial Services
KERYX BIOPHARMACEUTICALS	KERX	Health Care
KID BRANDS INC	KID	Consumer Discretionary
KIT DIGITAL INC	KITD	Technology
KMG CHEMICALS INC	KMGB	Materials & Processing
KODIAK OIL & GAS CORP	KOG	Energy
KRATOS DEFENSE & SEC SOL	KTOS	Producer Durables
L & L ENERGY INC	LLEN	Energy
LACROSSE FOOTWEAR INC	BOOT	Consumer Discretionary
LADENBURG THALMAN FIN	LTS	Financial Services
LEAR CORP	LEA	Consumer Discretionary
LECG CORP	XPRT	Producer Durables
LEE ENTERPRISES INC	LEE	Consumer Discretionary
LIBBEY INC	LBY	Consumer Discretionary
LIFETIME BRANDS INC	LCUT	Consumer Discretionary
LIMONEIRA CO	LMNR	Consumer Staples
LIONS GATE ENTMNT CORP	LGF	Consumer Discretionary
LOCAL COM CORP	LOCM	Technology
LTX-CREDENCE CORP	LTXC	Technology
LYDALL INC	LDL	Producer Durables
MAGMA DESIGN AUTOMATION	LAVA	Technology
MAGNUM HUNTER RES CORP	MHR	Energy
MARINEMAX INC	HZO	Consumer Discretionary
MARLIN BUSINESS SVCS	MRLN	Producer Durables
MATTSON TECHNOLOGY INC	MTSN	Technology
MAXLINEAR INC	MXL	Technology
MCCLATCHY CO	MNI	Consumer Discretionary
MEDIA GENERAL INC	MEG	Consumer Discretionary
MERU NETWORKS INC	MERU	Technology
METALS USA HLDGS CORP	MUSA	Materials & Processing
MGP INGREDIENTS INC	MGPI	Consumer Staples
MIDWESTONE FINL GROUP	MOFG	Financial Services
MILLER PETE INC	MILL	Energy
MINDSPEED TECHNOLOGIES	MSPD	Technology
MOSYS INC	MOSY	Technology
MPG OFFICE TRUST INC	MPG	Financial Services
NANOMETRICS INC	NANO	Technology
NATIONAL AMERN UNIV	NAUH	Consumer Discretionary
NATURES SUNSHINE PRODS	NATR	Consumer Staples
NEOSTEM INC	NBS	Health Care
NETWORK ENGINES INC	NENG	Technology
NEURALSTEM INC	CUR	Health Care
NEWCASTLE INVT CORP	NCT	Financial Services
NEXSTAR BROADCASTING GRP	NXST	Consumer Discretionary
NORANDA ALUM HLDG CORP	NOR	Materials & Processing
NYMOX PHARMACEUTICAL	NYMX	Health Care
OCCAM NETWORKS INC	OCNW	Technology
OCLARO INC	OCLR	Technology
ONE LIBERTY PROPERTIES	OLP	Financial Services
P A M TRANSN SVCS INC	PTSI	Producer Durables
PARK OHIO HOLDINGS CORP	PKOH	Producer Durables
PDF SOLUTIONS INC	PDFS	Technology
PDI INC	PDII	Producer Durables
PEREGRINE PHARMA INC	PPHM	Health Care
PGT INC	PGTI	Materials & Processing
PHARMACYCLICS INC	PCYC	Health Care
PILGRIMS PRIDE CORP NEW	PPC	Consumer Staples
PINNACLE AIRL CORP	PNCL	Producer Durables
PRESSTEK INC	PRST	Producer Durables
PRIMERICA INC	PRI	Financial Services
PROSPECT MEDICAL HLDGS	PZZ	Health Care
PURE BIOSCIENCE	PURE	Health Care
QUALITY DISTRIBUTION INC	QLTY	Producer Durables
RADIO ONE INC	ROIAK	Consumer Discretionary
RAM ENERGY RESOURCES INC	RAME	Energy
REACHLOCAL INC	RLOC	Consumer Discretionary
RENTECH INC	RTK	Materials & Processing
RESOLUTE ENERGY CORP	REN	Energy
RETAIL OPPORTUNITY INVTS	ROIC	Financial Services
RICHARDSON ELECTRONICS	RELL	Technology
ROADRUNNER TRNSN SVCS	RRTS	Producer Durables
RODMAN & RENSHAW CAP GP	RODM	Financial Services
RURAL/METRO CORP	RURL	Health Care
SANFILIPPO JOHN B & SON	JBSS	Consumer Staples
SANMINA SCI CORP	SANM	Technology
SCORPIO TANKERS INC	STNG	Producer Durables
SELECT COMFORT CORP	SCSS	Consumer Discretionary
SENOMYX INC	SNMX	Materials & Processing
SENORX INC	SENO	Health Care
SHILOH INDUSTRIES INC	SHLO	Materials & Processing
SIRIUS XM RADIO INC	SIRI	Consumer Discretionary
SOLTA MEDICAL INC	SLTM	Health Care
SOMAXON PHARMACEUTICALS	SOMX	Health Care
SONIC SOLUTIONS	SNIC	Technology
SPANSION INC	CODE	Technology
SPECTRUM BRANDS HOLDINGS	SPB	Consumer Staples
SPS COMM INC	SPSC	Technology
SS&C TECHNOLOGIES HLDGS	SSNC	Technology
STAAR SURGICAL CO	STAA	Health Care
STREAM GLOBAL SVCS INC	SGS	Producer Durables
SUMMER INFANT INC	SUMR	Consumer Discretionary
SUPERMEDIA INC	SPMD	Consumer Discretionary
SXC HEALTH SOLUTIONS	SXCI	Health Care
SYNERON MEDICAL LTD	ELOS	Health Care
TARGACEPT INC	TRGT	Health Care
TAYLOR CAPITAL GROUP INC	TAYC	Financial Services
TELENAV INC	TNAV	Technology
TESCO CORP	TESO	Energy
TESSCO TECHNOLOGIES INC	TESS	Technology
THERMADYNE HLDGS CORP	THMD	Producer Durables
THL CR INC	TCRD	Financial Services
THOMAS PROPERTIES GROUP	TPGI	Financial Services
THOMPSON CREEK METALS	TC	Materials & Processing
THOMSON REUTERS CORP	TRI	Financial Services
TPC GROUP INC	TPCG	Materials & Processing
TRANSATLANTIC PETROLEUM	TAT	Energy
TRANSCEPT PHARM INC	TSPT	Health Care
TWO HBRS INVT CORP	TWO	Financial Services
TYCO INTERNATIONAL LTD	TYC	Producer Durables
U S ENERGY CORP	USEG	Materials & Processing
ULTRA CLEAN HOLDINGS INC	UCTT	Technology
ULTRA PETROLEUM CORP	UPL	Energy
UNILIFE CORP NEW	UNIS	Health Care
UQM TECHNOLOGIES INC	UQM	Producer Durables
VERSO PAPER CORP	VRS	Materials & Processing
VIASYSTEMS GROUP INC	VIAS	Technology
VIRGINIA COMM BANCORP	VCBI	Financial Services
VIRNETX HOLDING CORP	VHC	Technology
VISTAPRINT N V	VPRT	Consumer Discretionary
VONAGE HLDGS CORP	VG	Utilities
WABASH NATIONAL CORP	WNC	Producer Durables
WARNER CHILCOTT PLC	WCRX	Health Care
WAVE SYSTEMS CORP	WAVX	Technology
WEATHERFORD INTL	WFT	Energy
WEST COAST BANCORP	WCBO	Financial Services
WESTWOOD ONE INC	WWON	Consumer Discretionary
WINMARK CORP	WINA	Consumer Discretionary
XERIUM TECHNOLOGIES INC	XRM	Producer Durables
XYRATEX LTD	XRTX	Technology
ZIOPHARM ONCOLOGY INC	ZIOP	Health Care

