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Call Updates

Allergan - AGN - close: 57.96 change: -0.72 stop: 54.95

AGN weathered the Monday market sell-off pretty well. The stock only lost 1.2% but shares did close under its simple 200-dma, which is a technical negative. The stock looks like it could dip back to the $56.00 region if the market continues lower. Given this market's volatility the safest bet may be to just exit all positions and wait for the smoke to clear. That would mean exiting AGN if you did go long today especially if you don't want to endure a drop back to $56.00 and risk being stopped out. I do think AGN will continue to show some relative strength. Wait for the bounce in the $57-56 zone before considering new bullish positions. More conservative traders may want to use a stop closer to $56.00 instead. Our target is the $64.00-65.00 range. The Point & Figure chart is bullish with a $75 target.

Picked on September 21 at $ 58.68
Change since picked: - 0.72
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 2.4 million


Tidewater Inc. - TDW - cls: 62.67 chg: +0.26 stop: 57.90

A massive rally fueled by short covering ahead of the crude oil futures expiration sent October crude prices up to $130 intraday before settling with a $15 gain. The November contract only rallied 5.6% toward $108. This lent some relative strength to the oil and energy stocks but even this strength was fading into the closing bell. The intraday low for TDW was only $61.27. Our suggested entry point to buy calls on TDW was the $60.75-60.00 zone. We are adjusting that entry range to $60.25-60.00 and more nimble traders may want to wait and see if TDW dips closer to $59-58 instead before jumping in. If triggered we're listing two targets. Our first target is $64.90. Our second target is $68.00.

Picked on September xx at $ xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 10/30/08 (unconfirmed)
Average Daily Volume = 1.4 million


Toll Brothers - TOL - close: 24.62 change: -2.22 stop: 23.95

Ouch! The homebuilders got crushed on Monday. Even an upgrade to a "strong buy" couldn't stop an 8.2% sell-off in TOL. The DJUSHB home construction index lost 12% as investors doubted how the government's latest bailout plan would help the homebuilders. A lack of details and a lack of faith permeated the market. If you entered this play at $25.00 instead of $26.00 the pain isn't quite so bad. More aggressive traders may want to widen their stop loss. It would be very easy for TOL to slip under $24.00 and hit our stop loss on an intraday spike before bouncing. The best case scenario here is that TOL bounces from here or above the $24.00 level. Wait for a move over $25.00 or $25.25 if you're looking for a new entry point for bullish positions. Honestly, in this volatile market I would hesitate to open almost any position.

Picked on September 22 at $ 26.00 *triggered 9/22
Change since picked: - 1.38
Earnings Date 12/04/08 (unconfirmed)
Average Daily Volume = 5.1 million


Washington Mutual - WM - close: 3.33 change: -0.92 stop: n/a

Wall Street was a lot less excited about the government's latest bailout plans come Monday than they were last week. On Friday a lot of the major financial stocks were up 20%. Today the average was a 10% decline. WM was hit hard with a 21.6% sell-off. There was some positive news. Another bank has joined the crowd of institutions considering a takeover of WM. There are currently six banks as potential suitors. However, investors could be nervous. There was some talk today that WM is in such dire straits that it is being pressured by government regulators to sell itself quickly. A significant downgrade by Moody's reinforced that issue. Plus, there was some discussion that WM might wait to see how the government's bailout plan takes shape before considering a sale of the company. So take your pick.... was the stock down because the company is in worse shape than expected? Or was the stock down because a sale of the company may be farther out than expected?

We were very specific that this was a high-risk, speculative bet that WM gets bought out at a premium. That's why we're not listing a stop loss because the stock is so volatile. We listed the October or January calls as suggested strikes to buy.

Picked on September 21 at $ 4.25
Change since picked: - 0.92
Earnings Date 10/22/08 (unconfirmed)
Average Daily Volume = 113 million


SPDR S&P Oil - XOP - cls: 50.83 chg: -1.19 stop: 46.75

Major oil stocks actually reversed into the red after spiking higher on a huge move in front month crude oil futures. Shares of the XOP ETF failed to rally past the simple 50-dma and bears could argue that the Friday-Monday move is a bearish reversal pattern. The stock hit our early target on Friday. We're not suggesting new bullish positions at this time. I am reiterating our weekend comments that more conservative traders will want to consider taking profits and closing this play right here. If XOP breaks the $50.00 level the next level of short-term support is the $48.00 mark. Our second target is $53.50.

Picked on September 16 at $ 46.70 /1st target hit 9/19/08
Change since picked: + 4.13
Earnings Date 00/00/00
Average Daily Volume = 2.0 million

Put Updates

Volatility Index - VIX - cls: 33.85 chg: +1.78 stop: n/a

Our put play on the VIX is not playing out as we expected but that doesn't mean it won't work for us. The big spike over 30 was a great entry point to buy puts as the VIX rarely stays this high for very long. The huge reversal on Thursday last week looked like a top, especially with the big bounce in stocks. Unfortunately, we are not in a normal market. The historic moves taken by the U.S. government last week are unprecedented and investors are unsure how to react. Last week's nonsense about banning short selling on almost 800 stocks threw another wrench in the gears and could affect how the VIX moves. The VIX is calculated on option premiums for the S&P 100 components. If market makers can't short stocks to hedge their positions they're going to raise spreads and premiums on options for those stocks, which could influence how the VIX is calculated. Investors aren't putting a lot of faith in the government's plan yet and that had stocks falling sharply today. Eventually volatility will recede as more details come forth on the bailout plan and as time passes. It would be very unusual for the VIX to stay above 30 for too long. It can happen and it has happened before but odds are against it. We would still consider buying November puts but you may want to see if the VIX spikes toward 40 again before initiating positions. We're setting our first target at 25.50. Our second target is 21.00.

Picked on September 16 at = 30.30
Change since picked: + 3.55
Earnings Date 00/00/00
Average Daily Volume = --- million

Strangle Updates


Dropped Calls

Amer. Intl.Group - AIG - cls: 4.72 chg: +0.87 stop: n/a

Target achieved. News that major shareholders of AIG are trying to organize a sale of assets to pay-off the U.S. government's loan to keep the company independent sent the stock soaring. Shares hit an intraday high around $5.50 (+43% intraday) and settled with a 22% gain. We were aiming for the $5.00 level with the expectation that we would be called out. If you haven't been called out of the position you will want to consider implementing some sort of stop loss that includes buying back the covered call if the stock hits your stop.

Picked on September 17 at $ 2.29 *opened 9/17, Target hit 9/22
Change since picked: + 2.43
Earnings Date 11/06/08 (unconfirmed)
Average Daily Volume = 69.8 million

Dropped Puts


Dropped Strangles


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