Option Investor

Portfolio Management

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A drop in oil prices, decent economic data and strong earnings from Apple (AAPL) lead to firmer Dow opening and positive close. In keeping to our disposition of 7-13-05 the following adjustments and trades were made to two of our current portfolio plays.

Adjustments to IBM and AMZN

7-14-05 Actions
IBM close $82.42
IBM seems to be just on a mission. The stock has moved straight up over 6 points since July 7, when it was hanging around $75.50. With the stock currently trading at $81.45 at the close of July 13th, it seems that a quick exit may be merited. If $82 is broken look to leave this position early and try to make the loss back over all this month. I would like to hold on until the July option series expires and see where we are, which could lead to a $2.50 - $2.75 Debit to close out if IBM breaks out above $82. Currently to close out the position it would be a DEBIT of $2.10 or a NET loss of $1.60 since we received a NET credit of $0.50. Let's hold here to expiration with a STOP at a NET DEBIT of $2.50 or a $2.00 loss or a penetration and
Close by IBM over $82.25.

Our IBM position was unfortunately stopped out for a NET DEBIT of $2.50 and a NET LOSS of $2.00 as IBM hit stop and closed above $82

AMZN - Amazon Close $37.19
It seems that Amazon wants to break out to the upside after bouncing off of $33 around July 1st, the stock has went directly up to test and break the $36 area. This puts out August 35 calls in a MONITORING position, since we received a credit of $0.80 and now are looking at a DEBIT of $2.10, we face a NET LOSS of $1.40. A test of $37 is probable. Any breakout above $37 and we take our loss. Looking for a STOP loss of $2.45 less the $0.80 credit we received of $1.65 or Amazon test and close above $37.
Our AMZN position was unfortunately stopped out for NET DEBIT of $2.45 as AMZN hit our STOP and closed above $37. This yielded us a NET LOSS of $1.65 after you credit the $0.80 we received for our initial premium.

We will keep you informed on any changes in regards to our current positions in future updates.

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