Deleted from the index

Company	Symbol	Sector

ACTIVIDENTITY CORP	ACTI	Technology
ADOLOR CORP	ADLR	Health Care
AGFEED INDUSTRIES INC	FEED	Consumer Staples
AMERICAN CARESOURCE HLDG	ANCI	Health Care
AMERICAN DAIRY INC	ADY	Consumer Staples
AMERICAN ORIENTAL BIOENG	AOB	Health Care
AMERICAN REALTY INVESTOR	ARL	Financial Services
AMICUS THERAPEUTICS INC	FOLD	Health Care
AMPAL AMERICAN ISRAEL	AMPL	Financial Services
AMREP CORP	AXR	Consumer Discretionary
ARYX THERAPEUTICS INC	ARYX	Health Care
ASCENT SOLAR TECH INC	ASTI	Energy
ASIAINFO HOLDINGS INC	ASIA	Technology
AUBURN NATL BANCORP	AUBN	Financial Services
BANK KY FINL CORP	BKYF	Financial Services
BANNER CORP	BANR	Financial Services
BAR HBR BANKSHARES	BHB	Financial Services
BENIHANA INC	BNHNA	Consumer Discretionary
BIODELIVERY SCIENCES	BDSI	Health Care
BOLT TECHNOLOGY CORP	BOLT	Energy
BOVIE MEDICAL CORP	BVX	Health Care
BRONCO DRILLING CO INC	BRNC	Energy
BROOKLYN FEDERAL BANCORP	BFSB	Financial Services
CALLIDUS SOFTWARE INC	CALD	Technology
CAPE BANCORP INC	CBNJ	Financial Services
CARDIAC SCIENCE CORP	CSCX	Health Care
CARDIOVASCULAR SYS INC	CSII	Health Care
CARDIUM THERAPEUTICS INC	CXM	Health Care
CELL THERAPEUTICS INC	CTIC	Health Care
CENTER BANCORP INC	CNBC	Financial Services
CENTRAL PACIFIC FINL	CPF	Financial Services
CHASE CORP	CCF	Materials & Processing
CHEVIOT FINANCIAL CORP	CHEV	Financial Services
CHICOPEE BANCORP INC	CBNK	Financial Services
CHINA AUTOMOTIVE SYSTEMS	CAAS	Consumer Discretionary
CHINA BAK BATTERY INC	CBAK	Producer Durables
CHINA FIRE & SEC GROUP	CFSG	Producer Durables
CHINA GREEN AGRICULTURE	CGA	Consumer Staples
CHINA HOUSING & LAND DEV	CHLN	Financial Services
CHINA INFORMATION SEC	CPBY	Technology
CHINA PRECISION STEEL	CPSL	Materials & Processing
CHINA SEC & SURVE TECH	CSR	Producer Durables
CHINA SKY ONE MED INC	CSKI	Health Care
CHINA TRANSINFO TECHNLGY	CTFO	Technology
CHINA-BIOTICS INC	CHBT	Consumer Staples
CHINACAST EDU CORP	CAST	Consumer Discretionary
CITIZENS HLDG CO MISS	CIZN	Financial Services
COGO GROUP INC	COGO	Technology
COMMUNICATIONS SYSTEMS	JCS	Technology
CREDO PETROLEUM CORP	CRED	Energy
CTC MEDIA INC	CTCM	Consumer Discretionary
CUBIC ENERGY INC	QBC	Energy
DISCOVERY COMMUNICATIONS	DISCK	Consumer Discretionary
DISCOVERY LABORATORIES	DSCO	Health Care
DOVER DOWNS GAMING & ENT	DDE	Consumer Discretionary
DUOYUAN PRINTING INC	DYP	Producer Durables
DYNAMICS RESEARCH CORP	DRCO	Technology
EASTERN CO	EML	Materials & Processing
EASTERN INSURANCE HLDGS	EIHI	Financial Services
ELOYALTY CORP	ELOY	Technology
EMCORE CORP	EMKR	Technology
ENGLOBAL CORP	ENG	Producer Durables
ENTEROMEDICS INC	ETRM	Health Care
ENTERPRISE BANCORP INC	EBTC	Financial Services
EVERGREEN ENERGY INC	EEE	Energy
FARMERS CAPITAL BK CORP	FFKT	Financial Services
FIRST ACCEPTANCE CORP	FAC	Financial Services
FIRST CALIFORNIA FINL GR	FCAL	Financial Services
FIRST DEFIANCE FINANCIAL	FDEF	Financial Services
FIRST FINL NORTHWEST	FFNW	Financial Services
FIRST FINL SVC CORP	FFKY	Financial Services
FRISCHS RESTAURANTS INC	FRS	Consumer Discretionary
FUQI INTERNATIONAL INC	FUQI	Consumer Discretionary
FUSHI COPPERWELD INC	FSIN	Materials & Processing
GENERAL STEEL HOLDINGS	GSI	Materials & Processing
GEOKINETICS INC	GOK	Energy
GRAMERCY CAPITAL CORP	GKK	Financial Services
GRAN TIERRA ENERGY INC	GTE	Energy
GREAT WOLF RESORTS INC	WOLF	Consumer Discretionary
GSE SYS INC	GVP	Technology
GTX INC	GTXI	Health Care
GUARANTY BANCORP	GBNK	Financial Services
HAMPTON ROADS BANKSHARES	HMPR	Financial Services
HARBIN ELECTRIC INC	HRBN	Producer Durables
HARVARD BIOSCIENCE INC	HBIO	Health Care
HEMISPHERX BIOPHARMA INC	HEB	Health Care
HERITAGE CRYL CLEAN INC	HCCI	Producer Durables
HICKORY TECH CORP	HTCO	Utilities
HQ SUSTAINABLE MARITIM	HQS	Consumer Staples
HURCO COMPANIES INC	HURC	Producer Durables
IDERA PHARMACEUTICALS	IDRA	Health Care
IMERGENT INC	IIG	Technology
INCONTACT INC	SAAS	Utilities
INDEPENDENCE HOLDING CO	IHC	Financial Services
INFORMATION SERVICES GRP	III	Financial Services
INNODATA ISOGEN INC	INOD	Producer Durables
INNOSPEC INC	IOSP	Materials & Processing
INSMED INC	INSM	Health Care
INTEGRATED ELECTRICAL SV	IESC	Producer Durables
IPASS INC	IPAS	Consumer Discretionary
ISTA PHARMACEUTICALS INC	ISTA	Health Care
JACKSON HEWITT TAX SVC	JTX	Consumer Discretionary
JAVELIN PHARMACEUTICALS	JAV	Health Care
K V PHARMACEUTICAL CO	KV.A	Health Care
KENTUCKY FIRST FEDERAL	KFFB	Financial Services
KOHLBERG CAPITAL CORP	KCAP	Financial Services
LAKES ENTERTAINMENT INC	LACO	Consumer Discretionary
LEGACY BANCORP INC	LEGC	Financial Services
LIHUA INTERNATIONAL INC	LIWA	Producer Durables
LUBYS INC	LUB	Consumer Discretionary
LULULEMON ATHLETICA INC	LULU	Consumer Discretionary
MANNATECH INC	MTEX	Consumer Staples
MATRIXX INITIATIVES INC	MTXX	Health Care
MEMSIC INC	MEMS	Technology
MERCADOLIBRE INC	MELI	Consumer Discretionary
MERCER INS GROUP INC	MIGP	Financial Services
MOLECULAR INSIGHT PHARMA	MIPI	Health Care
MYRIAD PHARMA INC	MYRX	Health Care
NESS TECHNOLOGIES INC	NSTC	Technology
NET 1 UEPS TECHNOLOGIES	UEPS	Financial Services
NIGHTHAWK RADIOLOGY HLDG	NHWK	Health Care
NIVS INTELLIMEDIA TECH	NIV	Consumer Discretionary
NOBEL LEARNING CMNTYS	NLCI	Consumer Discretionary
NORTHEAST CMNTY BANCORP	NECB	Financial Services
NORTHRIM BANCORP INC	NRIM	Financial Services
NORWOOD FINANCIAL CORP	NWFL	Financial Services
NOVAMED INC	NOVAD	Health Care
ODYSSEY MARINE EXPLOR	OMEX	Producer Durables
OHIO VY BANC CORP	OVBC	Financial Services
OILSANDS QUEST INC	BQI	Energy
OLD POINT FINL CORP	OPOF	Financial Services
OLD SECOND BANCORP INC	OSBC	Financial Services
OMEGA PROTEIN CORP	OME	Consumer Staples
ONCOGENEX PHARMAS INC	OGXI	Health Care
ORCHIDS PAPER PRODS COMP	TIS	Consumer Staples
ORION ENERGY SYSTEMS INC	OESX	Materials & Processing
OVERHILL FARMS INC	OFI	Consumer Staples
OXIGENE INC	OXGN	Health Care
PACIFIC CAPITAL BANCORP	PCBC	Financial Services
PAR TECHNOLOGY CORP	PTC	Technology
PARAMOUNT GOLD & SILVER	PZG	Materials & Processing
PARKERVISION INC	PRKR	Technology
PC MALL INC	MALL	Technology
PENNICHUCK CORP	PNNW	Utilities
PEOPLES FINL CORP MISS	PFBX	Financial Services
PERMA-FIX ENVIRONMENTAL	PESI	Producer Durables
PERVASIVE SOFTWARE INC	PVSW	Technology
PHOENIX TECHNOLOGIES LTD	PTEC	Technology
PONIARD PHARMA INC	PARD	Health Care
PORTEC RAIL PRODUCTS INC	PRPX	Producer Durables
PREMIERWEST BANCORP	PRWT	Financial Services
PRIMEENERGY CORP	PNRG	Energy
PROTALIX BIOTHERAPEUTICS	PLX	Health Care
PRUDENTIAL BANCORP INC	PBIP	Financial Services
QC HOLDINGS INC	QCCO	Financial Services
RADNET INC	RDNT	Health Care
RAE SYSTEMS INC	RAE	Producer Durables
RASER TECHNOLOGIES INC	RZ	Energy
READING INTERNATIONAL	RDI	Consumer Discretionary
REPLIGEN CORP	RGEN	Health Care
REPROS THERAPEUTICS INC	RPRX	Health Care
REPUBLIC FIRST BANCORP	FRBK	Financial Services
RESOURCE AMERICA INC	REXI	Financial Services
REWARDS NETWORK INC	DINE	Financial Services
ROCKWELL MEDICAL TECH	RMTI	Health Care
SHENGDA TECH INC	SDTH	Materials & Processing
SHORE BANCSHARES INC	SHBI	Financial Services
SMARTHEAT INC	HEAT	Producer Durables
SMITHTOWN BANCORP INC	SMTB	Financial Services
SOHU COM INC	SOHU	Technology
SOUTH FINANCIAL GROUP	TSFG	Financial Services
STANLEY FURNITURE CO INC	STLY	Consumer Discretionary
STARTEK INC	SRT	Producer Durables
STERLING FINL CORP WA	STSA	Financial Services
SULPHCO INC	SUF	Energy
SUN BANCORP INC NJ	SNBC	Financial Services
SUREWEST COMMUNICATIONS	SURW	Utilities
SUTOR TECH GROUP LTD	SUTR	Materials & Processing
SYMS CORP	SYMS	Consumer Discretionary
TGC INDUSTRIES INC	TGE	Energy
TODD SHIPYARDS CORP	TOD	Producer Durables
TOREADOR RESOURCES CORP	TRGL	Energy
TOWN SPORTS INTL	CLUB	Consumer Discretionary
TRANS1 INC	TSON	Health Care
TRANSCONTINENTAL REALTY	TCI	Financial Services
TREE.COM INC	TREE	Financial Services
U S GEOTHERMAL INC	HTM	Energy
U S GLOBAL INVS INC	GROW	Financial Services
ULTRALIFE CORPORATION	ULBI	Producer Durables
UNITED SECURITY BANC INC	USBI	Financial Services
UNIVERSAL TRAVEL GROUP	UTA	Consumer Discretionary
URANERZ ENERGY CORP	URZ	Materials & Processing
UTAH MED PRODS INC	UTMD	Health Care
VALENCE TECHNOLOGY INC	VLNC	Producer Durables
VALHI INC	VHI	Materials & Processing
WEB.COM GROUP INC	WWWW	Technology
WESTMORELAND COAL CO	WLB	Energy
WILBER CORP	GIW	Financial Services
WILLIS LEASE FINANCE	WLFC	Producer Durables
WONDER AUTO TECH INC	WATG	Consumer Discretionary
YADKIN VALLEY FINL CORP	YAVY	Financial Services
YRC WORLDWIDE INC	YRCW	Producer Durables
ZALE CORP	ZLC	Consumer Discretionary
ZHONGPIN INC	HOGS	Consumer Staples
ZION OIL & GAS INC	ZN	Energy

Time for A Technical Bounce? Time for A Bullish Option Strategy

2010-05-24T09:14:00.010-04:00

Good morning traders, I wanted to take a minute and give you my thoughts on the market. Overall I was very satisfied with Friday's price action and I strongly believe NOW the market is due for a rally. Below you will see some charts, which will support my belief.

First up, we'll take a look at the PowerShares QQQ ETF (QQQQ). The candle pattern here is what is known as a piercing pattern and usually signals a bullish reversal. Some key things to note on this chart are: volume on Friday took out the volume Thursday, and the QQQQ ended up closing back above the 200 day moving average.

Click chart to enlarge
Next up is the Dow Jones Industrial Average SPDR ETF (DIA). This chart is almost identical to that of the Q's as it formed the same bullish candle pattern, volume Friday took out Thursday's, and it closed above its 200 day moving average. However another thing to note is that the DIA traded within a quarter of the "Flash Crash" lows before bouncing.

Click chart to enlarge
Now for the last of the major index ETF's, the S&P 500 SPDR (SPY). As with the other two index ETF's outlined above, this also formed the same bullish piercing pattern, however it did not take out the previous days volume nor could it close above the 200 day moving average. One very interesting thing to note is that the ETF bounced after touching the February closing lows. You can see this on the chart with the Fibonacci retracement lines drawn in blue. We can see the ETF retraced 100% of the move from February 8 close to April 28 close and bounced off of the lowest line.

Click chart to enlarge
It's also important to note that I also believe volatility will come in (or trade lower). To most investor's or trader's it is common sense that as the market rallies, fear or volatility trades lower - which is true. So, the chart below of the volatility index [VIX] will also help support my belief. Unlike those bullish piercing patterns on the ETF's outlined above, the candle pattern which has emerged on the Volatility Index [VIX] is a very bearish pattern. The candle pattern which has emerged on this chart is what is known as a bearish engulfing.

