The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Thursday, February 17, 2005
Email – #233
** Losing The Patient
Our live-or-die option on UT Starcom (Nasdaq:UTSI) is definitely dying. The shares are about to break critical support at $14 per share. Unfortunately, the market sold off despite a good earnings report and the shares have done nothing but head south after initially bursting upward.
Action To Take:
Sell your UTSI January 2006 $20 call options (WQZ AD). As it stands now, the bid is at $1.20. You should easily be able to get out at $1.15 or better.
When selling the option, please do not just trash the bid with market orders. Sell your options carefully at the bid, and not in some type of panic. It is not a panic situation and all you will do is help the market maker make more money by artificially depressing the price. According to the Black-Scholes Model, the option is currently worth more than it is trading for. DO NOT place market orders – EVER.
On another note, our GE calls (VGE AH) are a great buy at current levels of $1.95. I am suspending our stop loss on this pick for now. The options are significantly undervalued in relation to the shares and with almost two years to go, this play is looking quite good, especially in light of the CEO’s recent million dollar insider buy and the excellent earnings release and 2005 guidance.
Regards,
Karim Rahemtulla
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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