The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Tuesday, October 24, 2006
Email – #343
** Coal in our Stockings?
The shares of retailer JW Nordstrom (NYSE: JWN) have moved higher in the past few weeks, putting our put LEAP position in jeopardy.
They should be reporting earnings in mid-November. At that time, we will either cut and run, or stay the course – depending on the commentary from the conference.
Unfortunately, this play has not gone our way, despite strong signs of a weakening economy and a strapped consumer who is hurt daily by declining home values and the inability to tap into equity. Lower oil prices have helped the mood of the consumer, but saving $10 on a fill-up pales in comparison to the possibility of an extra $200 or $300 per month payment when the adjustable rate mortgage actually adjusts.
Still, not every consumer is strapped. Our investment thesis was based on an overall slowdown in 2007, something that should be alluded to by retailers when they report earnings.
As it stands now, the shares of Nordstrom are extremely stretched, trading at more than 23 times next year’s earnings, while posting 10% year-over-year growth. Sometimes, fundamentals do count. Right now, it’s not one of those times. The options are still holding onto a lot of premium, considering the move in the shares. That usually indicates that there is substantial room for a big move up or down in the company’s future.
Our plan is to stick it out until the earnings release. Stay tuned for any changes.
Good Investing,
Karim Rahemtulla
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Current Portfolio:
Company / Symbol: Nordstrom (NYSE: JWN)
Option / Symbol: Jan. 08 $40 put (YJY MH)
Date Purchased: 9/26/06
Current Price: $2.65
Comment: Hold.
Company / Symbol: Equity Office Properties (NYSE: EOP)
Option / Symbol: Jan. 09 $30 put (OLH MF)
Date Purchased: 6/22/06
Current Price: $0.95
Comment: Hold.
Company / Symbol: Microsoft (Nasdaq: MSFT)
Option / Symbol: Jan. 08 $30 call (WMF AF)
Date Purchased: 8/8/05
Current Price: $2.05
Comment: Hold.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $12.21
Comment: Hold.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 08 $35 call (WZY AG)
Date Purchased: 4/25/06
Current Price: $3.00
Comment: Hold.
Bull & Bear Spreads
Company / Symbol: AMD Micro Devices (NYSE: AMD)
Option / Symbol: January 2009 $35 call (VVV AG)
Date Purchased: 6/21/06
Current Price: $2.45
Comment: Hold.
Company / Symbol: AMD Micro Devices (NYSE: AMD)
Option / Symbol: January 2009 $45 call (VVV AI)
Date Purchased: 6/21/06
Current Price: $1.40
Comment: Hold. Sold call against January 09 $35 call position.
Company / Symbol: CBOE Volatility Index (WCB: ^VIX)
Option / Symbol: Feb. 07 $15.00 call (VIX BC)
Date Purchased: 5/3/06
Current Price: $1.90
Comment: Hold
Company / Symbol: CBOE Volatility Index (WCB: ^VIX)
Option / Symbol: Feb. 07 $17.50 call (VIX BW)
Date Purchased: 6/14/06
Current Price: $1.35
Comment: Hold. Sold call against Feb. 07 $15 position.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $30 call (OPJ AF)
Date Purchased: 6/9/06
Current Price: $4.70
Comment: Hold.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $40 call (OPJ AH)
Date Purchased: 6/9/06
Current Price: $2.70
Comment: Hold. Sold call against January 09 $30 position.
Company / Symbol: Teva Pharmaceutical (Nasdaq: TEVA)
Option / Symbol: Jan. 08 $40 call (WTX AH)
Date Purchased: 5/23/06
Current Price: $2.35
Comment: Hold.
Company / Symbol: Teva Pharmaceutical (Nasdaq: TEVA)
Option / Symbol: Jan. 08 $45 call (WTX AI)
Date Purchased: 5/23/06
Current Price: $1.20
Comment: Hold. Sold call against January 08 $40 position.
Company / Symbol: Energy Select Sector SPDR (AMEX: XLE)
Option / Symbol: Jan. 07 $39 put (ORJ MM)
Date Purchased: 3/1/05
Current Price: $0.15
Comment: Hold.
Company / Symbol: Energy Select Sector SPDR (AMEX: XLE)
Option / Symbol: Sell Jan. 07 $37 put (ORJ MK)
Date Sold: 3/30/05
Current Price: $0.25
Comment: Hold. Sold put against January 07 $39 position.
