Buy Big Lots Options On Upcoming Earnings
Feb 26, 2010 Earnings, Options, Trading Idea
The following is the latest trade from our Options Capitalist service.
Closeout retailer Big Lots (BIG) reports its latest earnings news on Monday. There is a very good likelihood the company beats estimates, which should send the shares higher.
Buy the Big Lots March 2010 32.50 calls. They are now trading at $1.90 by $2.05. Enter to $2.40. There is a fifteen cents spread between bid and ask, which is larger than what we prefer, but with a beat, we should see a $2-$3 pop in the stock.
The Options Capitalist is a subscriptions-based options trading recommendation service. More information about the service can be found here.
Option Trade of The Day – 02/26/2010
Feb 26, 2010 Uncategorized
The following is the latest from our subscription-based Navivest Options Writer service. It is a very compelling trade that we are making freely available to readers of the Navivest blog.
Shares of InterMune (ITMN) are trading at $13.84, currently down $0.14 on the day. The stock in in a downtrend, after rallying from $13.46 on January 22nd, to a high of $17.81 on February 3rd.
The options on the stock are very richly priced and the March 20 calls are asking $2.00! Selling these, translates into a 14% potential in just three weeks on a covered basis. We will be selling uncovered calls, making it a 100% proposition if the stock does not get called away on us.
As a biotech company, there is the risk that the comany could announce some news that sends the shares soaring, but those risks, in the three week time frame we will be in the trade, are limited in our opinion.
THE TRADE:
Sell the InterMune (ITMN) March 20 calls.
TRADE FOLLOW-UP:
The First Solar calls are now bidding just $0.05, down about 95%, which is great for us, having sold those calls. Keep position open.
For information on Navivest Options Writer, click here.
Tags: calls, covered calls, first solar, intermune, ITMN, option writer, Options
Selling First Solar Calls – Easy Money In The Bank
Feb 23, 2010 Options, Trading Idea, Uncategorized
Trade Update II
On Thursday February 11, we sent out a recommendation to subscribers of our Navivest Options Writer service, that they sell the First Solar (FSRL) March 150 calls.
Our recommendation was premised on the fact that the stock would have to climb about 35 points before the March 19 expiration and beyond that, our analysis of First Solar, revealed that there was too much negative overhang on the company, making it unlikely that the company would rally that much in so short a time period.
While the stock did rally a few points after we got in, its been sold off drastically since last Friday, February 18 and the March 150 calls, which we got $0.92 for, are now bidding just $0.06!
March 19 is still a ways off, and the stock could see some upside move, but there is now a better than 95% chance that even if we hold on through expiration, the stock stays below $150. Alternatively, we can actually close out the position now and we realize a profit of 93.47%.
Buying calls and puts provide a great opportunity for traders to realize incredible profits in a very short period of time. However, this should be done only with the utmost care and after conducting a very thorough analysis of the underlying stock to see if it has a good likelihood of moving in the direction you expect it to, as well as analyzing the options, including looking at the options’ greeks, to make sure its not priced in a manner that stacks the odds against you to begin with, as we do when selecting options trading candidates for our Options Capitalist service.
Alternatively, instead of just buying and calls and puts, traders should look to sell options as well, to put the odds when trading options, in their favor. Selling options also helps offset risks inherent in the portfolio, from just buying calls.
Eighty percent of all options expire worthless, which means that when you buy a call or put, there is a good chance that it will be a losing proposition.
Using our above trade as an example, while our subscribers where selling the FSLR March 150 calls, others out there were taking the other side of that trade, buying the calls in the hopes that First Solar either climbs to over $150, so that they can exercise the option and buy the stock at a lower price, or sell the calls at a profit if there is some rise in the stock. But as aforementioned, we sold those calls at $0.92 and they are now bidding $0.06, meaning anyone buying those calls on February 11 and holding on through today, has lost $.86 cents on each call they bought, or 93%.
For more information on Navivest’s subscription based trading advisory service, visit out website at http://www.navivest.com
Tags: calls, calls options, first solar, options writer, sell options
Generate Options Income Selling Calls
Feb 19, 2010 Options
On February 11, we recommended that subscribers to our Navivest Options Writer service, sell calls on solar panel maker First Solar (FSLR). Our rational was that we expected the stock to drop, as European countries such as Germany and Spain, were going to be cutting the subsidies they currently provide to their citizens for installing solar power.
The generous subsidies offered by Germany has made that country the leader among all countries in solar usage. With the planned cuts in subsidy, demand will be lowered and solar pricing, which has taken a hit over the past couple years, will continue to deteriorate. This obviously will impact First Solar’s profits.
When we sent out the recommendation, First Solar was trading at $114. 45. We sold the March 150 calls on the premise that it would be very unlikely the stock would climb that high by March 19, 2010, when the March options expired.The stock actually rallied a bit this week, but today, the stock is down on disappointing earnings news released yesterday and two downgrades, bolstering our contention that the stock will not hit $150 before the March expiration. If the stock holds below 150 and thus is not called away on us, our profit on the trade is 100%, in a month!
Writing options should be a part of every options trader’s portfolio. 80% of all options expire worthless, meaning that for those writing options, they have the opportunity to be right 80% of the time, making a very strong case for why traders should make selling calls a part of their repertoire. With the right stock picking strategy underlying their call writing/options selling strategy, option traders can consistently generate options profit every month.
For more information on our service, visit our website at http://www.navivest.com/services.htm.
Tags: calls, first solar, Options, options writing, selling calls
