The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Thursday, May 11, 2006
#313
** The Big V Is Back
A couple of weeks back, we made the VIX trade – banking on the return of volatility. Since then, the VIX is up sharply, and our options are following slowly. Increased volatility is a good thing for the options markets, as it will make for sharper moves, up and down.
Our QQQQ put spread is up 40% right now and heading in the right direction. The next support level for the QQQQ is $38 – we are still a little way off that number, but if that is breached, it will be a long summer.
Target Corp. reported poor earnings, just as we anticipated when we went short the shares. We should have held on a little longer, but we made a nice profit, regardless. I bring this up to show you that LEAPS profits can occur quickly, no matter the point in the options cycle.
We currently have a couple of positions that are underwater – low dollars risked, but still underwater. Once sentiment changes for those companies, BSX in particular, we could see a nice pop. By the way, insiders at BSX are still buying as recently as yesterday. And, two major funds, Legg Mason and Maverick Capital, both initiated new positions in the company last quarter, to the tune of more than 10 million shares each.
We are short the market right now and the direction is in our favor. Sit tight; we have time on our side. I am starting to look at the gold LEAPS for a good entry point. The premiums are excessive right now, so we may have to do a spread to reduce our cost. There is an outside chance that we may engage a straddle (going long and short) if gold breaks the $600 level… not out of the realm of possibility, considering the huge daily moves. I will keep you updated, but I believe that we will have better opportunities at cheaper prices in coming weeks.
Current Portfolio:
Company / Symbol: CBOE Volatility Index (WCB: ^VIX)
Option / Symbol: Feb. 07 $15 call (VIX BC)
Date Purchased: 5/3/06
Current Price: $2.70
Comment: Hold.
Company / Symbol: sanofi-aventis (NYSE: SNY)
Option / Symbol: Jan. 08 $60 call (WFK AL)
Date Purchased: 4/17/06
Current Price: $3.00
Comment: Hold.
Company / Symbol: Boston Scientific (NYSE: BSX)
Option / Symbol: Jan. 08 $30 call (WBX AF)
Date Purchased: 2/27/06
Current Price: $1.15
Comment: Hold
Company / Symbol: Microsoft (Nasdaq: MSFT)
Option / Symbol: Jan. 08 $30 call (WMF AF)
Date Purchased: 8/8/05
Current Price: $0.90
Comment: Hold.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $11.44
Comment: Hold.
Bull & Bear Spreads
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 08 $35 call (WZY AG)
Date Purchased: New
Current Price: $5.10
Comment: Hold.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 08 $45 call (WZY AI)
Date Purchased: New
Current Price: $2.45
Comment: Hold. Sold call against January 08 $35 position.
Company / Symbol: Nasdaq 100 Trust (Nasdaq: QQQQ)
Option / Symbol: Jan. 07 $42 put (VCQ MP)
Date Purchased: 2/1/06
Current Price: $3.20
Comment: Hold.
Company / Symbol: Nasdaq 100 Trust (Nasdaq: QQQQ)
Option / Symbol: Sell Jan. 07 $38 put (VCQ ML)
Date Purchased: 2/1/06
Current Price: $1.30
Comment: Hold. Sold put against January 07 $42 position.
Company / Symbol: Energy Select SPDR (AMEX: XLE)
Option / Symbol: Jan. 07 $39 put (ORJ MM)
Date Purchased: 3/1/05
Current Price: $0.30
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: $0.15
Comment: Hold. Sold put against January 07 $39 position.
