The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Thursday, January 20, 2005
Email – #224
** Sell Lucent
The market is lackluster to say the least. The January “effect” has been negative and there is little sign of a turnaround as the market’s malaise continues day after day. Earnings are good, but not good enough and stocks of many highfliers are taking it on the chin.
Fortunately, that makes for good opportunities. The question is, when does the opportunity become so good that it can’t be passed up? For now I have my eye on a couple of opportunities…
Problem is that they keep getting cheaper every day. The dilemma is when to pull the trigger. Right now, each day brings cheaper prices and until that trend stops, it makes little sense to buy when tomorrow could be a better day. At some point, however, a disconnect will occur and the shares will be cheap regardless of the market.
Tomorrow, GE reports its earnings. They should be good. The importance however will be in the strength of the guidance. It could signal a turn in the market if GE comes out strong. Our GE calls are at a decent level considering what the market has done recently.
Our gold play, AngloGold, is suffering with a decline in the price of gold. However, that could change dramatically any day and the shares could move 10% to 20% in a matter of days when gold turns. The argument for gold still holds strong. As long as the US continues its unprecedented levels of deficit spending, gold will represent the ultimate hedge.
Our Daimler Chrysler puts are performing well, holding strong as the company’s shares begin their trek down. If DCX break below $44, we will be off to the races with this one.
As for the rest of our holdings, we are in great shape. Our strategy of bull spreads on Intel, Chesapeake and Interactive are cushioning any fall that is occurring in the markets.
Action to Take:
Recently Lucent (NYSE: LU), our only “flyer,” reported good earnings, but lower than expected revenues. The shares fell and so did our option.
Sell your Lucent options (YXL AA) at the market. The problem with flyers is they either work like magic or fall flat on their face. That is why it is prudent not to spend a lot of money on such a position.
There will be a new pick very soon – keep your powder dry.
Regards,
Karim Rahemtulla
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Current Portfolio:
Company / Symbol: AngloGold/Ashanti (NYSE: AU)
Option / Symbol: Jan. 07 $40 call (VKE-AH)
Date Purchased: 1/5/04
Current Price: $4.50
Comment: Hold.
Company / Symbol: General Electric (NYSE: GE)
Option / Symbol: Jan. 07 $40 call (VGE-AH)
Date Purchased: 1/4/04
Current Price: $2.40
Comment: Hold.
Company / Symbol: Daimler Chrysler (NYSE: DCX)
Option / Symbol: Jan. 07 $40 put (VLN-MH)
Date Purchased: 11/30/04
Current Price: $3.80
Comment: Hold.
Company / Symbol: Nortel Networks (NYSE: NT)
Option / Symbol: Jan. 06 $5 call (WNT-AA)
Date Purchased: 11/15/04
Current Price: $0.30
Comment: Sell.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Sell Jan. 06 $25.00 call (WNL-AE)
Date Purchased: 11/2/04
Current Price: $1.65
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: $2.70
Comment: Hold
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Sell Jan. 07 $30 call (VSW-AF)
Date Purchased: 12/10/04
Current Price: $2.75
Comment: Hold. Sold call against Jan 07 $25 position.
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Jan. 07 $25 call (VSW-AE)
Date Purchased: 9/14/04
Current Price: $5.40
Comment: Hold. No TS.
Company / Symbol: Lucent (NYSE: LU)
Option / Symbol: Jan. 06 $5 call (YXL-AA)
Date Purchased: 5/25/04
Current Price: $0.20
Comment: Sell at the market.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Sell Jan. 06 $30 call (WIK-AF)
Date Purchased: 2/9/04
Current Price: $0.05
Comment: Hold. Sold call against Jan. 06 $22.50 position.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Jan. 06 $22.50 call (WIK-AX)
Date Purchased: 8/29/03
Current Price: $0.15
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: $3.30
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: $4.70
Comment: Hold. No TS.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $10.52
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 – 2005 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.
