Despite the lack of a dip to buy last week I am going to take a chance on entering some new plays.
I would have liked it a lot better if we could have gotten a decent dip but the market has not cooperated. The end of day buying spurts is a change in sentiment on new quarter end fund inflows, earnings expectations and positive comments on global growth. I am hoping that continues next week but we are probably going to have to live without the quarter end money flows. That quarterly event has run its course.
I still believe we can see the markets rise to some extend over the next two weeks. It should be enough time to see the premiums deflate on the plays I am suggesting. I am expecting the market to begin to decline again by the end of July so we will keep some tight stops on the new plays once we make successful entries.
I picked some with high dollar options so there will be a quick decay of premium on a continued move higher. The object is not to hold them until expiration but until we are stopped out for a profit or we can close them for a decent gain. It is much easier to make a buck on decay on a $3 option than a $1 option.
I am not going to add the qualification that the market must be positive to enter these plays. I would like to see a decline at the open on Monday. If a stock opens negative then we will wait until it turns positive to enter the play. If you see a chance to sell the dip for a better entry then go for it but the official entry will be a positive open or a return to positive territory if the stock opens lower.
No Open Positions
CRR - Carbo Ceramics - $80.12
Carbo broke out to a new high last week on multiple upgrades. The strike I am recommending is more than $5 out of the money and below support. Carbo makes proppant particles that are injected into a shale gas well during the fracking stage. Their business is booming.
ENTER TRADE ONLY IF CARBO is positive.
SELL August $75 PUT (CRR-10T7500) currently $2.65 stop CRR @ $77.50
Chart of CRR
CRM - SalesForce.com Inc - $91.82
SalesForce appears to have recovered from the late June dip and moving higher. Earnings are not until August so no important events to produce surprises.
ENTER TRADE ONLY IF CRM is positive.
SELL AUGUST $85 PUT (CRM-10T8500) currently $3.20, stop CRM @ $88.00
Chart of CRM
VMW - WMWare - $69.91
VMWare took a $12 beating since late June and is recovering nicely. We should get a big decline in premium as August becomes front month. Earnings are July 20th so we need to exit on the 19th. That is one day into the August expiration cycle.
ENTER TRADE ONLY IF VMW is positive.
SELL AUGUST $65 PUT (VMW-10T6500) currently $2.50, stop VMW @ $66.50
Chart of VMW
CMG - Chipolte Mexican Grill - $140.47
We are selling $10 out of the money on CMG for a huge premium. Support is $135 and we are going to sell the $130 strike. Earnings are July 22nd so we need to exit on the 21st if not earlier. CMG has been a momentum darling but the recent market weakness has taken some of the bloom off the rose. CMG may have some growth problems ahead but we only need it to hold its gains for the next eight days.
ENTER TRADE ONLY IF CMG is positive.
SELL AUGUST $130 PUT (CMG-10T13000) currently $4.40, stop CMG @ $137.00
Chart of CMG
FSLR - First Solar - $132.13
FSLR has broken above recent resistance and appears to be surging higher. The two month depression in the solar sector has broken and the push is on to procure some additional tax credits for solar projects. President Obama asked for $5 billion in new money last week. We are going to sell well below the current price and pocket a large chunk of change.
ENTER TRADE ONLY IF FSLR is positive.
SELL AUGUST $120 PUT (FSLR-10T12000) currently $5.15, stop FSLR @ $124.75
Chart of FSLR