The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, November 15, 2004
Email – #211
** Time for a Flyer
Our Lucent options are cranking up, as Lucent hits $4 per share. We still have a year to go on this option and it is looking better every day. Dynegy is also acting very well, showing us a 10% profit with more than a year left.
Now for today’s pick…
It is a SPECULATIVE pick – no two ways about it. We are going to take a position in Nortel Networks (NYSE: NT). Now, before you take on this play you must realize a couple of things: First Nortel is embroiled in a massive accounting restatement. It should be done by the end of January… that is the play here.
If Nortel comes clean, as it has indicated it would, then the shares will gain 10% to 30% overnight, giving us a very healthy return on our options. The downside could come if Nortel fails to report numbers and gets delisted for failing to file in a timely manner.
Nortel’s business is going very well. It is landing contracts all over the world, and it is in very little danger of going out of business. The company restructured all of its top management earlier this year in an attempt to clean house and win back credibility after accounting shenanigans.
Earlier this year, Nortel shares hit $8.50 on growth prospects. Since then it has been spiraling down. However, each time there is an inkling of good news – that is, another resolution to the filing issue – the shares rally by 15% to 20% in a week. That is what we are counting on.
As the end of the year approaches, many money managers who own Nortel are cleaning house in their own portfolios for tax purposes. They are selling Nortel to take advantage of the tax-loss benefits. That, along with the latest delay in filing, has put tremendous pressure on the shares. Consequently, we can make a SPECULATIVE bet on Nortel shares quite inexpensively.
Action to Take: Buy the Nortel January 2006 $5 call options (WNTAA). Please remember this is a SPECULATION and you could lose a big chunk of your investment if this does not pan out. Fortunately, the investment is only $0.35 per contract. Do not pay more than that. Our near-term target is $0.60 within three months if Nortel rallies after finally filing its financials. Again, do NOT pay more than $0.35.
Regards,
Karim Rahemtulla
Current Portfolio:
Company / Symbol: Nortel Networks (NYSE: NT)
Option / Symbol: Buy Jan. 06 $5 call (WNTAA)
Date Purchased: 11/15/04 – NEW
Current Price: $0.35
Comment: BUY. Do not pay more than $0.35.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Sell Jan. 06 $25.00 call (WNL-AE)
Date Purchased: 11/2/04
Current Price: $2.45
Comment: Hold. Sold call against Jan. 06 $22.50 position.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Jan. 06 $22.50 call (WNL-AX)
Date Purchased: 10/19/04
Current Price: $3.60
Comment: Hold
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Jan. 07 $25 call (VSW-AE)
Date Purchased: 9/14/04
Current Price: $4.30
Comment: Hold. No TS.
Company / Symbol: Lucent (NYSE: LU)
Option / Symbol: Jan. 06 $5 call (YXL-AA)
Date Purchased: 5/25/04
Current Price: $0.50
Comment: Hold. No TS.
Company / Symbol: Dynegy (NYSE: DYN)
Option / Symbol: Jan. 06 $5 call (YNY-AA)
Date Purchased: 5/25/04
Current Price: $1.20
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: $0.15
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: $0.45
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: $3.40
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: $5.30
Comment: Hold. No TS.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $10.51
Comment: Buy under $10. No TS.
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.
Copyright – 2004 Mount Vernon Publishing. Mount Vernon Publishing does not act as an investment advisor or advocate the purchase or sale of any security or investment. Mount Vernon Publishing expressly forbids its writers from having a financial interest in any security recommended to its readers. All of our employees and agents must wait 24 hours after an Internet publication prior to following an initial recommendation. And for hard-copy-only publications, 72 hours after the publication is mailed. Investments recommended in this letter should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company. Mount Vernon Publishing provides its members with unique opportunities to build and protect wealth, globally, under all market conditions. The executive staff, research department and editors who contribute to recommendations are proud of the reputation Mount Vernon Publishing has built since its inception in 1984. We believe the advice presented to its members in our published resources and at our meetings and seminars is the best and most useful available to global investors today. The recommendations and analysis presented to members is for the exclusive use of members. Copying or disseminating any information published by Mount Vernon Publishing, electronic or otherwise is strictly prohibited. Members should be aware that investment markets have inherent risks and there can be no guarantee of future profits. Likewise, past performance does not assure future results. Recommendations are subject to change at any time.