Click chart to enlarge
How I'm playing this potential reversal
After looking at hundreds of charts over the weekend, I put together an option strategy using the Financial Select Sector SPDR (XLF). I chose the XLF for two reasons, the main reason being that the XLF formed the most bullish chart pattern of the major SPDR ETF's I analyzed, and the other reason being that implied volatility is highest in this ETF and if overall market volatility decreases as I expect it to, this should greatly benefit my strategy, as I will be net short volatility. Before you read the strategy outlined below you will need to have knowledge of stock options. To learn more about the option strategies outlined in this post, risks, pricing, calculations, other strategies, and options in general, check out my e-books heres..

Click chart to enlarge
XLF Option Strategy:
Using the September options expiration, I am looking at selling 14 strike put options for a credit of $115 per contract (meaning I receive $115 cash for each contract sold), with the premium received I will then look to open September vertical call spreads by purchasing September 16 call options and selling September 17 call options against them (one for one) for around $35 per call spread. Note I am choosing to sell the September 17 calls only because volatility is so high and I do not want to overpay for call option premiums. However if one is very bullish a higher strike call could be sold or none at all. Based on theoretical prices as of market close Friday May 21, 2010 this entire strategy can be filled for a net credit of $80.

Profit & Loss: My maximum loss using current data is $1320 per custom spread, and that is if the XLF trades and closes on September options expiration at 0 [zero] per share, highly unlikely. This strategy will return the net credit of $80 if shares of the XLF close above 14 but below 16 come September options expiration. If the ETF trades higher and come September options expiration shares of the XLF are at or above 17, the call side of this strategy will return an additional $65 or 186% (less commissions). This strategy will break even as long as the XLF closes and expires above 13.20 per share on September options expiration.

The ideas outlined above are bullish strategies and should not be considered if you think the ETF will sell off in the near future. However if you feel the ETF could move higher in the near future, this strategy could yield a nice gain. Selling puts "naked" is a very risky strategy and should not be considered with stocks one does not plan or want to hold long in their portfolio. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

I must state that one thing which makes me skeptical of a coming rally is the fact that so many individual stocks and ETF's have such OBVIOUS bullish potential reversal chart patterns. And as many of you know, the more obvious they are, the less likely they are to work. Also, it is very important to note before I get into the option position outlined above I need to see a follow through of Friday's action. From a technical standpoint I believe we are due for a bounce, however as we all know anything can happen... Happy trading.

Disclosure: No Positions

Potential Reversal in the Works?

2010-05-21T09:57:00.006-04:00

Traders, I am showing you a quick chart of the S&P SPDR (SPY). We opened near the February closing lows retracing 100% of the move. Now we need to reverse higher and a close above 108.46 on the SPY would be short term bullish and would signal a potential reversal. Of course the day is far from over, and I need to see volume take out the 647 million shares traded on the "flash crash" day, but at very least Thursday's volume. Below is the chart I have as of 10 AM.

Today will be extremely volatile and I don't underestimate a 500 point range! Keep in mind that close is king and the level to watch on the SPY is 108.46. A Similar level on the QQQQ is 44.76, but it did not test February closing lows at open.

Why Investor's Should Make Friends with Fear

2010-05-20T09:05:00.001-04:00

In this post I will give some advice on why I believe investor's should become friends with fear, and explain how it can be done using stock options. I'm certain many of you already know how the markets gauge fear, but for those of you who don't, a simple way to see how fearful the markets are is an indicator called the Volatility Index [VIX]. The entry symbol to track the VIX is different in almost every brokerage I use, so a sure and easy way to track it is the Ipath S&P 500 VIX Short Term ETN (VXX).

Historically anything above 30 on the Volatility Index is high and signals increased levels of fear in the markets, but for those tracking market volatility using the VXX it looks to be the 24-25 level.

So why should investor's make friends with fear? First it is very important to note that fear is friendly only to an investor which is well educated in stock options. Why? A major factor in pricing an option premium (or contract price) is volatility. Keeping all other things constant, higher volatility = higher premium. This means investor's can sell premiums to cost average down a position, or what I like doing in times of market correction... Selling "naked puts" to get into shares I don't mind owning.

With the VIX soaring to new 52 week highs in the past week, I have been selling premiums on out of the money options on stocks which I wouldn't mind owning. I do have to note that in my last post How I'm Buying Into the Market Correction I closed almost all of the positions the following trading day which was Monday May 10, 2010, even after stating I had sold the puts as an investment and not a trade, but a move of 400+ on the Dow signaled TAKE PROFITS and easy ones were taken. With just 2 trading days left until May options expire there is still some "juice" left in many stocks which I wouldn't mind owning if they were put to me Friday. Below is a list of stocks I am looking at selling puts on, the strike prices, and the per contract premium I would receive as of close Wednesday May 19, 2010.

Company/ETF	Ticker	Strike	Premium	Adjusted Price

SPDR Dow Jones Industrial Average ETF	(DIA)	100	$20	$99.80
SPDR S&P 500 ETF	(SPY)	107	$24	$106.76
PowerShares QQQ Trust, ETF	(QQQQ)	44	$8	$43.92
United States Oil Fund LP ETF	(USO)	33	$33	$32.67
Financial SPDR ETF	(XLF)	14	$4	$13.96
Technology SPDR ETF	(XLK)	21	$5	$20.95
SPDR S&P Metals and Mining ETF	(XME)	48	$30	$47.70
Apple Inc.	(AAPL)	230	$20	$229.80
American Express Company	(AXP)	39	$30	$38.70
Bank of America Corporation	(BAC)	15	$4	$14.96
Citigroup Inc.	(C) *	3	$4	$2.96
Caterpillar Inc.	(CAT)	57.5	$26	$57.24
Cisco Systems, Inc.	(CSCO)	24	$18	$23.82
Ford Motor Company	(F)	11	$7	$10.93
General Electric Company	(GE)	17	$13	$16.87
Corning Incorporated	(GLW)	17	$11	$16.89
Google Inc.	(GOOG)	460	$40	$459.60
Goldman Sachs Group, Inc.	(GS)	130	$25	$129.75
Intel Corporation	(INTC)	21	$10	$20.90
The Coca-Cola Company	(KO)	50	$4	$49.96
Pfizer Inc.	(PFE)	15	$3	$14.97
QUALCOMM, Inc.	(QCOM)	35	$10	$34.90
Sirius XM Radio	(SIRI) *	1	$5	$0.95
Visa Inc.	(V)	70	$72	$69.28

*Indicates June options expiration.

Before selling any puts naked, I always make sure I have enough cash to purchase the shares. I won't be in any rush to sell premiums Thursday because as of 2 AM (EST) futures are slightly under pressure, but once I get the feel of the market I will begin selling premiums on many of the stocks/ETFs outlined in the table above. It is also possible (and likely with the high volatility) that I will be adjusting strike prices according to the market.

The ideas outlined above are bullish strategies and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher or slightly lower in the near future, this strategy could yield a nice gain. Selling puts "naked" is a very risky strategy and should not be considered with stocks one does not plan or want to hold long in their portfolio. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

In conclusion I wanted to briefly explain to investor's that something good can be made of fear. Remember fear or volatility brings increased option premiums, therefore if shares fall and are put to an investor on May options expiration, volatility will likely increase or stay the same and option premiums will still be high for June options expiration. Therefore June call options can be written against the shares to sell them at a specific price for an increased option premium as well... But that's an article for another day.

Disclosure: Long BAC, C, F, QCOM, V, GOOG January 300 Calls, Short SIRI June 1 Puts

How I'm Buying Into the Market Correction

2010-05-10T09:15:00.003-04:00

A wise man once said "be fearful when others are greedy and greedy when others are fearful" and this can't be more true in the world of derivatives. When fear or Volatility increases in the market, option premiums soar and easy money can be made. In this post I will explain how I am taking advantage of the increased levels of fear in the market to make some money. First, I'll give a quick fact... The S&P 500 is down about 9% from the high on April 26, and the Volatility Index (VIX) has soared almost 240% in that same period. As I stated money can easily be made selling option premium, but it can also be lost just as easy. However I'm a bit more conservative and I choose to sell put options 5% - 10% lower on stocks or market ETF's I'm willing to take shares of. This is the reason I hold a ton of cash on the sidelines at all times so I can take the shares if I am wrong without going into margin. I began selling put options on stocks and ETF's I am willing to take shares of on Friday, after realizing the SPY bounced off of the 200 day moving average. I mainly sold put options on companies which have been beaten up after good earnings, but also sold put options on a few of my favorite companies. I have put (no pun intended) together a short list of stocks below which I have sold puts on, or will be selling puts on in the week ahead for the May options expiration. The data below is as of market close Friday May 7, 2010.

Company/ETF	Ticker	Strike	Premium	Adjusted Price
SPDR Dow Jones Industrial Average ETF	(DIA)	99	$150	97.50
SPDR S&P 500 ETF	(SPY)	106	$190	104.10
PowerShares QQQ Trust, ETF	(QQQQ)	43	$73	42.27
United States Oil Fund LP ETF	(USO)	35	$76	34.24
SPDR S&P Metals and Mining ETF	(XME)	49	$135	47.65
Apple Inc.	(AAPL)	210	$240	207.60
American Express Company	(AXP)	37	$67	36.33
Bank of America Corporation	(BAC)	15	$40	14.60
Citigroup Inc.	(C)	3	$2	2.98
Ford Motor Company	(F)	11	$34	10.66
General Electric Company	(GE)	15	$21	14.79
Corning Incorporated	(GLW)	16	$21	15.79
Google Inc.	(GOOG)	450	$410	445.90
QUALCOMM, Inc.	(QCOM)	33	$25	32.75
Visa Inc.	(V)	75	$55	74.45

The ideas outlined above are bullish strategies and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher or slightly lower in the near future, this strategy could yield a nice gain. Selling puts "naked" is a very risky strategy and should not be considered with stocks one does not plan or want to hold long in their portfolio. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Disclosure: Short May AAPL 220 Put Options, AXP 38 Put Options, BAC 16 Put Options, F 12 & 13 Put Options, GLW 16 & 18 Put Options, GOOG 450 & 510 Put Options, QCOM 36 & 38 Put Options, V 75 Put Options, XME 50 Put Options

How I'm Playing Qualcomm

2010-05-02T11:20:00.006-04:00

I know it's been a while since I've posted on my blog, but I have been extremely busy with my business. However, I wanted to write a quick post about Qualcomm (QCOM), as I am very confident about an option strategy which I will detail later in this post. First I will note that in my early days as an investor I got BURNED buying shares of Qualcomm and vowed never to purchase or play the stock ever again. It was close to the turn of the new millennium and Qualcomm was really heating up, hitting new highs daily, so I had to jump on the bandwagon. But as we all know nothing lasts forever and "down she came" in the first 6 months of 2000. I didn't jump ship though hoping it would come back, after all many of my other stocks were picking up the slack. But again, nothing lasts forever and the entire market underwent the tech bubble burst. Between Qualcomm and a few other high flying tech stocks such as Corning (GLW) my portfolio dropped over 90% from the peak in 2000 to year end 2001. A painful lesson, but one of the most valuable lessons I've ever learned. Enough about the past though, time to look at the present.

