The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, September 23, 2005
#276
** Volatility Continues… Value Abounds
Doral (NYSE: DRL) released a statement last night informing investors that the restatement was on track. More importantly, they released a firm date, November 10, by which they would issue the restatement, and they confirmed that it would fall within the expected range. I see this as a good sign, since it removes some of the uncertainty surrounding this issue. Expect volatility with Doral shares in the coming days as a result of this news.
Outside market factors, such as Hurricane Rita and a general negative environment, may cause the shares to “trade with the market,” but the long-term potential of our January 2007 LEAPS looks very good at this point.
Our Nasdaq-100 Trust put options (QQQ VL) that expire in late October are going to trade in very volatile fashion as well. I do not believe in trading short-term options, unless they are event driven, otherwise the time decay can kill the price quickly. We will most likely sell this option on Monday once the effect of the hurricane is made clear.
If the oil infrastructure in the Port Arthur area is hit hard, we should see a negative impact on the market. Look for an alert Monday.
Finally, our Microsoft options (WMF AF) are CHEAP. The shares are down about $1.25 since we got in, and the options are down about the same. This is quite puzzling since the options do not usually react in step with the shares when we are trading LEAPS. Especially in this case, when we have more than TWO YEARS left.
As I stated the other day, I am inclined to cease using stop-losses in cases where we have a good opportunity to make money and we have a LOT of time left. This is one of those cases. Continue holding this position. If it falls farther, we may double down.
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.
Copyright – 2005 Mt Vernon Options Club. Mt Vernon Options Club does not act as an investment advisor or advocate the purchase or sale of any security or investment. Mt Vernon Options Club 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. Mt Vernon Options Club 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 Mt Vernon Options Club 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 Mt Vernon Options Club, 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.
