Options Trader: Weekly Wrapup

by: Philip Davis

Wow, what a week, what a finish! 91 positions were still in play this week with 47 gaining over 50%, 9 gaining more than 500%, and just 7 losers (mostly 20% stop outs but 2 total losses).

Up on big volume, Google Inc. (NASDAQ:GOOG) and Chicago Mercantile Exchange Holdings (NASDAQ:CME) flying on the last day, Motorola Inc. (MOT) still going strong, Apple Computer Inc. (NASDAQ:AAPL) still over $74, Microsoft Corp. (NASDAQ:MSFT) up 2% today…

The Nasdaq gave us the leadership we always wanted with a 4% gain on the week, while the Russell 2000 posted a 3.5% gain. This goes in-line with my master plan of draining money out of commodity players and redistributing the wealth to the starving masses (or at least to Steve Jobs, Larry and Sergey, who looked a little hungry at the last conference). Here’s the chart:

Dow Jones Industrial Index 5-yr Weekly Chart

The Dow and S&P tacked on about 2% with almost no downward action other than “Don’t Panic” Thursday. The NYSE had the weakest week but, as I’ve said, it is miles ahead of the others over the long haul, so anything other than down is very good for the NYSE!

Larry Kudlow is making an excellent point that we need to watch the Core Chained CPI, which is virtually flat to last year, and I wholeheartedly agree. It is very similar to the way I look at the regular CPI, throwing out extraneous information and adjusting some of the weighting.

Oil finished the week with a sickening thud, down right at the 5% rule for the week at $63.33 after being down 5% in the short week before, which was 5% lower than the week before that, which was flat to the week before that, which was 5% down from the week before that, which was 5% down from the all-time high that was set 30 days earlier.

I don’t make these things up, I just report them and head off to Stockholm to collect my medal and plaque…

So we got a pause at 10%, followed by a 10-day consolidation, followed by a 5% drop and a 3-day consolidation, followed by a 10% drop. In comments we mentioned the Fibonacci goal of $54ish (I would throw out the $79 high and use $77 so the downside goal would be $52). That is, conveniently, 3 5% moves away from where we are now...

Overall, in the past 45 days (you need to play with this chart) Oil is down 15%, Exxon is flat, Total S.A. (NYSE:TOT) and Chevron Corp. (NYSE:CVX) are down 5%, and ConocoPhillips (NYSE:COP) is down 15% with oil. In the default view, you can see ExxonMobil Corp.'s (NYSE:XOM) irrational exuberance since June 6th that has placed it 5% ahead of its peers. Run the chart out to the max time and you will see that, not only is Exxon usually the laggard of the group, but that historically, oil companies tend to trade well below the trend in oil prices.

Gold had another terrible day, finishing way down at $576, as copper finally gave up some ground (1.3%), as the Dollar gave us the bounce we called for yesterday (I hate it when I’m a day early on these things!).

It was a great week, if you are a new reader and you made a lot of money this week, quit now, I don’t think it will get much better than this! But, if you are daring and you want to stick around, let’s get ready to have some real fun as things start to get really serious coming into the end of Q3!

Today's Picks:
Frankly, this has never happened before. I am usually in cash once every 2 weeks, three at the most. This run, this rally, even though I predicted it, has left me with more positions than I can track.

For the new site, we will be employing a nice tracking system with entry and exit dates and all sorts of cool stuff, so I am apologizing in advance for this list as the best I can do (without spending a week working on a review) is to just lay out the picks and how they’ve done since they were initiated:

