I was reading this article and found it quite interesting ( 'Bin Laden' options trading? ). It talks about unusual options activity and is trying to dispel rumors of current options activity and why they are happening. Many think that only a terrorist attack could turn a profit on this options activity, where a large market swing is needed to turn a profit. It also outlines how there were big puts in the airlines and insurance prior to 9/11, which I was unaware of. Insiders knew of an attack and made tons of money off of it. At the end they say this is a 'box spread' and is a simple interest rate trade. It may just be a coincidence that Sept 11 is between now and Sept 18, the day Bernanke is 'supposed' to cut rates...
Now from our peon point of view, I would think that the strange options activity would be due to the Fed cutting interest rates. However, we are just peons, we don't know what's really going on. If there is a rate cut, there will be a huge swing upward of confidence and an increase in the market. If we don't get one the market gets worried about a recession and pulls a lot out. However, the article talks that there needs to be a 50% change in the SPX 700 in order to turn a profit on these options...
How can this benefit us? Something is obviously up, insiders know something. I expect and want a rate cut on Sept 18 (I'm getting a mortgage, could use a lower rate coupled with high investment in the market). If we don't get one I anticipate a decrease in the market. So we can either make a lot of money or lose a lot of money. I'm going to counteract this by becoming more liquid. I want to get to a point where 20% of my investment assets are in a high yield money market account. This will give me flexibility for more buying if we get another dip, and if not I have money that I'm going to need and use to purchase my house that will sit in a high yield account.
So yes, I may sit this one out. Good luck, and trade on.
Friday, August 31, 2007
Options before Earnings
Over the past few weeks, I've watch tech and internet companies come up big prior to earnings. Specifically I've predicted GRMN, PCLN, CSCO, NVT as companies that would produce good earnings. Usually, when companies have good earnings and good future earnings and growth forecast you see a jump in share price. Although I guessed correctly on those, I did not have any money at the time of their earnings releases to capture this jump.
Options may be a good way to capture this. Next week I feel ALTR will come out with a good earnings report. Their previous 5 reports have beat consensus. I'm looking at a cheap OTM call for near term, SEPT and OCT @ strike price 25. I didn't buy my previous play option, and am debating on purchasing these or not. For now I will make a mental note and see how I do. I would buy a SEPT 07 and OCT 07 strike price 25 call for $20 and $60 respectively. Only time will tell if I get the correct call on this one.
An update to my TSL call...currently I could sell the call I have for TSL (TSL-CI MAR 08 Strikeprice 45) for $11.00. That is a 50% gain in one week. That beats investing in China...(unless you are buying and selling daily on these 10 % changes). :)
Options may be a good way to capture this. Next week I feel ALTR will come out with a good earnings report. Their previous 5 reports have beat consensus. I'm looking at a cheap OTM call for near term, SEPT and OCT @ strike price 25. I didn't buy my previous play option, and am debating on purchasing these or not. For now I will make a mental note and see how I do. I would buy a SEPT 07 and OCT 07 strike price 25 call for $20 and $60 respectively. Only time will tell if I get the correct call on this one.
An update to my TSL call...currently I could sell the call I have for TSL (TSL-CI MAR 08 Strikeprice 45) for $11.00. That is a 50% gain in one week. That beats investing in China...(unless you are buying and selling daily on these 10 % changes). :)
Thursday, August 30, 2007
Long shot call
Ready for the next wave of solar? So far we have seen two peaks from most solar companies as they mostly move together. Well, I have found a good play and hopefully someone will take the bait. 07 OCT @ 20.00 for YGE...sell at .10 to .30 on Scottrade; however, where I seek to buy them at is on USAA (currently market has no sellers according to USAA). So why even buy these calls? First, it will cost a total of $20-$50, a small price to pay. I risk hardly anything and have a good chance to make some cash. I think this option trades at a DISCOUNT to TSL option. Even though YGE has never hit 20, I think with the solar momentum could push it over 20. Here is why...
Solar moves in groups, all following the same trend.
TSL share price cost three times more than YGE. Now some of that has to do with supply (more shares outstanding for YGE than TSL). However, YGE has outperformed TSL since YGE came public. If they follow the same trend, TSL OCT 07 @ 60 should be three times as much. However, THEY AREN'T! TSL is trading at 6 times the price. I have an order to buy two YGE calls OCT 07 @ 20.
Solar moves in groups, all following the same trend.
TSL share price cost three times more than YGE. Now some of that has to do with supply (more shares outstanding for YGE than TSL). However, YGE has outperformed TSL since YGE came public. If they follow the same trend, TSL OCT 07 @ 60 should be three times as much. However, THEY AREN'T! TSL is trading at 6 times the price. I have an order to buy two YGE calls OCT 07 @ 20.
