Navivest Options Writer

03/23/10

Allegheny Technologies (ATI) – $54.03

ATI shares have had a good run since the last week of February. The stock is now seriously overbought and we should see some correction or at the very least, some sideways trading.

Sell the Allegheny Technologies May 2010 60 calls. They are currently asking $1.60. Enter here between $1.50 and $1.70.

Navivest

for mor information on our subscription based services, visit the Navivest website at http://www.navivest.com.

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