The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, October 22, 2004
Email – #207
** Straight Talk
I hope that is what you expect from me. Unlike many editors out there, I don’t hide behind my computer. When something is not right I will tell you. When it’s time to bail, I will tell you. That’s just the way I am. I have made more than 1,000 recommendations in my career and I make each one with the same intention – to win. That’s the way it is and that’s the way I am.
Why am I telling you this? Because I know that you may wonder sometimes about certain picks and why they are performing one way or another. And, you may be wondering if I really care about the pick if it isn’t a winner. I care about all of my picks. The winners make me really happy and the losers stink. That’s life. But each pick is made with the intent of winning – whether long, short, spread or straddle.
Right now our portfolio is in a weird state. We have several positions that are winning, some huge like CHK, PDG. Others like LU and DYN are on the cusp of winning. Then we have IACI and FRX, which are not doing so hot. Our new pick Intel is doing fine – it was up 10% in one day and now close to breakeven a day later.
But, what all of these picks have in common is that they were bought with 1) very little money compared to owning the stock, and 2) each one has AT LEAST a year and three months left to go. In fact, our poorest performing position IACI has OVER 2 years left to go.
It’s really easy to get caught up in the short-term market swings. But with LEAPS we have the luxury of creating OUR OWN little market with VERY LOW dollar risk and superior return potential.
Is every pick going to be a winner? My marketing department prays for that every night. But the reality is that we will have losers. However, when we make gains of double, triple and quadruple digits, then we can easily pay for any losers that we may have and still have a ton of profits left over.
Looking forward, November 3 will be the most important day of this investing year. How the market reacts to the winner will dictate the general tone for the next few months. For us it does not really matter who wins or loses, as long as we stick to our strategy of risking a little bit of cash to control a whole lot of money. In every type of market we will have ups and downs. With LEAPS, the trend is much more important than the strike price.
You’ve probably seen that annoying commercial about “channeling stocks” where the announcer talks about how stocks trade in ranges up and down. I believe we are in a range-bound market and our profits will be made by buying PUT LEAPS or CALL LEAPS with that belief in mind. There are very few breakout situations in the market today and so the skill will be to trade these ranges.
Regards,
Karim Rahemtulla
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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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