The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Wednesday, September 29, 2004
Email – #203
** Travel Tales
This morning, Cendant Corp. announced that it had reached an agreement to buy online travel powerhouse Orbitz for $1.2 billion. What does that have to do with us?
Our latest pick, Interactive Corp. (Nasdaq: IACI) owns Expedia. Expedia is the 800-pound gorilla in the online travel business, doing more than three times the business of Orbitz. The Orbitz deal, a cash deal, values Expedia at more than $3 billion, about 1/4 of the valuation of IACI. To show you how undervalued IACI is at current levels, the company has several travel and non-travel franchises like Hotels.com, Ticketmaster, HSN, Hotwire, LendingTree, etc. – a veritable goldmine of major online and communications brands. When added up, the value of these brands is worth more than the share price. In light of the recent cash valuation for Orbitz, the value of IACI is quite a bit higher than the current share price.
I promised you volatility with this pick and we’re getting it. These shares have the potential to move $2 or $3 – either way – in one trading session. With more than 2.4 years left, this is a position that has the potential for excellent returns. While we have a $1.90 MENTAL sell stop on the options, I will more than likely recommend adding to the position if we get that low and still have two years or more left – UNLESS there is a structural issue at the company. In this market and with such a volatile issue, we may not have seen bottom yet, but if the insider purchases are any indication, we may be close.
Regards,
Karim Rahemtulla
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Current Portfolio:
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Jan. 07 $25 call (VSW-AE)
Date Purchased: 9/14/04
Current Price: $2.90
Comment: Hold. TS is $1.90.
Company / Symbol: Lucent (NYSE: LU)
Option / Symbol: Jan. 06 $5 call (YXL-AA)
Date Purchased: 5/25/04
Current Price: $0.30
Comment: Hold. No TS.
Company / Symbol: Dynegy (NYSE: DYN)
Option / Symbol: Jan. 06 $5 call (YNY-AA)
Date Purchased: 5/25/04
Current Price: $0.95
Comment: Hold. No TS.
Company / Symbol: Placer Dome (NYSE: PDG)
Option / Symbol: Sell Jan. 06 $25 call (YDI-AE)
Date Purchased: 4/1/04
Current Price: $1.50
Comment: Hold. Sold call against Jan. 06 $20 position.
Company / Symbol: Placer Dome (NYSE: PDG)
Option / Symbol: Jan. 06 $20 call (YDI-AD)
Date Purchased: 1/23/04
Current Price: $3.40
Comment: Hold. No TS.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Sell Jan. 06 $30 call (WIK-AF)
Date Purchased: 2/9/04
Current Price: $0.10
Comment: Hold. Sold call against Jan. 06 $30 position.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Jan. 06 $22.50 call (WIK-AX)
Date Purchased: 8/29/03
Current Price: $0.30
Comment: Hold. No TS.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Sold Jan. 06 $15 call (WZY-AC)
Date Purchased: 11/6/03
Current Price: $2.60
Comment: Hold. Sold call against Jan. 06 $12.50 position.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 06 $12.50 call (WZY-AV)
Date Purchased: 7/28/03
Current Price: $4.10
Comment: Hold. No TS.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $10.25
Comment: Buy under $10. No TS.
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Bio:
Karim Rahemtulla is the former Investment Director of The Oxford Club. The editor of The Smart Options E-Report, The Income Trader – A Covered Call Strategy and The LEAPS Option Trader, Karim is also a regular contributor to The Oxford Club Communiqué. His highly successful trading systems use covered calls and LEAPS to boost returns on blue chip stocks, and during the bear markets of 2000 and 2001, his picks outperformed the major market averages. Educated in England, Canada and the U.S. and fluent in several languages, Karim travels the world to find the best investment opportunities for our members.
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