The LEAPS Option Trader
105 W. Monument Street
Baltimore, MD 21201
Thursday, October 13, 2005
#281
** Doral Update
Doral Financial (NYSE: DRL) is our most speculative options position. The shares have been weak recently, as a result of the weak overall market and investor trepidation about the upcoming restatement. Unfortunately, the shares are also being impacted by rising interest rate fears, which is affecting all of the financials.
Here is the latest on Doral:
1) The company announced that it would restate its earnings by November 10. I think it will happen sooner rather than later – maybe as soon as November 1. The company has several preferred share issues that are listed on the Nasdaq – these have nothing to do with the common shares. These PREFERRED shares are subject to being delisted if the company does not file by November 1, or get a further extension. While this has no bearing on the common shares, it would not “look” good.
2) The company’s current CEO, John Ward, was just granted options to purchase DRL shares at $12.86, good for a year. This is a good sign. In my experience, when you dangle a carrot in front of a go-getter, he usually goes and gets.
3) The company has not issued any new material news regarding the restatement – this is very good news since it will most likely fall within 10% of what the company is projecting. Morningstar, the research outfit that has been closely following the situation has maintained its speculative buy rating, with a $35 fair value target.
4) Our options expire in more than a year. This should allow for the events to play out and for the company to begin to regain its value in the months ahead. That is, of course, if the restatement goes as expected and there is no fraud or intent to defraud – so far, there is NO sign of this. Rising interest rates may dampen some of the move, but once the rate rises are over (I think there may be two more left), financials will most likely rally, adding more fuel to the fire.
So, for now, hang tight and look for breaking news any day now.
Regards,
Karim Rahemtulla
Current Portfolio:
Company / Symbol: Microsoft (Nasdaq: MSFT)
Option / Symbol: Jan. 08 $30 call (WMF-AF)
Date Purchased: 8/8/05
Current Price: $1.70
Comment: Hold.
Company / Symbol: Sun Microsystems (Nasdaq: SUNW)
Option / Symbol: Jan. 08 $5 call (WSU-AA)
Date Purchased: 7/27/05
Current Price: $0.80
Comment: Hold.
Company / Symbol: Doral Financial (NYSE: DRL)
Option / Symbol: Jan. 07 $20 call (OVL-AD)
Date Purchased: 5/6/05
Current Price: $1.05
Comment: Hold.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $10.61
Comment: Hold.
Bull & Bear Spreads
Company / Symbol: Placer Dome (NYSE: PDG)
Option / Symbol: Buy Jan. 08 $17.50 call (YDI-AW)
Date Purchased: New
Current Price: $3.70
Comment: Hold
Company / Symbol: Placer Dome (NYSE: PDG)
Option / Symbol: Sell Jan. 08 $25 call (YDI-AE)
Date Purchased: New
Current Price: $1.80
Comment: Sold call against Jan. 08 $17.50 position.
Company / Symbol: International Game Technology (NYSE: IGT)
Option / Symbol: Buy Jan. 08 $30 call (WGG-AF)
Date Purchased: 9/6/05
Current Price: $3.40
Comment: Hold
Company / Symbol: International Game Technology (NYSE: IGT)
Option / Symbol: Sell Jan. 08 $40 call (WGG-AH)
Date Purchased: 9/6/05
Current Price: $1.25
Comment: Sold call against Jan. 08 $30 position.
Company / Symbol: Lexar (Nasdaq: LEXR)
Option / Symbol: Jan. 07 $7.50 call (VRF-AU)
Date Purchased: 10/7/05
Current Price: $2.05
Comment: Hold
Company / Symbol: Lexar (Nasdaq: LEXR)
Option / Symbol: Sell Jan. 07 $12.50 call (VRF-AV)
Date Sold: 10/7/05
Current Price: $0.80
Comment: Hold. Sold call against Jan. 07 $7.50 position.
Company / Symbol: Energy Select SPDR (AMEX: XLE)
Option / Symbol: Jan. 07 $39 put (ORJ-MM)
Date Purchased: 3/1/05
Current Price: $2.00
Comment: Hold.
Company / Symbol: Energy Select SPDR (AMEX: XLE)
Option / Symbol: Sell Jan. 07 $37 put (ORJ-MK)
Date Sold: 3/30/05
Current Price: $1.50
Comment: Hold. Sold put against Jan. 07 $39 position.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Jan. 06 $22.50 call (NQ-AX)
Date Purchased: 10/19/04
Current Price: $1.65
Comment: Hold.
Company / Symbol: Intel (Nasdaq: INTC)
Option / Symbol: Sell Jan. 06 $25.00 call (INQ-AE)
Date Sold: 11/2/04
Current Price: $0.60
Comment: Hold. Sold call against Jan. 06 $22.50 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.
Company / Symbol: Interactive Corp. (Nasdaq: IACI)
Option / Symbol: Sell Jan. 07 $30 call (VSW-AF)
Date Sold: 12/10/04
Current Price: $2.00
Comment: Hold. Sold call against Jan 07 $25 position.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Jan. 06 $22.50 call (NAY-AX)
Date Purchased: 8/29/03
Current Price: $0.05
Comment: Hold.
Company / Symbol: Nokia (NYSE: NOK)
Option / Symbol: Sell Jan. 06 $30 call (NAY-AF)
Date Sold: 2/9/04
Current Price: $0.05
Comment: Hold. Sold call against Jan. 06 $22.50 position.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 06 $12.50 call (CHK-AV)
Date Purchased: 7/28/03
Current Price: $18.20
Comment: Hold.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Sold Jan. 06 $15 call (CHK-AC)
Date Sold: 11/6/03
Current Price: $15.70
Comment: Hold. Sold call against Jan. 06 $12.50 position.
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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