Back in Action GUEY!

Ahhh, it's nice to be trading options again... Now that Perm-a-bear and I have started our business, we've started to trade during the slower business days.

Put on a calendar spread today. Ticker MCD, sold a Nov Call, 57.50 strike and bought a Dec Call, 57.50 strike. Debit of .25 so not much risk on the downside here. MCD hasn't made many large moves in the last year, and given the past years volatility, there's little reason to believe it will move in the next month. Earnings come out late October, but little reason to believe there will be a major suprise to move the price substantially. Max profit is over $90. Great probablity of success.

BTW, go to put a plug in for the business. www.foodjetdeliveries.com

MOT Summary

Closed out MOT. My underlying target price was $7.00, however, I sold the put when the underlying could not break past the $7.05 price today. It kept bouncing back. With 50% profit achieved, and a delta of 46, I figured there was no reason to wait for the price drop to $7.00 for an additional $2.50 in profit. The stock has been trading sideways the past couple days, so I see no momentum to move it far below $7.00 in the near term, another factor in my decision to close the position.

Over all, one of my most successful trades to date. AL

HON, JNPR: Position Update

I decided to close out my JNPR bear put spread because I had achieved max profit potential and my broker does not charge for buying back options priced lower than .05. This essentially means that there is zero reason for me to hold onto this position, as I have risk with no further possible gain. Total profit on trade (1 contract spread): $40.00

The HON bear put spread is also at max profit but I haven't closed yet because I haven't been following equities too closely recently. Barring an astronomical event, the stock is going to stay far below my break-even price. Total profit (unrealized, 1 contract spread): $70.

I am currently monitoring an opportunity to get short Jun '09 Eurodollars. I am looking for a reversion to the levels where a recent breakout occurred. I'll keep you posted.

Permabear

CCL, MOT Update

Higher oil prices have continued to hamper Carnival. Most analysis of this company that I've read is bullish on CCL, noting it's at a bargain price. They could be right in the long run, but short term, this thing is going to continue to plummet. Analysts never mention airline prices either, which is an important factor in cruising, and continue to rise. Carnival is currently trading at $31.69 and I'm at a 100% paper profit. Will hold until next earnings or Carnival hits the strike of $25, which ever comes first. As the delta has steadily been increasing, my profits will begin to increase more quickly should the stock continue on its downward trend (Gamma is, however, relatively low).

Motorola has mostly been flat since my last post. Currently it is trading at $7.37. My price target is still $7.00 stock price. Option is now ITM. Up 34%, not looking for a huge return on this. Should see a 50%-60% profit. AL

Bearish on Cruises

Bought a very cheap OTM put on Carnival Cruises (CCL) about a month ago. High oil costs should not only effect their margins, but also their bookings. High airline tickets are a factor as many must fly to the embarking ports. In addition, as consumers look to cut back on expenses, we could see negative impact on their on-board customer spending (such as the $16 coconut drinks).

Position: JAN09 Strike $25. Earnings came out last week, with bookings on future cruises on pace with last year. Should drop before next earnings report. Will hold until next earnings report; expecting negative news for investors.

One concern I have is low liquidity when I want to close the position.

Trade is currently up 42% with CCL currently trading at $34.14. AL

Losses = Leasons Learned

"Whenever I have lost money in the stock market I have always considered that I have learned something; that if I have lost money I have gained experience, so that the money really went for a tuition fee." Edwin Lefevre - Reminiscences of a Stock Operator.

And my lesson learned: Never go against your instinct, or the market.

I was sure we were in a Bear market. Yet I got bullish on several stocks. And the market collected tuition.

My Nokia options expired worthless. My call on the Cemex vertical bear credit spread got exercised. I went against the market, and my instinct, resulting in losses.

All handset makers have seen a large decline in recent weeks. The state of the economy, plus the release of Apple's Iphone at half its previous price, have created large concerns for companies, such as Nokia, as there has been an increase in international competition. The share price has declined dramatically in the past few weeks.

So, going with my instinct, and market behavior, I bought a January ATM put option on Motorola on Thursday, strike 7.5. I'm already up 35% and have a target of $7.00 for the stock. With the current Delta at -.45, I am looking to close the position with a 50% gain. However, if Motorola breaks through the $7.00 barrier, I will hold my position and reevaluate.

I also had my first experience with being assigned. Cemex had declined rapidly in the past week, with no major news from the company explaining the decline. Then there was an unexpected hike in interest rates by the Mexican Government hurting shares further. I immediately liquidated my 100 shares at a decent price this morning, with a small gain. However, I will now close all my options positions in the future before expiration to eliminate assignment risk. AL

Trade Update

Just a quick update.

JNPR and HON bear put spreads are working out well.

I lost a decent amount on my PBR bull call spread. Moral of the story, if I am a permabear, then stick to shorting! Jk, anyways...

There was a nice run up in PBR which offered me an excellent opportunity to exit the position with a small loss ($30).

Not much going on besides that.

Until next time, Permabear OUT.