Good evening traders. Over the past year there have been fairly decent sell-offs after options expiry on more than one occasion. I'm not saying this will happen again but I believe the conditions are ripe. If we get a rally tomorrow I would seriously consider selling positions into strength to preserve capital and lock in any profits. The returns on our positions are mixed right now but I would be particularly interested in selling OXY and PRE tomorrow if these stocks rally. Remember, exit positions when you can, not when you have to.
CALL Play Updates
Holly Corp - HOC - close: 25.89 change: -0.97 stop: 24.95
Well, HOC didn't exactly follow-through higher like we anticipated today. I could not find any specific news as to why the stock sold off so hard. But I bought calls shortly after the open and was frustrated all day long. In any event, here is how I will manage the position going forward. When you look at HOC's chart it tends to rebound nicely and quickly after violent sell-offs. HOC has sold off 5 times this year prior to the most recent sell-off and every time the stock has bounced back nicely. With the previous 4 sell-offs the stock has rallied to make new higher highs. I am looking for a similar rally but I am not looking for a higher high this time around (I wasn't looking for that when we released the play yesterday either). HOC's 200-day SMA at $25.53 should provide good support if there is continued weakness tomorrow. There is also good support from previous lows in this area. The stock's 50-day and 20-day SMA's just below $28.00 could pose some resistance if HOC rallies. Our stop remains just below recent support and the 200-day SMA at $24.95. Our 1st target is $28.90 and our 2nd target is $29.95.
Current Position: MAY CALL $25.00 @ $2.55
Entry on April 15th at $ 26.79
Earnings Date May 6th (unconfirmed)
Average Daily Volume = 811,000
Listed on April 14th, 2010
Coca-Cola - KO - close: 54.26 change: -0.69 stop: $53.39 *NEW*
The congestion/resistance area we have been mentioning in the $55 to $56 area proved to be too much for KO today as the stock sold off -1.26%. KO's price is coiling, making higher lows and lower highs over the past month. I don't think KO is going to do much until after options expiry on Friday. There are is a lot of open interest in April puts at or below $55.00 and April calls at $55.00. It seems logical that KO will stay below $55.00 until next week. There are 5 calendar weeks in the May options cycle so I am not too concerned about time decay right now. With that being said, if KO happens to rally I would suggest conservative traders sell positions to preserve capital and limit losses. Our target to exit the position remains at $57.00. I would like to move our stop up to $53.39 which is just below the 200-day SMA and April 8 low.
Current Position: CALL May $55.00 (KO 10E55.00) at $1.62
Entry on March 24th at $ 55.22
Earnings Date 04/21/10
Average Daily Volume = 14.6 million
Listed on March 23rd, 2010
Occidental Petrol. - OXY - close: 86.47 change: +0.31 stop: 83.45
OXY saw buyers step in again on weakness in the stock which created another bottom tail on the daily chart. We need OXY to break over $87.00 which should get the stock moving to our target of $88.75. The $3.25 calls we bought are now worth about $3.75 (+15%) so conservative traders should consider locking in profits or tightening up stops, especially if OXY rallies tomorrow. Our official stop is $83.45 but a more conservative stop could be placed $84.25 which is below the recent breakout. We have a longer-term target at $94.00 but this could take several weeks to achieve.
Current Position: BUY CALL MAY $85.00 (OXY 10E85.00) at $3.25
Entry on April 7th at $85.50
Earnings Date 04/29/10 (unconfirmed)
Average Daily Volume = 5.5 million
Listed on April 6th, 2010
PartnerRe Ltd. - PRE - close: 79.85 change: -1.12 stop: $78.75
We are getting whipsawed around with PRE right now. The stock gave back all its gains from Wednesday and closed down -1.38%. PRE traded almost to $81.00 early today before selling off hard. It just can't seem to break out above our key $81.05 resistance level. PRE is still above its upward trend line and holding onto to its 20-day SMA but I am getting concerned it has run out of steam. Yesterday I suggested conservative traders consider lightening up positions or take profits and I echo those comments again, although our calls are now in the red. Please just be nimble and honor the stop at $78.75 if PRE starts to sell off. I am going to lower our target slightly on this trade to $81.40 and will gladly take profits if we get there. A second more aggressive target is $83.90.
Current Position: CALL MAY $80.00 (PRE 10E80.00) $ $2.40
Entry on April 6th at $ 80.55
Earnings Date 04/27/10
Average Daily Volume = 989 thousand
Listed on March 20th, 2010
PUT Play Updates
SPDR S&P 500 Index - SPY - close: 121.29 change: +0.10 stop: 123.05
SPY took breather today thanks to a late day sell-off and closed only +0.08% higher. After Google's less than spectacular earning's after the bell, the S&P 500 futures were down about -2.50 points. If this carries into tomorrow we may see some selling pick up. Over the past year there have been some fairly decent sell-offs after options expiry. Our plan remains the same. Our target is $115.50 and we have a time frame of a couple of weeks. Our stop is $123.05 but expect to lower the stop if the trade gets moving in our direction.
Current Position: SPY PUT MAY $119.00, entry at $2.05
Entry on April 13th at $ 2.05
Earnings Date Not Applicable
Average Daily Volume = 164 million
Listed on April 12th, 2010
CLOSED BULLISH PLAYS
L-3 Communications - LLL - close: 95.61 change: +0.43 stop: N/A
We taking this play off of portfolio as options expire tomorrow. We chose the out of the money $100 calls to keep our capital investment very small and our position size limited. We have lost $0.30 on the trade.
Closed Position: CALL APRIL 100.00 (LLL 10D100.00) @ $0.00, entry at $0.30
Entry on March 18th at $ 93.88
Earnings Date 04/22/10
Average Daily Volume = 908 thousand
Listed on March 17th, 2010