Navivest Stocks and Options Blog

Profiting From The Wild Market Volatility

Jun 2, 2010 Options

With the stock market currently undergoing an extreme case of volatility, individual investors are no doubt very nervous and debating whether they should be in the markets at all. If you are a trader, the answer is yes you should be in the markets. For a trader, these are the best of times.

Yesterday, with the pre-market indicators suggesting that the Dow Jones Industrial Average would open lower by more than a hundred points, we sent out trades for the day to subscribers of our Options Capitalist service.

Being that we were going to be seeing major moves to the downside in individual stocks, we sent out three trades instead of our usual one, in case one opened outside of our entry range. The trades consisted of two puts and one call and with stocks looking to open much lower, we knew the puts would open much higher and we did not want to be shut out for the day. By sending out three trades we were hoping that at least one would pan out. As it turns out, we were able to get into all three.

The trades were the Freeport McMoRan (FCX) June 65 puts, which we got into at $1.70, the First Solar (FSLR) June 100 puts, which we bought at $2.25 and the Randgold (GOLD) June 90 calls, which we entered into at $2.95.

We were looking for a much lower close from where we entered, but at 2:50 PM, we sent out an exit alert to close out all the trades. Not all our subscribers use auto trading and we were worried that if we sent out the exit alert after 3 PM, some of our subscribers might miss the email before the market close.

We closed out the FCX puts at $1.87, the First Solar puts at $2.74 and the Randgold calls at $3.43, which gave us decent gains of 10-20% in the trades. Not bad for one day, thanks to volatility. Of course, just as soon as we exited, the markets fell off a cliff and had we been able to hold on, we would have had over 25% gains in the put trades. But we did want to be out to avoid an up day today and as it stands, in the early going, FCX and FSLR are up.

While the volatile moves are scary, traders willing to brave it, can make very good money.

Tags: first solar, freeport mcmoran, Options, randgold

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

Stocks To Watch – 02/19/2010

Feb 19, 2010 Earnings, Stock Market, Stocks

Apollo Group (APOL)

College Operator Apollo Group, better known for its University of Phoenix, is off $4.11 to $67.34, a loss of 6.34% after announcing that it is anticipating its earnings for its second quarter period ending February 28, will come in between $0.77 and $0.82, with revenue coming in at $1.07 billion. This is below current consensus estimates of revenue of $1.09 billion and an EPS of $0.94.

First Solar (FSLR)

Solar panel maker First Solar is currently the worst performer among S”&P 500 stocks. The stock is off $8.98 or 7.11% to $117.31. First Solar reaffirmed its estimates for this year, announcing that it still expects revenue to come in between $2.7 to $2.9 billion, with EPS coming in at $6.05 to $6.85. Traders were disappointed that the company did not raise its guidance

Intuit (INTU)

Intuit, which makes software for personal and small business use, is up $2.60 to $32.92, a gain of 8.58%. The company reported yesterday, that its fiscal second quarter profits rose 34%. The company also reported selling 10.9 million units of its Turbo Tax software through February 13, which was a million units ahead of last year’s sales.

JC Penney (JCP)

The mall retailer is up $1.73 to $27.69, a 6.66% gain on the company’s latest earnings results. For its latest four quarter period, JCP reported earnings of $200 million, or $0.84 per share on revenue of $5.55 billion, a 3.6% decline over the comparable period a year ago. The earnings was down from $211 million or $0.95 in the same period a year ago.
Analysts had been forecasting revenue of $5.55 billion and an EPS of $0.82.

The company also raised current year guidance, announcing that it anticipates earnings of $1.55 per share, $0.10 better that the current consensus estimates of $1.45.

Smith International (SII)

The oil and gas services company, which is currently the second best performer among the 500 S&P 500 stocks, is up $4.65 or 13.94% to $38, on a report from the Wall Street Journal, that the company is in talks to be acquired by Schlumberger (SLB).

Tags: apollo group, first solar, intuit, jc penney, s&p 500, smith international