The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, February 7, 2005
Email – #228
** Position Update
So far our most recent picks, General Electric (NYSE: GE), AngloGold (NYSE: AU), UT Starcom (Nasdaq: UTSI) and Daimler Chrysler (NYSE: DCX) are off to a less than stellar start.
While GE as been trending up recently, the options have not followed. But with two years left, we only need a 10% rise in the NEXT 6 to 12 months to make a profit.
UTSI is a live or die stock/option. In the coming days the company will announce earnings and guidance. It will be win or lose with this one.
AU is different story. It is a pure gold play and gold has been correcting. Had you bought AU, the stock, you would be down significantly in dollar terms. The option, a two-year play, still has legs. Gold is retesting multi-month lows. If that re-test is successful, AU will move up strongly with the price of gold.
Finally, DCX. A few weeks ago, I mentioned that DCX had to fall below $44 for us to see signs of life in the option. We made it under $45 before we rallied back to $46 recently. While the shares are holding up the best of all the automakers, there are kinks in the armor. The dollar is still weak, oil is still high and many of the European markets the DCX serves are actually weakening.
While DCX is not a one-trick pony, the shares are strongly identified with the Daimler Benz and Chrysler division. So far, Ford and GM are both showing signs of sales declines and shortfalls this year – if DCX follows, its shares will fall hard.
All of the positions I just mentioned with the exception of our DCX put have another thing in common. According to the Black-Scholes valuation model that I use to calculate the price of any option trade we make, GE, UTSI and AU are between 20% and 30% below fair value. When the shares begin to move, I am counting on that premium remaining there to give us an added boost on the way up.
Regards,
Karim Rahemtulla
Current Portfolio:
Company / Symbol: UT Starcom (Nasdaq: UTSI)
Option / Symbol: Jan. 06 $20 call (WQZ-AD)
Date Purchased: 1/26/05
Current Price: $1.70
Comment: Hold.
Company / Symbol: AngloGold/Ashanti (NYSE: AU)
Option / Symbol: Jan. 07 $40 call (VKE-AH)
Date Purchased: 1/5/04
Current Price: $3.20
Comment: Hold.
Company / Symbol: General Electric (NYSE: GE)
Option / Symbol: Jan. 07 $40 call (VGE-AH)
Date Purchased: 1/4/04
Current Price: $2.30
Comment: Hold.
Company / Symbol: Daimler Chrysler (NYSE: DCX)
Option / Symbol: Jan. 07 $40 put (VLN-MH)
Date Purchased: 11/30/04
Current Price: $2.85
Comment: Hold.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Sell Jan. 06 $25.00 call (WNL-AE)
Date Purchased: 11/2/04
Current Price: $1.50
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: $2.60
Comment: Hold
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Sell Jan. 07 $30 call (VSW-AF)
Date Purchased: 12/10/04
Current Price: $2.30
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: $4.30
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: $0.05
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: $4.00
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: $5.90
Comment: Hold. No TS.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $10.65
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.
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