As stated I vowed never to play Qualcomm again, but a lot changes in ten years and a company can go from highly speculative to highly valuable, and in my opinion Qualcomm is highly valuable, and has become even more valuable after selling off over 10% since earnings. I would like to accumulate shares of QCOM on weakness not only because they are presently a smart, safe, and sound company, but looking to the future projected earnings put a forward PE of around 15 on this company, not to mention if and when a device similar to the iPhone from Apple (AAPL) comes to Verizon (VZ), Qualcomm will benefit greatly.

Click chart to enlarge

However I do not want to catch a falling knife because I feel more downside is likely, especially if the market heads lower. It is also worth noting that QCOM formed a bearish engulfing candle pattern on Friday, a potential signal of short-term weakness in the stock, which makes the following option strategy all the more attractive.

Qualcomm Option Strategies: First I'll state that this option strategy may strike you as bearish, and it is, but just for a short time (which is the reason I stated it will benefit from the bearish candle pattern short-term). Overall it is bullish as I am willing to take shares of the stock if it reaches a certain price. I am currently looking to open positions on both the May and June options expiration (half of my desired shares for each expiration). It looks like Qualcomm is trying to form a base around 38 per share, so I will use that as my first level of support. Additional levels of support come in around 37 and 35.50.

May Expiration Strategy: I will structure a ratio put spread using these levels of support. First I'll look to purchase May 38 strike put option contracts, and against each of these contracts I am long, I will sell two May 37 strike put option contracts. This can all be done for a theoretical net credit of $8. This means I receive $8 cash for every one of these positions I am long. For example, If I am willing to get long 500 shares of Qualcomm, I will purchase 5 of the May 38 put contracts, and sell 10 of the May 37 put contracts.

May P&L Info: If Qualcomm closes at or above 38 per share on May options expiration (May 21, 2010) and assuming this strategy is left open, this strategy will return the net credit of $8 per position (less any commissions). If Qualcomm closes at or below 37 per share at expiration and assuming the strategy is left open, this strategy will be profitable down to the break even point of 35.92 per share, but will result in purchasing 100 shares of Qualcomm at 37 for each ratio spread position. The profit max for this strategy at expiration is shares of Qualcomm at exactly 37 per share, which would result in a profit of $108 per ratio position.

June Expiration Strategy: I will employ the same option strategy but slightly different strike prices. I will look to purchase June 37 put contracts and sell two June 36 put contracts against each contract I am long. I decided to structure the June option strategy for a slight lower entry level in case Qualcomm sells off beyond our lowest level of support listed, not to mention I don't like entering shares of any stock all at once (or for the same price). This strategy can be done for a theoretical net credit of $39 per spread.

June P&L Info: If Qualcomm closes at or above 37 per share on June options expiration (June 18, 2010) and assuming this strategy is left open, this strategy will return the net credit of $39 per position (less any commissions). If Qualcomm closes at or below 36 per share at expiration and assuming the strategy is left open, this strategy will be profitable down to the break even point of 34.61 per share, but will result in purchasing 100 shares of Qualcomm at 36 for each ratio spread position. The profit max for this strategy at expiration is shares of Qualcomm at 36 per share, which would result in a profit of $139 per ratio position.

The ideas outlined above are bullish strategies and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.
These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long AAPL May 220 Put Options, GLW May 19 Put Options, QCOM, Short AAPL May 230 Put Options, GLW May 20 Put Options

Monday's Hot Stocks on Heavier Volume

2010-04-06T09:28:00.000-04:00

Today's breakout report is for Monday April 5, 2010. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher/lower in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 22 stocks which traded higher on heavier volume, and 3 stocks which traded lower on heavier volume Monday April 4, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The tables below show the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). The first table is a list of potential bullish stocks, the second table is a list of potential bearish stocks. For your convenience I have ranked both tables in order from greatest to least volume % change.

Breakout Bull
Company	Ticker	Price Change	Volume Change
GeoMet, Inc.	(GMET)	20.44%	1460.55%
Symyx Technologies, Inc.	(SMMX)	22.15%	676.45%
Antares Pharma, Inc.	(AIS)	4.58%	663.89%
POZEN Inc.	(POZN)	8.93%	523.40%
GeoResources, Inc.	(GEOI)	8.62%	521.70%
Anooraq Resources Corporation	(ANO)	6.45%	484.42%
CARDIOME PHARMA CORP	(CRME)	7.70%	470.69%
Microvision, Inc.	(MVIS)	18.54%	407.07%
Axcelis Technologies, Inc.	(ACLS)	7.07%	385.59%
Overstock.com, Inc.	(OSTK)	10.53%	366.65%
Cerus Corporation	(CERS)	14.84%	309.17%
Reliance Steel & Aluminum	(RS)	7.83%	297.00%
Eastman Kodak Company	(EK)	13.19%	292.16%
KMG Chemicals, Inc.	(KMGB)	8.05%	283.07%
AerCap Holdings N.V.	(AER)	7.05%	194.38%
Joe's Jeans Inc.	(JOEZ)	11.31%	191.86%
Harley-Davidson, Inc.	(HOG)	10.54%	183.33%
First BanCorp.	(FBP)	14.35%	181.19%
Cree, Inc.	(CREE)	9.96%	169.51%
Ruth's Hospitality Group, Inc.	(RUTH)	8.82%	164.60%
Aixtron	(AIXG)	4.47%	134.76%
Louisiana-Pacific Corporation	(LPX)	9.11%	109.31%

Breakout Bear
Company	Ticker	Price Change	Volume Change
Lender Processing Services, Inc.	(LPS)	-4.12%	302.06%
Global Payments Inc.	(GPN)	-2.08%	104.51%
Lindsay Corporation	(LNN)	-3.49%	101.79%

From the bullish list of stocks above, one stock which has had some serious momentum lately is KMG Chemicals, Inc. (KMGB). I caught nearly a double in this stock almost three years ago, when many chemical stocks were near their all time highs. As we know most of these stocks including KMGB came crashing back down to earth, however KMGB has been on a tear the last week, and it is starting to remind me of summer 2007. Although I usually write an option strategy on stocks I am bullish on, I will not be able to today, because KMGB is not an optionable stock, however I did not want to pass up the opportunity to let my readers know about this potential bullish breakout. As always I will first give a summary of KMGB from Google Finance and a 6 month daily chart below.

KMG Chemicals, Inc. manufacture, formulate and globally distribute specialty chemicals. The Company has acquired and operates segments engaged in the electronic chemicals, industrial wood preserving and animal health businesses. The electronic chemicals segment provides wet process chemicals to the semiconductor industry, primarily to clean and etch silicon wafers in the production of semiconductors. The Company is a supplier of wet process chemicals to the semiconductor industry in the United States, and has presence in Europe. The Company’s wood preserving chemicals, pentachlorophenol, or penta, and creosote, are sold to industrial customers who use these preservatives primarily to extend the useful life of utility poles and railroad crossties. Its animal health pesticides are used on cattle, swine and poultry to protect these animals from flies and other pests.

Click image to enlarge

KMG Chemicals traded in a tight range for most of March and looks as if it may have formed a base near the 15-16 area before breaking to the upside. Short term it looks as if KMGB is a bit over extended, however I certainly won't be shorting it here. To play the momentum I would purchase shares on any weakness and set a tight trailing stop loss of about 4% - 7%. On weakness, I would need to see KMGB hold the 17.50 level two consecutive days in order to purchase shares.

This is a bullish strategy and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Disclosure: No Positions

Economic Recession Unfolds in 10 Minutes

2010-04-04T15:31:00.006-04:00

I made some changes to my original video and re-uploaded it to Youtube. It is much better quality and I really wanted the video to have the original music tracks: Money Talks by AC/DC, When the Levee Breaks by Led Zeppelin, Gimme Shelter by The Rolling Stones, You Ain't Seen Nothing Yet by Bachman-Turner Overdrive, Low Budget by The Kinks, and Blurry by Puddle of Mudd. Youtube hasn't disabled the sound yet (knock on wood) so watch it while you can and let me know what you think. The various songs used in this video are reserved by original artists. The pictures and news articles used in this video are reserved by original sites. Please comment rate and subscribe to my videos! Also if you'd please share this video I'd greatly appreciate it!

Happy Easter & Thanks Again

2010-04-04T13:21:00.003-04:00

I thought I'd take a minute and thank all of my readers again for the great growth my blog has experienced over the past year. I Hope and plan to bring as many posts of interest in the months ahead. Thanks again, and happy Easter!

It's a Crude Summer: 3 Energy ETF's, 3 Option Plays

2010-04-02T08:08:00.000-04:00

The major indices traded higher across the board Thursday, helped manly by basic materials and energy. Natural gas and crude oil futures traded higher to close the session by 6.33% and 1.85% respectively. In this article I will outline why I believe it is time to get long some black gold and discuss how I will play the move using options.

United States Oil Fund (USO)
Before I get into any details, I would like to give an ETF summary from Google Finance and the 6 month (daily) chart below.

United States Oil Fund, LP [USOF] is a limited partnership. USOF is a commodity pool that issues limited partnership interests [units] traded on the NYSE Arca, Inc. (the NYSE Arca). The Company’s general partner is United States Commodity Funds LLC (the General Partner) and is responsible for the management of USOF. The investment objective of USOF is for the changes in percentage terms of its units’ net asset value [NAV] to reflect the changes in percentage terms of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the changes in the price of the futures contract on light, sweet crude oil traded on the New York Mercantile Exchange (the NYMEX).

Click chart to enlarge
As we can see from the chart above USO has successfully broken and closed two consecutive days above the triangle pattern drawn in blue which is a bullish signal. Some resistance may come in around 41.50 - 42 per share, but I honestly believe we could easily see $100 per barrel by mid July so I think we will clear resistance setting new 52 week highs on this ETF.

USO Option Play: As stated I think we could see oil futures trade higher by 15 points or roughly 18% by mid July, therefore with the USO I am looking at opening July Vertical Call Spreads. Yes my prediction on crude oil translates into the ETF trading near 47-48 per share, however I must leave room for error. I would look at purchasing in-the-money July 40 Call options and immediately selling July 45 Call Options against them. As of current market data this spread could be opened for a theoretical price of $202 (plus any commissions) per call spread. This spread is currently in-the-money by 1.24 points so the premium paid for this spread is $78 or 78¢ per share; not too much considering there is over 100 days until the spread expires. If I were to get this spread I would look to take my first wave of profits if and when oil traded to $90 per barrel, then $95, and then $100. I would most likely take losses and stop out if oil trades near $78 and then $75 and try again if and when oil reestablishes an uptrend. If oil hits my target of $100 per barrel earlier than I expect such as by mid June, and we get a flashback of summer 2008 and every analyst on the street is slapping $150 - $200 price targets on oil, I would adjust my profit takes slightly, but remember three words we never hear an analyst say are: I was wrong...

ProSharesUltra DJ-AIG Crude Oil (UCO)
This is a leveraged ETF and should not be held for a long period of time, see my post Double and Triple Leveraged ETFs Revisited: The Real Decay to get a better understanding. Before I get into how I am looking at playing this ETF using options for a continued crude rally, I will give a summary of this ETF from ProShares and the chart below.