China options
My friend suggests buying China...and I agree with him. Since I have done so I have reaped benefits, buying into CEO at 91, selling lots at 105 and 118. Recently I bought ACH (again recommended) at 45.80 then at 42. I sold 3 lots of this, ones at 49, 52, 66. Made lots of money. But the bad thing was I had to put up a lot of money. China is volatile market here. In the long run it is going up, due to valuation reasons between Yuan and dollar and Chinese Olympics. My friend says it will be a good market at least until the end of 08. Well want to get in on the fun and make money! Sure, lets get into the options then. We will put less money up and get a similar return. I currently think ACH is too high. So technically I should put it, but I'm a novice at options. I will wait for it to go down. I'm not sure which one to get into here, but I know since this month ACH has went from 34 to 66. Now I think it will pull back, wait awhile and go again. Here's why I'm so intrigued by this. If these companies continue to act nuts, why not buy a really high call, risking nothing, and getting everything. My point here is ACH-IL, a sept 60 call, was selling for about .30 cents on AUG 23. Today it will fetch $10.00. Investing in ACH from those times you get a 100% increase in value. Here you get a 1000/30, or a 3333% gain.
Yes it's easy to look back and say, if I would have done this, look at what I would have got. But Chinese options on ACH, CEO, PTR, CHL, BIDU could all be good. I'm looking to buy some contracts on a pull back.
Yes it's easy to look back and say, if I would have done this, look at what I would have got. But Chinese options on ACH, CEO, PTR, CHL, BIDU could all be good. I'm looking to buy some contracts on a pull back.
Playing Solar / Defense Companies
I had to leave work early yesterday to run some errands, so I did not get a chance to see the market close. It looks like it fared well, up 247. Solar stocks did well yesterday (I'm following YGE and TSL heavily, I think they are best of breed). I expect the solar stocks to go up for awhile then come back down. They are going to mimic tech of 99-01. They have been very cyclical of late...and with an increase I plan to sell a covered call on YGE for strike price 20 (not sure what month, looking at MAR 08 though). As prices retreat I will buy a call at strike price 15 for the same month. The difference will be pocket money. If I can time it right I'd like to sell my call on TSL and rebuy at a lower price. Bulls make money, bears make money, pigs get slaughtered...so call me a pig, but I fully expect a 100% return on TSL. Yesterday at close bidders were wanting 9.40 per contract. Had I sold, that's a 23% gain ($180) in 3 days. Try getting that by owning a stock! That is a good gain considering the stock only went up about 15%. Anyways, long solar because remember...we are in a global warming crisis. (kidding).
Since I am active reservist in the Indiana National Guard, I was trying to find ways to play the market on defense industries. Now pretty much any defense stock is a safe bet at least until NOV 08 when a democratic president will likely take over... but I specifically have my eyes set on the Mine Resistant Ambush Protectant (MRAP) vehicles. These are heavy duty uparmored vehicles that can withstand most IED's. While most contracts have came out for MRAP, MRAP II contracts will be awarded next year. Let me tell you, the Army needs these vehicles. And lawmakers will gain public support for the war by giving funds to these programs because it shows we are protecting our troops. How can we benefit? I currently have OSK, a late MRAP contender that never received any contracts. They have a PE ratio of around 13. They have been eliminated actually from MRAP I, but have teamed up with the company I think will make the most here, CRDN, for MRAP II. CRDN is the body armor company, making the sappy plates for the flack jackets we have in country (of which there will be orders for those within the next year). Now OSK will reap some benefit to this...I expect a 20% increase in their stock price in a year's time. Both of these companies are ahead of the curve, and are working on MRAP II instead of bothering with MRAP I. Don't forget that we will be supplying other countries with body armor and vehicles as well, specifically Iraq and Afganistan. How will these countries pay for these? They won't, your tax dollars will. Who benefits? All of us if we can invest in these companies. I'd suggest buying a 75 dollar call on CRDN at 5 or better for MAR 08 (AUE-CO). Look to buy these on down days.
