Weekly Update: May 9, 2013

| May 9, 2013

Weekly Update:  May 9, 2013


What To Watch

I’m going to take a break from the normal update to address some common questions from subscribers I’ve been getting lately.

Let’s start with how long a trade stays open.  Typically, my policy is that the trade is only good for the day of the recommendation.  However, I realize some subscribers may not be able to act on the trade alert during market hours.  As such, I don’t have any issue with executing the trade the next morning if the price is at or under our buy price.

That’s the official policy.  In other cases, use your discretion.  There’s clearly a big difference between an option with 50 days to expiration and one with 10 days to go.  Just remember, a $1.00 option with 50 days to expiration is completely different than a $1.00 with 10 days to expiration.  Time decay is our worst enemy – so trade accordingly.

Regarding stop losses – to put it simply, I don’t believe in using stop losses with options.  The price of options can swing all over the map before it expires, and I hate missing out on opportunities by getting stopped out too soon.

Now, there are clearly times when we’ll close out a position for a loss prior to expiration.  But, I always make that decision on a case by case basis.  Basically, in this service, we won’t be using stop losses.

Let’s take a look at our portfolio…


Portfolio Recap

Position #1:  Weatherford International (WFT) June $12 Calls

Price Paid: $0.92

Price Sold: $1.98

A combination of positive earnings and a better than expected jobs number propelled WFT to big gains last week.  We were able to close out our calls for 115% gains.  Nice work!


Position #2:  LinkedIn (LNKD) June $150 Puts

Price Paid: $1.18

Current Price: $1.05

Time Until Expiration: 43 days

After moving in our favor immediately after entering the trade, our LNKD puts have pulled back somewhat.  The options are now worth just a bit under what we paid for them.  The stock is sitting right at the 50-day moving average. If it breaks below this key level, there’s nothing but air until the 200-day moving average around $130.  Let’s hang on to our puts for a chance at huge gains.


Position #3:  Fusion-io (FIO) June $14 Calls

Price Paid: $1.15

Current Price: $1.40

Time Until Expiration: 43 days

FIO bounced pretty quickly after we entered the trade.  In fact, our calls are currently over 20% winners.  As I said in the trade alert yesterday, I feel the selling has been overdone in this stock.  I believe FIO will climb back to its 50-day moving average, just over $16 per share.  If that’s the case, our calls will be big winners.  Keep holding for big profits ahead.


Category: OTW Weekly Updates