ProShares Ultra DJ-UBS Crude Oil seeks daily investment results, before fees and expenses, that correspond to twice (200%) the daily performance of the Dow Jones—UBS Crude Oil Sub-Index

Click chart to enlarge
UCO Option Play: Even though these leveraged ETF's decay with increased levels of volatility, I don't have a problem taking a bet on this ETF, because as stated multiple times already, I believe the trend for crude oil is up until mid July. As we can see from the chart above this ETF too has broken above the triangle pattern (drawn in blue) and closed two consecutive days. This chart predicts UCO trading to 15 and change in a very short period, therefore I have decided to structure a shorter term bet which will get me into this ETF for very slight premium. I would look at opening Vertical Call Spreads for the May option expiration. I would purchase May 13 strike call options and sell May 15 strike call options against them. Based on current market data this spread can be opened for a theoretical price of $80 per spread (plus any commissions). This ETF is currently trading at 13.65 which puts a premium of just over 1% on this spread. The best case scenario would be for this ETF to close and expire above 15 per share on May 21, 2010 which would result in a gain of 150% on the investment, however I rarely wait until expiration to close positions, therefore I would look to lighten up if and when crude works its way up to $90, and then $95 per barrel, and would most likely stop out and take losses if and when crude settled below $80 per barrel.

Energy Select Sector SPDR (XLE)
This ETF is one of the most liquid energy related ETF's out there, and does not invest directly in commodities, but oil and gas related companies. For those unfamiliar with this fund, I have listed the top ten holdings and the chart below.

Company	Ticker
ExxonMobil Corporation	(XOM)
Chevron Corporation	(CVX)
Schlumberger, Ltd.	(SLB)
Occidental Petroleum Corporation	(OXY)
ConocoPhillips	(COP)
Apache Corporation	(APA)
Anadarko Petroleum Corp.	(APC)
Devon Energy Corporation	(DVN)
Halliburton Company	(HAL)
XTO Energy, Inc.	(XTO)

Click chart to enlarge
XLE Option Play: We can see from the chart above that a similar triangle pattern has emerged but has not yet been broken. Although the XLE has not broken and closed above it, I strongly believe it is only a matter of time before it follows the trend of the previous two ETF's discussed. I would like to see the XLE break and close two days above 59 per share, if and when it does, I will be looking at purchasing the June 30, 2010 60 strike call options (note these are the later of the two options which expire in June). Based on current market data the theoretical price is $180 per contract. This is actually the least volatile of the three ETF's discussed in this article, so although the speculation is the cheapest, the probability of having these calls payoff is also the lowest. If the triangle pattern is broken to the upside, the chart projects the XLE up to 63 per share on a short term basis. If I happen to get into these calls, I would look to cover some of my position by selling the 63 call options for the same expiration against the 60's (making the position into a vertical call spread) first if XLE traded to 60.50, then 61.50, and then to 63.

The ideas outlined above are bullish strategies and should not be considered if you think the ETF's will sell off in the near future. However if you feel the ETF's could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Disclosure: Long UCO April 10 Calls, XLE June 59 Calls, Short UCO April 12 Calls, UCO April 13 Calls, XLE April 56 Puts

Over 500 Option E-Books Sold and Counting

2010-03-25T10:10:00.000-04:00

I sold my 500th E-Book on July 5, 2009. Thank you to all my readers for purchasing my E-Books and reading my blog. I will continue to blog because of you! Even though demand for my E-Books seems high, I still want to make them affordable as possible and educate as many people about the option world as possible. I will continue to sell my option E-Books for rock bottom prices, and offer a 100% satisfaction guarantee! Lingo used in my blogs may seem frustrating at times, but once you understand the world of options it is as simple as 1-2-3. I have made some new updates to both E-Books to make them even simpler to understand and learn how to open and close the option positions.
Options are growing at an extremely fast rate as you can see from the chart below.

There is a reason for this growth. It is because they hedge your portfolio so well! As optimistic as I'd like to be, I do not know what the future holds. I do know that options are a great way to protect your portfolio against the volatile environment ahead.

Learning to trade options was one of the best moves financially I've ever made, like explained in My Story. I was taught the step by step process when I was 16 years old and was able to build on the basics. I strongly believe if I was never taught to trade options step by step like shown in my E-Books, I would have never learned because I may have given up trying to digest some of the other material out there. Get involved with options today with my simplified option E-Books and save an addition 15% when you buy both together. I promise you'll easily understand my E-Books.

I also recommend that once you have learned the basics of options you set up a live virtual account at OptionsXpress. This will help you develop your own strategies, and you'll be able to become more familiar with the pricing of options, risks, etc... Setting up a virtual account with "virtual funds" will ensure that you understand the basics of options, and is a great way to practice before trying options with real money.

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After successful checkout click "return to merchant" and you will be directed to a page where you can download both E-Books

Volume Talks Wednesday: A Bullish Biotech Breakout Option Play

2010-03-25T09:02:00.000-04:00

Today's breakout report is for Wednesday March 24, 2010. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher/lower in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 28 stocks which traded higher on heavier volume, and 19 stocks which traded lower on heavier volume Wednesday March 24, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The tables below show the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). The first table is a list of potential bullish stocks, the second table is a list of potential bearish stocks. For your convenience I have ranked both tables in order from greatest to least volume % change.

Breakout Bulls
Company	Ticker	Price Change	Volume Change
Funtalk China Holdings	(FTLK)	18.24%	2416.04%
Idera Pharmaceuticals	(IDRA)	10.06%	679.49%
Felcor Lodging Trust Inc	(FCH)	19.73%	569.78%
Neurogesx Inc	(NGSX)	7.75%	553.35%
Radian Group Inc.	(RDN)	22.12%	470.75%
M B I A Inc	(MBI)	14.29%	381.22%
Blackrock Muniyield Investment Fund	(MYF)	1.16%	333.77%
Putnam Managed Municipal Income Trust	(PMM)	2.29%	270.43%
China Biologic Products	(CBPO)	24.01%	266.42%
Celldex Therapeutics Inc	(CLDX)	10.75%	261.88%
Caraco Pharm Labs Inc	(CPD)	2.09%	249.47%
Rural/Metro Corporation	(RURL)	4.75%	249.36%
Ixia	(XXIA)	1.48%	248.58%
M G I C Investment Corp	(MTG)	6.38%	234.75%
Oriental Financial Group Inc.	(OFG)	6.97%	229.11%
Kraton Performance Polymers	(KRA)	4.13%	186.08%
Team Health Holdings, Inc.	(TMH)	4.92%	175.64%
Dreamworks Animation Skg	(DWA)	3.75%	174.71%
Health Grades Inc	(HGRD)	4.38%	146.20%
Darden Restaurants Inc	(DRI)	2.28%	145.27%
Oil States International, Inc.	(OIS)	3.23%	139.24%
Hersha Hospitality	(HT)	7.55%	119.05%
Perrigo Company	(PRGO)	1.05%	89.86%
Phillips-Van Heusen Corporation	(PVH)	1.09%	83.73%
Assured Guaranty Ltd	(AGO)	5.93%	64.68%
Williams Sonoma Inc	(WSM)	3.70%	52.70%
Baidu Inc	(XXIA)	2.29%	50.51%
Onebeacon Insurance Group	(OB)	3.40%	19.91%

Breakout Bears
Company	Ticker	Price Change	Volume Change
ESCO Technologies Inc.	(ESE)	-12.14%	1381.01%
Genzyme Corporation	(GENZ)	-6.38%	476.62%
Nice Systems Ltd.	(NICE)	-3.33%	352.83%
Robbins & Myers, Inc.	(RBN)	-6.64%	312.32%
NetEase.com, Inc.	(NTES)	-3.93%	216.36%
Tennant Company	(TNC)	-4.21%	129.47%
BRF Brasil Foods	(BRFS)	-2.25%	118.35%
Encore Wire Corporation	(WIRE)	-2.87%	109.94%
General Mills, Inc.	(GIS)	-1.89%	103.21%
The Toro Company	(TTC)	-1.60%	101.68%
National Grid plc (ADR)	(NGG)	-2.86%	99.40%
Xilinx, Inc.	(XLNX)	-5.53%	95.15%
Under Armour, Inc.	(UA)	-5.32%	94.79%
Endo Pharmaceuticals	(ENDP)	-4.47%	94.55%
AboveNet, Inc.	(ABVT)	-4.20%	91.55%
Equinix, Inc.	(EQIX)	-1.88%	81.19%
Capella Education Company	(CPLA)	-1.00%	77.73%
Bristow Group Inc.	(BRS)	-2.39%	77.01%
Carnival plc	(CUK)	-1.22%	76.54%

Out of the bullish list above, one stock which appeared Tuesday and multiple times in previous scans is Perrigo Company (PRGO). Before I get into any detail I will give a company summary from Google Finance below.

Perrigo Company is a global healthcare supplier that develops, manufactures and distributes over-the-counter and prescription pharmaceuticals, nutritional products, active pharmaceutical ingredients, and pharmaceutical and medical diagnostic products. The Company operates in three segments: Consumer Healthcare, Rx Pharmaceuticals and API. The Company has other category that consists of the Israel Pharmaceutical and Diagnostic Products. The Company operates through wholly owned subsidiaries. In the United States, its operations are conducted through L. Perrigo Company, Perrigo Company of South Carolina, Inc., Perrigo New York, Inc., Perrigo Holland, Inc. and Perrigo Florida, Inc. Outside the United States, its operations are conducted through Perrigo Israel Pharmaceuticals Ltd., Chemagis Ltd., Quimica y Farmacia S.A. de C.V., Laboratorios Diba, S.A., Wrafton Laboratories Limited, Brunel Pharma Limited and Galpharm Healthcare Ltd.

Perrigo announced they were to acquire PBM Holdings, a private label baby food maker, for $808 million and was upgraded shortly after Tuesday, this caused the stock to spike higher, and the bullish price action continued Wednesday. I certainly believe the momentum for this stock is to the upside and if I was to ride the momentum in the stock I would consider getting long on a slight pull back and set a tight trailing stop loss. However I am considering opening a bullish option strategy which I will outline in detail below.

Click chart to enlarge
Perrigo Option Strategy: I would like to see slight profit taking bringing this stock back down to earth before I get long, but if it happens to pull back I need to see it hold two days above the 54.20 level which it opened at on Tuesday following the bullish news. My ideal entry point would be around this level, but before entering I would need to see a bullish confirmation on the chart. The option strategy I am looking at structuring is a very simple one, and only requires the use of two option contracts and one expiration. I would look at purchasing April 55 strike call options and immediately selling April 60 call options against them (1 for 1). This strategy is currently in-the-money and using current data it is trading a slight discount to the shares which is not unusual for in-the-money vertical spreads. This position could currently be opened for a net debit of $265 per spread. Depending on where the stock trades from here will determine the premium/discount for this vertical call spread, but as of this data the spread is trading at a discount of 15 cents per share. As stated I would like to get into this stock after a slight pull back and a bullish confirmation after that, therefore if I do end up opening this strategy near my ideal entry point, I would surely be paying a premium to open this spread.

