The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Friday, May 18, 2007
Email – #267
Another Big Winner: 175% in James River Coal
Dear Subscriber,
Please close the remaining half of James River Coal (Nasdaq: JRCC). At the current bid of $5.50, it’s a 175% gain.
I’m very happy with the James River Coal gain, which is helping to offset the pullback in our Diamonds Trust (AMEX: DIA) June 2007 $132 puts (DAW-RB). I’m leaving this trade open for now, as I’m still expecting profit taking in the major indexes. I will keep you posted.
Digital Realty Trust (NYSE: DLR) has finally started to break, and this is great news for our July 2007 $40 puts (DLR-SH), which are now in-the-money.
Because of time decay, we still have some ground to make up. However, the stock just broke the 50-day moving average – a significant event, as the 200-day moving average is sitting at $35, and is my “target” for the stock. Should the stock continue to fall, we will be sitting on a BIG winner. Our patience is finally starting pay off on this trade.
** New Trade ***
Today, we are going to buy the Bunge (NYSE: BG) July 2007 $80 calls (BG-GP) for no more than $2.80.
On a fundamental level, the company is solid. I am most encouraged with the extremely low price to sales ratio of 0.4 and the optimistic 15 forward P/E. (The industry average is almost 33).
Bunge is also a great way to capitalize on China, as the company is well poised to become a leader in soybean sales to the starving nation. China has 1.3 billion mouths to feed, and while the country used to be the largest exporter of soybeans, is now the largest consumer in the world. What’s more, global warming is taking a toll on world’s crop production, with global grain stocks at 30-year lows.
Domestically, many U.S. farmers are going out of business, as many crop prices are at record lows. And this is because only a few large companies control the bulk of America’s agriculture. This is a sad state of affairs, and implies great risk buying agriculture in the U.S.
However, Bunge specializes in emerging economies, and feeding the broader world, which is were prices are poised to skyrocket. Hence our position in a global company, rather than a domestic one.
Bunge recently experienced three months of profit taking, and has bounced off the 50-day moving average, another encouraging sign for our long position.
I’m expecting new highs for this company in the coming weeks, which will bode well for our stock; however, should the major indexes truly begin to fail, I will close this position to avoid taking a loss based on sympathy selling.
Exit is everything,
Mark Whistler
Current Portfoli
Bunge Ltd. (NYSE:BG)
Jul 07 $80 calls BG-GP
Purchased: NEW
Current Price: Buy at $2.80 or better.
Diamonds Trust (AMEX: DIA)
Jun 07 $132 puts DAW-RB
Purchased: 5/10/2007
Current Price: $0.65
James River Coal Company (Nasdaq: JRCC)
Jun 07 $7.50 calls JQM-FU
Purchased: 4/24/2007
Current Price: Take Profits and Close Position
InterContinental Exchange (NYSE: ICE)
June 07 $100 puts ICE-RT
Purchased: 3/21/2007
Current Price: $0.00
June 07 $155 calls IHH-FK
Purchased: 3/21/2007
Current Price: $1.70
Digital Realty Trust (NYSE:DLR)
July 07 $40 puts DLR-SH
Purchased: 3/14/2007
Current Price: $1.60
