The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, February 25, 2005
Email – #234
** What’s 50 Bucks Worth?
You may be wondering why we have not closed out our Chesapeake Energy (NYSE: CHK) spread. You may recall that we have about $50 (for 10 contracts) at risk in our Chesapeake trade to make $2,500 by the end of this year if CHK stays above $15. It looks like a good bet right now since CHK is trading over $20 and just reported good numbers.
If we closed out the position today, we would be leaving about $500 on the table because of the spread. The $12.50 calls that we would sell would net us about $6.50, but the $15 calls we’d have to buy back would cost us $8.90, a spread of 40 cents or $40 per contract. It may not seem like much, but then our risk is very low at this point and giving up $400 for ten contracts seems like an unjustified expense.
Right now, all of our spread trades are quite profitable. I will continue to recommend these types of bull-spread trades in the future. After all, while $50 may seem like small change, $2,500 certainly is not.
Regards,
Karim Rahemtulla
Current Portfolio:
Company / Symbol: Comcast (Nasdaq: CMCSA)
Option / Symbol: Jan. 07 $35 call (VPK-AG)
Date Purchased: 2/16/05
Current Price: $3.80
Comment: Hold. Mental sell stop is $1.95.
Company / Symbol: AngloGold/Ashanti (NYSE: AU)
Option / Symbol: Jan. 07 $40 call (VKE-AH)
Date Purchased: 1/5/04
Current Price: $5.10
Comment: Hold.
Company / Symbol: General Electric (NYSE: GE)
Option / Symbol: Jan. 07 $40 call (VGE-AH)
Date Purchased: 1/4/04
Current Price: $1.75
Comment: Hold.
Company / Symbol: Daimler Chrysler (NYSE: DCX)
Option / Symbol: Jan. 07 $40 put (VLN-MH)
Date Purchased: 11/30/04
Current Price: $2.50
Comment: Hold.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Sell Jan. 06 $25.00 call (WNL-AE)
Date Purchased: 11/2/04
Current Price: $1.95
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: $3.30
Comment: Hold.
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Sell Jan. 07 $30 call (VSW-AF)
Date Purchased: 12/10/04
Current Price: $1.30
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: $2.85
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: $6.50
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: $8.90
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.
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