Profit & Loss: The maximum loss from the example outlined above is limited to $265 per vertical call spread and will occur if Shares of Perrigo trade and close at or below 55 per share by April options expiration. The gain from this strategy is limited to $235 (or 88.7%) per spread and will result if shares of Perrigo close at or above 60 per share at April options expiration. The break even price per share is 57.65 at April options expiration. If I enter into this trade I will be monitoring my position based on the chart, as I rarely wait until expiration to close or allow my position to get exercised. As always, I will be updating the status of this trade in future breakout reports.

This is a bullish strategy and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: No Positions

Volume Talks Monday: A Sirius Reversal

2010-03-23T09:39:00.005-04:00

As the market traded higher across the board Monday on lighter volume, there were many stocks which traded higher/lower on above average volume. Today's breakout report is for Monday March 22, 2010. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher/lower in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 23 stocks which traded higher on heavier volume, and 12 stocks which traded lower on heavier volume Monday March 22, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The tables below show the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). The first table is a list of potential bullish stocks, the second table is a list of potential bearish stocks. For your convenience I have ranked both tables in order from greatest to least volume % change.

Breakout Bulls
Company	Ticker	Price Change	Volume Change

Centene Corporation	(CNC)	10.58%	389.30%
Health Management Associates, Inc.	(HMA)	11.32%	360.71%
HRPT Properties Trust	(HRP)	6.96%	272.68%
Williams-Sonoma, Inc.	(WSM)	12.26%	247.85%
iStar Financial Inc.	(SFI)	6.30%	217.18%
Las Vegas Sands Corp.	(LVS)	9.90%	178.27%
Systemax Inc.	(SYX)	4.85%	167.35%
Universal Health Services, Inc.	(UHS)	6.18%	164.06%
The Boston Beer Company, Inc.	(SAM)	5.05%	146.43%
The Scotts Miracle-Gro Company	(SMG)	3.38%	141.24%
Sirius XM Radio, Inc.	(SIRI)	3.98%	128.19%
ViroPharma Incorporated	(VPHM)	4.16%	127.76%
Lumber Liquidators Holdings, Inc.	(LL)	5.54%	107.32%
Pennsylvania R.E.I.T.	(PEI)	8.40%	106.50%
Wynn Resorts, Limited	(WYNN)	6.68%	96.99%
Waddell & Reed Financial, Inc.	(WDR)	3.32%	90.93%
Cooper Tire & Rubber Company	(CTB)	3.30%	64.00%
Emergency Medical Services Corporation	(EMS)	6.05%	62.14%
Tenneco Inc.	(TEN)	6.29%	60.80%
Jo-Ann Stores, Inc.	(JAS)	3.27%	60.65%
NetLogic Microsystems, Inc.	(NETL)	7.35%	57.54%
Baidu, Inc.	(BIDU)	1.77%	55.70%
SXC Health Solutions Corp.	(SXCI)	1.88%	53.37%

Breakout Bears
Company	Ticker	Price Change	Volume Change

Dex One Corp	(DEXO)	-2.83%	294.51%
Gallagher Arthur J & Co	(AJG)	-2.38%	288.77%
Piper Jaffray	(PJC)	-3.82%	175.60%
Chesapeake Energy	(CHK)	-4.01%	172.50%
World Acceptance Corporation	(WRLD)	-3.54%	157.74%
Consol Energy, Inc.	(CNX)	-1.89%	134.31%
Amphenol Corporation	(APH)	-1.22%	111.98%
Telekomunikasi Indo	(TLK)	-1.99%	100.12%
Sunpower Corp	(SPWRA)	-3.96%	85.78%
Cabot Oil & Gas Corp	(COG)	-1.55%	80.04%
Unitedhealth Group, Inc.	(UNH)	-3.17%	57.44%
Pre Paid Legal Services	(PPD)	-1.92%	55.14%

Out of the bullish list above, one stock I was watching all day Monday was Sirius XM Radio, Inc. (SIRI). Sirius opened Monday slightly lower than Friday's close and traded down to 79 cents before reversing the day to close higher by 3.98%. Most of us know about Sirius XM, but as always before we get into the chart details, I will give a company profile from Google (GOOG) Finance below.

Sirius XM Radio Inc. has two principal wholly owned subsidiaries, XM Satellite Radio Holdings Inc. and Satellite CD Radio Inc. The Company is engaged in broadcasting in the United States, its music, sports, news, talk, entertainment, traffic and weather channels for a subscription fee through its satellite radio systems, the SIRIUS system and the XM system. On July 28, 2008, its wholly owned subsidiary, Vernon Merger Corporation, merged (the Merger) with and into XM Satellite Radio Holdings Inc. and, as a result, XM Satellite Radio Holdings Inc. became its wholly owned subsidiary. The SIRIUS system consists of three in-orbit satellites, approximately 120 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios. The XM system consists of four in-orbit satellites, over 700 terrestrial repeaters that receive and retransmit signals, satellite uplink facilities and studios.

Looking at the chart below, we can see some rather bullish price action. To me, this price action signals short term strength; I was selling June put options as it ticked positive, and buying May call options near close when it was apparent of this bullish chart pattern. I wrote about Sirius XM in early March as I saw a similar reversal, and Sirius traded higher by roughly 10% following that post before retesting the lows of that reversal day on March 2. If I was strictly an equities trader I would get long Sirius XM here with trailing stop loss of about 5-6%. However I am more of an options trader, so I have outlined a strategy below which will put me into shares of Sirius for roughly a 7.7% discount and give me unlimited gains to the upside if it happens to move higher by May options expiration.

Sirius XM Radio Option Strategy: This is a very simple trade to make and only require two different option legs. First I would look to sell in the money June 1 strike put options for a credit of $25 per contract. Note that if Sirius closes on June 19, 2010 below $1 per share I will receive 100 shares for each contract I am short. I would then look to purchase May 1 strike Call options for $5 per contract. This would put $20 (less commissions) into my account for each long combo position I got filled making my overall cost basis on each share of Sirius 80 cents (if it gets put to me). It is very important to note that I do not mind owning shares of Sirius at 80 cents come June options expiration. By purchasing the May call options, I will also capture unlimited gains beyond 1.05 per share by May options expiration. There is a rumor that March auto sales may be stronger than anticipated which would be a positive for Sirius, therefore there may be some increased buying in shares of Sirius going into that release on April 1, and will likely cause an increase in volatility which will cause the options to be a bit overpriced. It is important to note that I am looking to get long additional shares of Sirius for a slightly lower cost without losing upside potential, which is why I am using this option strategy. It is extremely important to note that this strategy is much less liquid than purchasing shares of SIRI and may not suit a very active trader.

Profit & Loss: The maximum loss from this strategy will be $80 per long combo position and will be if Shares of Sirius XM trade to zero ($0.00) by June options expiration. The gain from this strategy is unlimited until May options expiration with profit increasing with each penny shares of Sirius trade over $1.05, the position can be closed at anytime or shares can be exercised at expiration for $1. After May options expiration the gain is capped to $20 per long combo position until June options expiration, with the maximum gain being if Sirius closes above $1. The break even per share price is 80 cents at June options expiration. I rarely wait until expiration to close or allow my position to get exercised.

This is a bullish strategy and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long SIRI, SIRI May 1 Call Options, Short SIRI June 1 Put Options

Volume Talks Monday: A Potential Option Straddle Play

2010-03-16T10:03:00.001-04:00

Today's breakout report is for Monday March 15, 2010. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher/lower in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 7 stocks which traded higher on heavier volume, and 15 stocks which traded lower on heavier volume Monday March 15, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The tables below show the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). The first table is a list of potential bullish stocks, the second table is a list of potential bearish stocks. For your convenience I have ranked both tables in order from greatest to least volume % change.

Breakout Bulls on Heavier Volume

Company	Ticker	Price Change	Volume Change
CNX Gas Corporation	(CXG)	16.13%	1234.78%
Phillips-Van Heusen Corporation	(PVH)	9.76%	589.99%
St. Jude Medical, Inc.	(STJ)	8.16%	370.10%
Pegasystems Inc.	(PEGA)	6.71%	241.31%
Baidu, Inc.	(BIDU)	4.83%	163.08%
Medicis Pharmaceutical Corporation	(MRX)	4.85%	117.51%
EMCOR Group, Inc.	(EME)	2.50%	100.15%

Breakout Bears on Heavier Volume

Company	Ticker	Price Change	Volume Change
Sterling Construction Company, Inc.	(STRL)	-16.60%	975.96%
Resources Connection, Inc.	(RECN)	-3.60%	613.37%
Watson Pharmaceuticals, Inc.	(WPI)	-2.63%	302.53%
EZCORP, Inc.	(EZPW)	-7.15%	282.74%
Ulta Salon, Cosmetics & Fragrance, Inc.	(ULTA)	-5.23%	203.46%
Varian Semiconductor	(VSEA)	-5.30%	201.71%
CONSOL Energy Inc.	(CNX)	-10.09%	183.59%
ExlService Holdings, Inc.	(EXLS)	-3.93%	155.54%
athenahealth, Inc	(ATHN)	-2.20%	153.09%
Thor Industries, Inc.	(THO)	-6.42%	149.09%
Hi-Tech Pharmacal Co.	(HITK)	-7.69%	143.85%
Lam Research Corporation	(LRCX)	-4.61%	141.50%
CGG Veritas	(CGV)	-3.45%	131.85%
Almost Family, Inc.	(AFAM)	-2.23%	131.48%
Jinpan International Limited	(JST)	-9.42%	122.14%

Out of the bearish list in today's report, I have two ideas. First, because options do not trade on Ulta Salon, Cosmetics & Fragrance, Inc. (ULTA), I will note that I would look at getting long this stock if it pulls back to the 21.50 range and can hold that level for two consecutive closes. Ulta had a great earnings report on March 11 and rocketed higher on massive volume, however it was downgraded Monday morning giving back much of Friday's gains. I think if Ulta holds the 21.50 range, it is due for a move beyond its 52 week high. I would get long near 21.50 with a tight trailing stop loss. The other stock which caught my eye is Almost Family, Inc. (AFAM), but before I get into the option strategy I am looking at using I will first give a company summary from Google (GOOG) Finance below.

Almost Family, Inc. (Almost Family), along with its subsidiaries, is a provider of home health services. The Company has service locations in Florida, Kentucky, Connecticut, New Jersey, Ohio, Massachusetts, Alabama, Missouri, Illinois, Pennsylvania and Indiana (in order of revenue significance).The Company has two operating segments: Visiting Nurse [VN] and Personal Care [PC]. The Company is compensated for its services by Medicare (Visiting Nurse only), Medicaid, other third party payors (insurance companies and other sources) and private pay (paid by personal funds). Its VN segment provides a range of Medicare-certified home health nursing services to patients in need of recuperative care, following a period of hospitalization or care in another type of inpatient facility. The Company’s PC segment provides services in patients' homes on an as-needed, hourly, or live-in basis. On June 1, 2009, the Company acquired the assets of the Medicare-certified home health agencies.

When checking the chart on Almost Family, I noticed a rather ugly bearish engulfing pattern formed Monday. The stock hit an intraday low of 35.30 which is support, however it bounced off of that level and closed a bit higher.