Since I am active reservist in the Indiana National Guard, I was trying to find ways to play the market on defense industries. Now pretty much any defense stock is a safe bet at least until NOV 08 when a democratic president will likely take over... but I specifically have my eyes set on the Mine Resistant Ambush Protectant (MRAP) vehicles. These are heavy duty uparmored vehicles that can withstand most IED's. While most contracts have came out for MRAP, MRAP II contracts will be awarded next year. Let me tell you, the Army needs these vehicles. And lawmakers will gain public support for the war by giving funds to these programs because it shows we are protecting our troops. How can we benefit? I currently have OSK, a late MRAP contender that never received any contracts. They have a PE ratio of around 13. They have been eliminated actually from MRAP I, but have teamed up with the company I think will make the most here, CRDN, for MRAP II. CRDN is the body armor company, making the sappy plates for the flack jackets we have in country (of which there will be orders for those within the next year). Now OSK will reap some benefit to this...I expect a 20% increase in their stock price in a year's time. Both of these companies are ahead of the curve, and are working on MRAP II instead of bothering with MRAP I. Don't forget that we will be supplying other countries with body armor and vehicles as well, specifically Iraq and Afganistan. How will these countries pay for these? They won't, your tax dollars will. Who benefits? All of us if we can invest in these companies. I'd suggest buying a 75 dollar call on CRDN at 5 or better for MAR 08 (AUE-CO). Look to buy these on down days.
Wednesday, August 29, 2007
Today's trades, thoughts, ideas
Welcome to my blog. This blog will contain ideas on the markets, what I invest in, and why.
Yesterday was a active day for me. I made 4 trades throughout the day. I bought some 25 shares of YGE, a Chinese solar company, at 13.50 per share. This gives me 100, and I have a option strategy that I plan to put into action if I can purchase the options at a good price. I will map out this plan when i have done it. I sold two covered call options for 07 DEC @ 12.50 on SVNT for 3.60 apiece, netting $720. SVNT is a biotech company, and is currently in phase III of a gout drug. This gives me more cash up front to buy stock or options with. I'm currently not sure if I should have sold 2 options on that. I think I may buy one back if the share price approaches 11-12 per share. Regardless I used the money to purchase 100 shares of EMC at 19.30 per share. I feel EMC is undervalued given the spinoff of VMW (currently own 90% of VMWare), and since they sold the 10% are sitting on a huge pile of cash that they can use to buyback stock or aquire someone. I anticipate a buyback of stock, enhancing shareholder value. It expect a result similar to CY when they spun off SPWR. Yes, I'm using Cramer's idea, but I used to own EMC and I think things have turned the corner for them.
My last trade was LMT. I saw the market decreasing, and realizing I have a flight reservation payment, a rate lock for mortgage payment and my monthly bills...I sold LMT. I think LMT could have ran up longer, but I wanted to preserve some liquidity in case the market drops like it did two weeks ago. At that time I had no money to buy low.
My options strategy is going well, only two days young. I could sell my TSL call I bought on monday for 7.60 / contract today for 8.50/ contract. That's a 12 percent or so gain in 2 days. I expect TSL to approach 60 by next March and I can net a 100 percent gain though. I think TSL and YGE are the most undervalued solar companies, and I expect the solar industry to continue rising similar to tech in 99-01. When we start seeing splits, we start selling.
That's all for now. These were my thoughts from yesterday, Aug 28, 2007.
Yesterday was a active day for me. I made 4 trades throughout the day. I bought some 25 shares of YGE, a Chinese solar company, at 13.50 per share. This gives me 100, and I have a option strategy that I plan to put into action if I can purchase the options at a good price. I will map out this plan when i have done it. I sold two covered call options for 07 DEC @ 12.50 on SVNT for 3.60 apiece, netting $720. SVNT is a biotech company, and is currently in phase III of a gout drug. This gives me more cash up front to buy stock or options with. I'm currently not sure if I should have sold 2 options on that. I think I may buy one back if the share price approaches 11-12 per share. Regardless I used the money to purchase 100 shares of EMC at 19.30 per share. I feel EMC is undervalued given the spinoff of VMW (currently own 90% of VMWare), and since they sold the 10% are sitting on a huge pile of cash that they can use to buyback stock or aquire someone. I anticipate a buyback of stock, enhancing shareholder value. It expect a result similar to CY when they spun off SPWR. Yes, I'm using Cramer's idea, but I used to own EMC and I think things have turned the corner for them.
My last trade was LMT. I saw the market decreasing, and realizing I have a flight reservation payment, a rate lock for mortgage payment and my monthly bills...I sold LMT. I think LMT could have ran up longer, but I wanted to preserve some liquidity in case the market drops like it did two weeks ago. At that time I had no money to buy low.
My options strategy is going well, only two days young. I could sell my TSL call I bought on monday for 7.60 / contract today for 8.50/ contract. That's a 12 percent or so gain in 2 days. I expect TSL to approach 60 by next March and I can net a 100 percent gain though. I think TSL and YGE are the most undervalued solar companies, and I expect the solar industry to continue rising similar to tech in 99-01. When we start seeing splits, we start selling.
That's all for now. These were my thoughts from yesterday, Aug 28, 2007.
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