  • Barrick Gold Corp. (NYSE:ABX) Oct $32.50 puts finished at $3.40 (up 325%).
  • Adeza Biomedical Corp. (ADZA) hit $17 on a 3.5% jump today (up 3.3%).
  • AAR Corp. (NYSE:AIR) Feb $25s hit $2.05 (up 60%).
  • I got bored with Amgen Inc. (NASDAQ:AMGN), but the Oct $70s rewarded more patient types at $1.95 (up 35%).
  • Apple Computer Inc. (AAPL) $72.50 puts were a wipeout at .25.
  • Boeing Co. (NYSE:BA) Nov $80s got hammered yesterday, but are still up 35% at $1.35.
  • Best Buy Co. Inc. (NYSE:BBY) Oct $47.50s were part of Tuesday’s retail call, and flew up to $6.90 (up 320%). The Dec $57.50s ran up to $2.45 (up 20%) on our first day.
  • Bed Bath & Beyond Inc. (NASDAQ:BBBY) Oct $35s finished at $3 (up 200%).
  • Burlington Northern Santa Fe Corp. (BNI) Oct $70s are now $2.50 (up 55%):
  • BP PLC (NYSE:BP) $70 puts finished at $5.10 (up 140%), but we rolled that 40% into the Oct $60 puts, down a nickel to .25 and the Oct $65 puts are at $1.45 (up 20%).
  • Brookfield Properties Corp. (NYSE:BPO) went off the table back even at $35.80 -– no more shorting real estate!
  • Bear Stearns Companies Inc. (NYSE:BSC) Oct $140s finished at $2.50 (up just 95% after today’s $3 pullback). Shame on you if you didn’t stop out between up 200% and here!
  • Continental Airlines Corp. (NYSE:CAL) pulled back a bit today, but the Dec $30s are still a nice $3 (up 150%).
  • Caterpillar Inc. (NYSE:CAT) Oct $70s are back to .75, and this is a big play if the rally is real.
  • Chesapeake Energy Corp. (NYSE:CHK) Oct $30 puts finished at $1.75 (up 170%), and the $30 puts finished at .90 (up 600%). These were freebies from the profits on the $32.50 puts at the beginning of the month, and a great example of the joy of rolling your profits!
  • CKE Restaurants Inc. (CKR) $15s ended up at $1.75 (up 250%)
  • Core Laboratories N.V. (NYSE:CLB) was a pretty good pick for a short, down 16% to $64.29. This is pretty good for a straight stock call, but if they had options we would have made a fortune!
  • Consolation Club member, Coach Inc. (NYSE:COH) Oct $32.50s are up 180% to $2.20, more than enough to buy a bag!
  • Costco Wholesale Corp. (NASDAQ:COST) Oct $50s finished at 1.70 (up 130%). The Jan $52.50s are $1.95 (up 25%).
  • CSX Corp. (NYSE:CSX) Jan $32.50s are up to $2 (up 40%), even after today’s 2% pullback.
  • Chevron Corp. (CVX) $65 puts finished at $3.20 (up 600%), and we rolled into the Oct $60 puts early, now .95 (up 160%).
  • E.I. DuPont de Nemours (NYSE:DD) Oct $42.50s finished the day at .85 (up 150%), but we took the money at .75. The $40s finished at $2.25 (up 115%).
  • Dell Inc. (NASDAQ:DELL) Jan ’08 $27.50s held $1.50 (down .10), but we cleverly sold the Oct $22.50s for .60 (now .40) so we could relax while it works on the descending 50 DMA.
  • Walt Disney Company (NYSE:DIS) Oct $30s went into the money at $1 (up 66%).
  • Dow Chemical Company (NYSE:DOW) Dec $40s hit $1.05 (up 55%), but I think they should be doing much better (like DD).
  • eBay Inc. (NASDAQ:EBAY) is not off to a good start, and the Oct $30s dropped a dime to .80 on some bad usage numbers.
  • EnCana Corp. (NYSE:ECA) Oct $50 puts hit $5.00 (up 825%)
  • Eagle Materials Inc. (NYSE:EXP) didn’t move much, but the Jan $40s went to $2.30 (up 10%) as sentiment changed.
  • Fairchild Semiconductor Intl. (FCS) finally got it in gear and the Jan $20s hit $1.65 (up 60%).
  • Florida Rock Industries Inc. (FRK) Mar $45s are $2.50 (down .20), still unaware of the uptick in builders…