Click to enlarge chart
The chart tells me we will see short term weakness in this name, so I would put a short position on this stock if it breaks below 35.25 with a stop loss at Monday's open of 36.47. Key levels of support below 35.30 to watch are 34, and 32.50. However I noticed a big bet in the options market Monday and will outline the strategy below.

Almost Family Option Straddle: It seems that at the same time (Monday - 12:27 PM) someone dumped 100,000, 500 May 35 Straddle positions were traded for a net debit of $422 per straddle. A total of 510 May 35 call options traded on open interest of 1064, and a total of 500 May 35 put options traded on open interest of 806. The open interest suggests that these straddles could have been closed, however if these straddles were opened I may follow the money and copy this trade. Be careful, the April 35 straddle position may seem like a better idea because it is about two-thirds of the price, however the May 35 straddle gets more than double the amount of time until expiration, but more importantly AFAM is likely to report earnings by May options expiration. If these straddles were opened someone is betting quite heavily that AFAM will be above/below 35 per share by at least 12.06% by May options expiration, however they will likely be closed before expiration as the straddle will gain value with any directional move as long as the move is sooner rather than later. The current theoretical price of opening one May 35 straddle is roughly $450.

Profit & Loss: Assuming I could open this option position for the price of $450, my maximum risk is limited to $450 per straddle, this will occur if both legs of the straddle are held and AFAM closes at exactly 35 per share on May options expiration. The break even points for this straddle are shares of AFAM at either 39.50 or 30.50 on options expiration. The profit for this strategy is unlimited with it being greater for each penny shares of AFAM trade above the higher break even point, or each penny shares of AFAM trade below the lower break even point. I rarely wait until expiration to close or allow my position to get exercised.

This is a neutral strategy and should not be considered if you think the stock will trade in a tight range in the near future. However if you feel the stock could have a large move in either direction by May options expiration and have the money to speculate with, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: No Positions

Party Like It's 1999: Shares of Baidu Trading Higher Than Shares of Google

2010-03-15T08:59:00.004-04:00

Well today is the day that shares of Baidu (BIDU) are trading higher than Google (GOOG). After this whole story with China broke and Google's pain became Baidu's gain, I didn't think it would take this this long until shares of Baidu were trading higher than Google... Well as of pre-market today when Google announced they are almost 100% certain they will be pulling out of China, the shares are down about 2% to 569, and Baidu up about 4% to 572. I understand that Baidu is a growth story and they are expected to grow 2010 earnings 50% over 2009, but I am not going to shake a stick at the 18% Google is expected to grow; not to mention that is well baked into the share price based on current levels of PE ratios. I am not going to say short one and buy the other, but it feels a bit like 1999 and if I had to choose one to own here, I would most definitely buy Google. However I will say that both can be owned as a pair trade. I have traded both Baidu and Google multiple times, but currently do not own Baidu in my investment portfolio.

Volume Talks Wednesday March 10: Two Option Ideas on One Hot Stock

2010-03-11T09:32:00.003-05:00

Today I am going to introduce my new breakout report which will also include stocks which traded the session lower on heavier volume. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher/lower in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 26 stocks which traded higher on heavier volume, and 19 stocks which traded lower on heavier volume Wednesday March 10, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The tables below show the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). The first table is a list of potential bullish stocks, the second table is a list of potential bearish stocks. For your convenience I have ranked both tables in order from greatest to least volume % change.

Breakout Bulls on Heavier Volume
Company	Ticker	Price Change	Volume Change
Psychiatric Solutions, Inc.	(PSYS)	21.29%	1435.10%
Kinetic Concepts, Inc.	(KCI)	14.29%	1240.87%
Vanda Pharmaceuticals Inc.	(VNDA)	11.30%	610.19%
Evercore Partners Inc.	(EVR)	2.41%	586.03%
Harbin Electric, Inc.	(HRBN)	10.00%	558.51%
Aixtron AG	(AIXG)	7.27%	417.52%
Helix Energy Solutions Group Inc.	(HLX)	8.93%	371.88%
RadioShack Corporation	(RSH)	5.58%	290.62%
Rovi Corporation	(ROVI)	3.29%	277.25%
Micrel, Incorporated	(MCRL)	1.25%	163.32%
Universal Health Services, Inc.	(UHS)	2.98%	151.05%
Denbury Resources Inc.	(DNR)	4.02%	143.64%
Alaska Air Group, Inc.	(ALK)	5.64%	132.41%
Helen of Troy Limited	(HELE)	2.46%	123.50%
Newell Rubbermaid Inc.	(NWL)	2.07%	115.43%
Assured Guaranty Ltd.	(AGO)	8.01%	115.39%
Amylin Pharmaceuticals, Inc.	(AMLN)	6.47%	104.22%
Companhia Siderurgica Nacional	(SID)	2.11%	91.91%
The Boeing Company	(BA)	3.27%	81.41%
Valeant Pharmaceuticals International	(VRX)	1.78%	66.44%
OmniVision Technologies, Inc.	(OVTI)	4.34%	65.04%
Jo-Ann Stores, Inc.	(JAS)	1.83%	54.59%
Nordson Corporation	(NDSN)	1.87%	51.42%
MetLife, Inc.	(MET)	2.38%	50.80%
Power Integrations, Inc.	(POWI)	1.45%	50.72%

Breakout Bears on Heavier Volume
Company	Ticker	Price Change	Volume Change
Transatlantic Holdings, Inc.	(TRH)	-1.01%	938.92%
AboveNet, Inc.	(ABVT)	-12.19%	877.72%
The Boston Beer Company, Inc.	(SAM)	-3.17%	564.04%
J. Crew Group, Inc.	(JCG)	-4.32%	465.83%
AeroVironment, Inc.	(AVAV)	-3.11%	449.55%
Navistar International Corporation	(NAV)	-5.29%	420.91%
Collective Brands Inc.	(PSS)	-7.17%	364.99%
Smith & Nephew	(SNN)	-2.15%	336.74%
EQT Corporation	(EQT)	-5.68%	292.01%
DaVita Inc.	(DVA)	-2.54%	185.85%
VanceInfo Technologies Inc.	(VIT)	-4.40%	157.98%
RehabCare Group, Inc.	(RHB)	-2.26%	142.11%
Coca-Cola FEMSA, S.A.B. de C.V.	(KOF)	-1.00%	111.62%
International Speedway Corporation	(ISCA)	-3.06%	111.42%
Carrizo Oil & Gas, Inc.	(CRZO)	-2.34%	79.42%
Cummins Inc.	(CMI)	-1.47%	67.38%
Western Digital Corp.	(WDC)	-1.86%	56.64%
Landstar System, Inc.	(LSTR)	-1.32%	55.74%
Kohl's Corporation	(KSS)	-1.79%	53.49%

Out of the large list of stocks above one stock that caught my eye quickly from the bullish list was Nordson Corporation (NDSN). This stock has appeared several times in the past 2 weeks as it has been in a steady incline since it reported earnings on February 22, 2010. As always I will first give a company summary from Google (GOOG) Finance below.

Nordson Corporation is engaged in manufacturing of equipment used for precision material dispensing, testing and inspection, surface preparation and curing. The technology-based systems are found in the production facilities globally. It serves the markets, including the appliance, automotive, bookbinding, container, converting, electronics, food and beverage, furniture, life sciences, medical, metal finishing, nonwoven, packaging, semiconductor and solar energy industries. The equipment ranges from manual, stand-alone units for low-volume operations to microprocessor-based automated systems for high-speed, high-volume production lines. The Company operates in three business segments: Adhesive Dispensing Systems, Advanced Technology Systems and Industrial Coating Systems. In January 2010, the Company acquired German distributor GLT mbH based in Pforzheim, Germany.

This company is a real growth story, and one I certainly wouldn't mind betting on. The company is projected to grow FY 2010 earnings 49% over FY 2009, and another 26% in FY 2011.

Click chart to enlarge
As we can see from the chart above this stock is very strong, setting new 52 week highs everyday and judging by the top end of the bollinger band 73 doesn't seem impossible short-term. If I was only an equity trader, I definitely wouldn't short it here, but would actually consider getting long these shares and setting a tight trailing stop loss, however I am more of an options trader so I'll outline my plans below.

Nordson Corporation Vertical Call Spread Strategy: Sooner or later profits have to be taken, therefore I plan on waiting for a slight correction in this stock before structuring this trade. I would like to see the stock pull back to the 20 day moving average and support at around 65 per share on lighter volume and hold at least 2 days. If this occurs I would look at purchasing a 65 strike call option with at least 20 days until expiration and writing out a 70 strike call option against it. If the chart gives me a clear bullish sign and I am convinced Nordson will move higher in the days after the light volume test, I may choose to just purchase at-the-money call options and wait for a move higher to write out the higher strike call option for a greater premium.

Nordson Corporation Vertical Put Spread Strategy: As stated this stock may reach levels of 73 before profits start to be taken, therefore here is an idea that will return a very nice yield considering the risk in a very short time period. With the hovering on a strike price it is always a great idea to see what premiums can be made if the stock holds the current level or even continues higher. With the trend being up on this stock, I would look at selling near-the-money March Vertical Put Spreads. I would sell the March 70 put options and purchase the March 65 put options against them to limit my downside risk. As of current data this spread can be opened for a net credit of $95 or a 19% return on maintenance (less any commissions) in 9 calendar days.

Profit & Loss: The first strategy outlined is a scenario which accurate profit and loss cannot be determined, however the maximum loss will be limited to the price paid per option spread, and the maximum gain will be limited to $500 less the price of the spread. The second scenario is based on current data, therefore we can get a much more accurate profit and loss. Assuming this vertical put spread was opened for a net credit of $95, the maximum loss is limited to $405 per spread, and that is if Nordson sells off and closes at or below 65 a share on March options expiration (March 19). If Nordson moves higher, sideways, or lower-but by less than 11 cents a share by March options expiration this strategy will return the maximum profit of $95 per spread. It is also important to note that the break even point for this strategy is shares of Nordson at exactly 69.05 on March options expiration. Commissions are not taken into account for any of the profit and loss calculations.

Updates to Previous Posts:
As stated on my blog post here I thought ROVI corporation was an ideal stock to structure a synthetic stock position on for the March options expiration with two closes above 34.50. I updated that post here (where I informed readers to keep a close eye on Nordson) and said an ugly pattern had emerged and I would not get into Rovi until that patern had been voided. It was completely voided on March 2 and closed at 34.75. On March 3 ROVI was setting up to close its second day above 34.50 (closed at 34.63) and I entered into this trade near close. It has since rallied as much as 10.9% intraday. Although the chart still looks good and signals ROVI could move higher, the stock finished well off the highs sending me signal to lighten up on this position, therefore I closed two-thirds of my vertical put spread position on ROVI, as well as one-third of my March 35 Call Position on ROVI.

This is a bullish strategy and should not be considered if you think the stock will sell off in the near future. However if you feel the stock could move higher in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long ROVI March 35 Call Options, Short ROVI March 35/30 Vertical Put Spread

Tuesday's Hot Stocks: One Fahionable Option Trade

2010-03-03T09:27:00.001-05:00

With the major indices trading slightly higher Tuesday, there were 28 stocks which broke higher on BIG volume. If this is your first time reading one of my breakout reports you'll want to read the section below, however if you are familiar with my daily breakout report you should skip ahead to the list of stocks.