  • Force Protection Inc. (NASDAQ:FRPT) finally got an analyst and he liked it! We gained 8.5% today to finish at $7.63 (up 20%). Hey, maybe these stock things aren’t so terrible after all, but I’m out as it’s way past target.
  • General Electric Co. (NYSE:GE) Oct $35s are slow but steady to .45 (up 200%), and you can still get them! I said this at .15, .25 and .35 so far...
  • General Motors Corp. (NYSE:GM) made a nice one day call with the $32.50 puts finishing at .85 (up 750%) on a 4% drop today. This was pure luck as I just couldn’t get a dime for them yesterday...
  • Corning Inc. (NYSE:GLW) is back at the 200 DMA and the Feb $25s are up to $1.70 (up 20%); very playable if it breaks through $23.50 – watch Texas Instruments Inc. (NYSE:TXN) for confirmation.
  • Harrah's Entertainment Inc. (HET) Jan $70s inched up to $2.30 (up 25%); these are profits from the prior trade so very tight stops!
  • It’s almost time to get back into Intel Corp. (NASDAQ:INTC)! I think we had 4 trades on that last week that made over 200% each!
  • iShares Russell 2000 Index ETF (NYSEARCA:IWM) Oct $72s are still $2.25 (up 65%).
  • Johnson & Johnson (NYSE:JNJ) Oct $65s dropped to .60 (down 30%) and I’m out.
  • Lennar Corp. (NYSE:LEN) Oct $40 were a lucky escape as they went back to even, down 40% from the week’s open.
  • Marvell Technology Group (NASDAQ:MRVL) Jan $21.25s flew up to $2.10 (up 90%), and we are already .55 ahead from the first time we were in and out!
  • I’m worried I outsmarted myself with this morning’s Morgan Stanley (NYSE:MS) call, as no one seems to care that they lost the Public Service Enterprise Group Inc. (NYSE:PEG) deal. The Oct $70 puts fell .25 to $1.40, and I’m worried about holding it into earnings.
  • Microsoft Corp. (MSFT) Oct $27.50s doubled today to .35 (up 130%), and the Oct $25s finished the month at $2.05 (up 105%)...
  • Micron Technology Inc. (NASDAQ:MU) Jan $20s are still $1 (up 250%).
  • Nokia Corp. (NYSE:NOK) Oct $20s are .50 (down .10), but I keep buying them!
  • Oil Service HOLDRs ETF (NYSEARCA:OIH) made a valiant attempt to recover, but the Oct $130 puts look safe at $5.40 (up 45%).
  • Overseas Shipholding Group Inc. (NYSE:OSG) Oct $65 puts finished well in the money at $4.20 (up 125%) and the Jan $60 puts hit $3.40 (up 130%).
  • Southern Copper Corp. (PCU) was our conservative copper short. We picked up $2.75 so far on the short and we sold the Oct $95 put for $6 (now $8) for a very dull but safe net $.75 gain since Monday. I really didn’t think it would break $90 so easily...
  • Phelps Dodge Corp. (PD) held up better than I thought, but the Oct $82.50 puts ran up to $3.50 (up 250%) while the Jan $82.50 puts are at $7.20 (up 80%).
  • Public Service Enterprise Group Inc. (PEG) did drop 6% today, but the Oct $60 puts ended at $1.05 (down .25). Very disappointing, but I’m hanging my hat on the fact that PEG was at $41 prior to the failed takeover. Perhaps people think they are still in play, but I don’t see another offer coming after regulators said no way to this deal.
  • PetMed Express Inc. (NASDAQ:PETS) is looking like we will get called away, as it ran up to $10.34 already. We entered at $9.63 and sold the Oct $10s for .65 (now .95). I didn’t think it would run up so fast and I’m still dubious...
  • NASDAQ 100 Trust Shares ETF (QQQQ) Oct $39s doubled to $1.80 and the current $39s finished at $1.10 (up 270%)...