To reiterate previous blog posts like this, the first thing I do is scan the list for familiar names, such as stocks I am quite familiar with or ones which have appeared on similar scans multiple times in the past week or two (most of these names are unfamiliar so it saves a lot of time). This indicates there may be some real momentum behind the stock, and that it could trade higher in following sessions as well. Then (if and when any of the stocks I find are familiar to me), I make sure the stock has options available to trade, and then take a look at the chart(s) to see if I can structure a potential option trade. The list in this post includes 28 stocks, all of which traded higher on heavier volume Tuesday March 2, 2010. Many times I find an option strategy I plan on opening if I am convinced some money can be made.

The table below shows the company, ticker, per share % increase, and volume increase (% increased compared to 50 day average). For your convenience I have ranked the stocks in order from greatest to least volume % change.

Company	Ticker	Price Change	Volume Change
RiskMetrics Group, Inc.	(RISK)	4.22%	708.32%
Sotheby's	(BID)	5.47%	398.03%
Sirius X M Radio, Inc.	(SIRI)	1.24%	389.34%
Domino's Pizza, Inc.	(DPZ)	5.10%	352.15%
The Dress Barn, Inc.	(DBRN)	4.35%	345.73%
Acxiom Corporation	(ACXM)	6.07%	343.50%
A. O. Smith Corporation	(AOS)	2.70%	248.57%
Rovi Corporation	(ROVI)	3.95%	234.36%
Power Integrations, Inc.	(POWI)	1.99%	210.19%
Green Mountain Coffee Roasters Inc.	(GMCR)	5.12%	207.96%
VeriFone Holdings, Inc.	(PAY)	4.77%	195.50%
VMware, Inc.	(VMW)	1.39%	182.60%
Medivation, Inc.	(MDVN)	5.17%	179.23%
Atheros Communications, Inc.	(ATHR)	3.11%	165.37%
J.C. Penney Company, Inc.	(JCP)	3.44%	153.81%
NBTY, Inc.	(NTY)	3.46%	143.64%
Albemarle Corporation	(ALB)	2.26%	141.47%
F5 Networks, Inc.	(FFIV)	2.47%	140.16%
Sirona Dental Systems, Inc.	(SIRO)	2.30%	124.33%
Hartford Financial Services	(HIG)	3.67%	109.34%
WebMD Health Corp.	(WBMD)	1.09%	107.75%
priceline.com Incorporated	(PCLN)	1.17%	103.15%
RINO International Corporation	(RINO)	7.29%	94.85%
Concho Resources Inc.	(CXO)	2.12%	84.46%
Steven Madden, Ltd.	(SHOO)	1.90%	78.74%
Jo-Ann Stores, Inc.	(JAS)	1.58%	66.80%
Smith International, Inc.	(SII)	2.40%	53.17%
Vale (ADR)	(VALE)	2.49%	51.69%

Out of the 28 stocks above, there are quite a few which I have already outlined potential option trades on in previous posts, therefore if you follow my posts you'll definitely want to see the update section below. Out of Tuesday's breakout stocks on big volume, one which I have been debating opening an option strategy on for some time is Steven Madden, Ltd. (SHOO), however at this point I believe the stock is overbought and I would like to wait for a pull back to get long. First I will give a company summary from Google (GOOG) Finance below.

Steven Madden, Ltd. designs, sources, markets and retails fashion-forward footwear for women, men and children. The Company also designs, sources, markets and retails name brand and private label fashion handbags and accessories through its Daniel M. Friedman Division. The Company distributes products through its retail stores, its e-commerce Website, department and specialty stores throughout the United States and through special distribution arrangements in Canada, Europe, Central and South America, Australia and Asia. Its business comprises three segments: Wholesale, Retail and First Cost. Steven Madden Retail, Inc., its wholly owned retail subsidiary, operates Steve Madden and Steven retail stores, as well as its e-commerce Website. Its wholly owned subsidiary, Adesso-Madden, Inc. acts as a buying agent for footwear products under private labels and licensed brands for many mass merchandisers and mid-tier department stores. In February 2010, the Company acquired Buddha, Inc.

Steven Madden (SHOO) reported earnings the morning of February 25, 2010, gapped higher and closed much lower (opened at 43.58, closed at 41.99; a rather bearish chart pattern and a potential reversal signal), the following day the stock traded in a big range (high of 42.94, and low of 41.23) but bulls managed to dominate and SHOO closed nearly unchanged, just 2 cents higher, SHOO seems to have regained its footing and on March 1 & 2 the stock has exploded to the upside on larger volume. As stated before, the day of earnings signaled a very ugly chart pattern to me, and I believe SHOO would have sold off if it was not helped by Deckers (DECK) reporting earnings the evening of February 25. As stated I believe SHOO is a bit overbought, but based on the current chart I certainly wouldn't short it here, so I will outline a potential option trade that will get me into the stock lower if SHOO sells off, but will allow me to participate in gains if the stock continues higher, sideways, or even lower by as much as 10% over the next 17 days.

Steven Madden Vertical Put Spread: As stated I wouldn't mind picking up shares of this stock if it traded lower, and based on the chart and bollinger bands I don't believe seeing the stock down near the 40-38 range is impossible. Instead of setting a limit order to purchase these shares, I have decided to sell March 40/35 vertical put spreads, that way if the stock continues higher I will also return slight gains, instead of just having a good until canceled limit order. Using current market data, this strategy could be opened for a net credit of $25 per spread or 5% return on maintenance (less any commissions) in 17 calendar days, but I plan on placing my order on weakness in the underlying to try and get a bit more premium than current levels.

Profit & Loss: Assuming I could open this option position for the prices outlined above, my maximum risk is limited to $475 per position, this will occur if SHOO sells off and closes on March options expiration at or below 35 per share. This position will achieve maximum profitability if SHOO closes above 40 per share on March options expiration (10.17% lower than Tuesday's close price), returning $25 profit per option spread (less any commissions). The break even point for this strategy is SHOO at 39.75 per share at March options expiration (less any commissions), anything below 39.75 per share at expiration will result in an unrealized loss on shares of SHOO (assuming the position is not closed and is exercised).

This should not be considered if you think the stock will sell off by more than 10% in the near future. However if you feel the stock could move higher or sideways in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

Updates to Previous Posts:
First it is important to note that I traded entirely out of my China Agritech (CAGC) March Vertical Call Spread position Tuesday as I noticed immediate weakness following a huge gap higher at the open. It looks as if the daily chart is marked with a very ugly bearish engulfing candle pattern, and I would not want to be long this stock here.

Second I lightened up on my Sirona Dental (SIRO) position after witnessing the stock reverse off the higher end of the bollinger band near 38 per share. The chart still looks okay on Sirona, however this was my signal to lighten up.

Third, going way back to my Sirius (SIRI) buy-write option strategy outlined on February 2, 2010, I believe that identical strategy could be considered at these levels. Going into the close Tuesday, I purchased additional shares of Sirius as it looked like it had a reversal day and the short term bottom may be in (gapping lower at the open, trading as low as 82 cents, and finishing the day in positive territory; having its second highest volume day in the past 52 weeks, only to the day Sirius got booted from the Russel Index on June 26, 2009). I hope to write the shares out for the March options expiration on strength in Sirius, however I may have to write them out for April.

Last but not least another update to Rovi Corporation (ROVI). After outlining a bullish option strategy on February 24, I made an important update to the post on February 25 stating a very bearish pattern had emerged and it was likely to show some short term weakness. ROVI showed weakness the following three days, but finally broke out again Tuesday voiding that bearish chart pattern and actually setting a new 52 week high. I might reconsider opening the option strategy outlined in my post on ROVI, however I think I would rather purchase shares of the stock and set a tighter trailing stop loss, as ROVI has just been far too volatile lately.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long NTY March 45 Call Options, SIRI, SIRO March 40 Call Options, SIRO April 25 Put Options, Short RINO March 20 Put Options, SIRI March 1 Call Options, SIRO April 30 Put Options

Detailed Option Trade for a Potential Apple Reversal

2010-03-02T17:30:00.000-05:00

Apple has been on a tear lately, up over 6% from the closing price Monday February 23. Judging by Tuesday's price action, I believe it may head a bit lower in the following sessions, and I have outlined an option strategy to capture a move lower below. First I must mention that I do not mind owning shares of Apple after options expiration, because the strategy outlined below does involve being naked one contract of Apple (AAPL), this means for each contract I am "naked" I could get 100 shares of Apple "put" to me.

Click chart to enlarge

As we can see from the chart above, Apple gapped higher to 209.93 per share at open Tuesday and closed below that price at 208.85, finishing the day down 0.14 points (14 cents). The volume was not huge, but greater than the previous two trading sessions. I believe Apple is heading lower short term based on this bearish looking pattern, but for confirmation I need to see Apple close lower on at least average volume Wednesday.

Apple Ratio Put Spread Option Strategy: With this pattern emerging, I decided to structure a ratio put spread on Apple. This is a fairly simple trade and only involves two different option legs for the same expiration. I first must state that I only anticipate short term weakness on Apple down to the 20 or 50 day moving averages before it consolidates and moves higher. With my short term price target being near 200 per share and the stock trading near 209 per share, that gives me all the info I'll need to structure this trade. First I purchased in-the-money March 210 strike put option contracts on Apple, then for each one (1) I purchased, I sold two (2) March 200 strike put options against them. I was able to open this spread for a net debit of $170 per ratio put spread. Using current market data as of close Tuesday the theoretical price for opening one of these spreads is roughly $195 per spread, which gives an extrinsic option premium to this spread of $80. Once opened it is very important to be monitoring this position, as I rarely wait until expiration day to close or let the position exercise, so a key support level to watch is 205. If Apple tests support near 205 per share and holds, I will look to be exiting this position, if it cannot hold the 205 level I will continue to hold it.

Profit & Loss: Although I rarely wait until expiration to get out of my positions, I will outline the maximum profit and losses associated with this trade if I waited until March options expiration to close or get exercised on this position. Assuming I could open this option position for the prices outlined above, my maximum risk is limited to $195 per spread, this will occur if Apple trades higher and closes on March options expiration at or above 210 per share. This position will achieve maximum profitability if Apple closes exactly at 200 per share on March options expiration, returning 513% or $805 profit per option spread. This strategy has two break even points, one being Apple at 208.05 per share, and the other at 195.98 per share at expiration (less any commissions). Anything below 195.98 per share at expiration will result in an unrealized loss on shares of Apple (assuming the position is not closed and is exercised). It is important to note the net delta, gamma, and theta for this strategy as well, considering it may be a good idea to trade out of this spread before expiration. Based on current market data some important Greeks to note for this spread are Delta = -0.082, Gamma = 0.014, and Theta = -0.077.

This should not be considered if you think the stock will rally in the near future. However if you feel the stock could move lower but no lower than 4.23% in the near future, this strategy could yield a nice gain. To get a better understanding of stock options and different option strategies please check out my Simplified Stock Option Trading E-Books.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

The reason option volumes have surged in the last five years is because they are a great way to hedge your portfolio as well as create income off of your shares (see chart here). Keep in mind when using this strategy it is essential that broker commissions are low enough to profit from the position.

Disclosure: Long AAPL March 210 Put Options, Short AAPL March 200 Put Options