  • Royal Dutch Shell (NYSE:RDS.A) $70 puts finished at $4.90 (up 890%), but we got out 200% ago and rolled profits into the Oct $65 puts at .50, now $1.35 (up 170%).
  • Restoration Hardware Inc. (RSTO) is the way to play a stock! We were in at $6.17, out at $7.20, in at $7.04 and now at $7.72. Getting ready to exit again with a .10 trailing stop:
  • Rio Tinto plc (RTP) $190 puts finished at $5.10 (up 70%).
  • Starbucks Corp. (NASDAQ:SBUX) Oct $35s were exited in comments at .75, as 50% in one day seemed like plenty.
  • SmartVideo Technologies Inc. (SMVD) is back at $1.35 (up .10) and now they are getting a little press!
  • Sony Corp. (NYSE:SNE) has surprised me by not going down (yet); my Jan $45s are still $1.85 (up .10).
  • Sunrise Senior Living Inc. (SRZ) was a good call to hold through the downgrade and the Jan $30s ran up to $4.10 (up 85%).
  • There must be some kind of rule against this, but we have now made money for the 3rd time in one month on the same option. Oh well, until they make us stop we can enjoy the Seagate Technology (NASDAQ:STX) Mar $22.50s at $2.65 (up 55%) and, even though this is profits of other profits, let’s keep a tight stop around $2.25. The Oct $25s are still .40.
  • Suncor Energy Inc. (NYSE:SU) $80 puts finished at $12.80 (up 570%). The Oct $65 puts finished at $2.15 (up 30%).
  • Sunoco Inc. (NYSE:SUN) $75 puts finished the week at $13.50 (up 1,125%), but at 900% we rolled into the Oct $60 puts which hit $2.10 (up 110%).
  • Sun Microsystems Inc. (NASDAQ:SUNW) $5s gave us a very lucky exit at .25 (up 66%) this morning! I had them on my dead trade list...
  • Target Corp. (NYSE:TGT) Oct $50s finished way in the money at $4.40 (up 190%), and the Oct $47.50s are even better at $6.10 (up 205%)! What a pretty chart!
  • Oh yeah, Monday I realized we didn’t have any TGT Oct $52.50s, now $2.40 (up 140%). You can tell I really like a trade when I pick it 3 times!
  • If BA moves next week it is time for Boeing Buddies™ Titanium Metals Corp. (TIE) and BE Aerospace Inc. (NASDAQ:BEAV) to make a move...
  • The queen of the Consolation Prize Palace is Tiffany & Co. (NYSE:TIF), with the Jan $35s just a nickel out of the money at $2.40 (up 140%). This is our second visit to this option as well! Very tight stop as we test the 200 dma at $35.20!
  • Toll Brothers Inc. (NYSE:TOL) $25 puts were a wipeout of .40!
  • Texas Instruments Inc. (TXN) Oct $32.50s are back at .95 (up 15% avg. from my double down at .70). This one is still good for an entry if the SOX break 465.
  • We chickened out of Harris & Harris Group Inc. (NASDAQ:TINY) March 10s at $2.75 (up 140%), but it’s tempting me again as it consolidates under the 200 DMA at $12.50.
  • United Parcel Service (NYSE:UPS) stalled a bit but the Jan $75s made it to $2.60 (up 30%).
  • Vornado Realty Trust (NYSE:VNO) Oct $105 puts stopped us out at $1.40 (down 20%) and the Dec $100 puts killed us at $1.50 (down 20%).
  • Consolation Prize Team Member Williams-Sonoma Inc. (NYSE:WSM) Oct $32.50s are getting close to the money at $1 (up 300%), a nice roll from the double+ on the Oct $30s! We also took the Oct $35s for .20, and the $1 should come 2/3 off the table to preserve a double for sure.
  • Yahoo! Inc. (NASDAQ:YHOO) Oct $30s ran back to $1.15 (up 40%)...
  • ExxonMobil Corp. (XOM) $67.50 puts hit $2.80 (up 460%).

Thanks for all the comments! I really appreciate all the ideas and advice.

Have a great weekend,

- Phil

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