The LEAPS Trader
105 W. Monument Street
Baltimore, MD 21201
Tuesday, May 22, 2007
Email – #375
** New Highs Aplenty
The bulls are running and so is our portfolio of LEAPS.
Chesapeake (NYSE: CHK) is back on track and trading with strength going into the summer, just where we want to be. Because this is a LEAP for January 2008, the time decay will occur at a faster rate in coming months, and we will be selling this position before summer’s end.
Freeport Copper and Gold (NYSE: FCX) is at new highs, and our bull-spread is looking very healthy, up over 50% to date. With FCX, it’s all about three things: China, private equity and strong earnings. The China story, while volatile, will likely continue until mid-2008 when the Chinese play host to the Olympics. As for private equity, Freeport bought Phelps Dodge last year at a price many thought was too high… only to be vindicated by the prices being paid today for mining companies. And earnings at FCX are extremely strong with the shares trading at a forward price earnings of less than 10.
Teva (Nasdaq: TEVA) is also setting new highs, and our TEVA bull-spread is quite profitable as well. The company is introducing a slew of new products, and earnings are coming in better than expected. There is one caveat with Teva – the company is subject to ongoing lawsuits by other pharmaceuticals, which are continually challenging Teva’s right to make its drugs available in the generic market. For the most part, this is a cost of doing business and Teva wins in most scenarios. But there will be an occasional blip that carries headline risk for the company, and the shares will react in volatile fashion when this type of news hits the wires.
Microsoft (Nasdaq: MSFT) continues to power higher, trading within a whisker of its 52 -week high last week. The shares pulled back because of an acquisition in the Internet ad space, which it paid $6 billion for. This is a drop in the bucket for the company, but it has a history of paying top dollar, and in this case the market is not rewarding the company for its buy.
Our S&P 500 MITTS (AMEX: MCP) are at all-time highs with the S&P setting new highs. We have terrific protection with this play as our principal is guaranteed at $10, above our entry price. Raise your sell-stop on this position to $13.
I’m looking at a pick right now that has very good potential to make money for us over the next few months. Heavy insider buying by top officers and a strong business model for just about any market condition are compelling reasons to buy into this story. I am still researching the opportunity. One of the issues is the price of the options. I am trying to figure out a way that we can buy this company without laying out more than 10% to 15% of the underlying share price.
Stay tuned, we will probably be entering this position later this week or early next week.
Good Trading,
Karim
——————————————————————————–
Current Portfolio:
Company / Symbol: Coeur D’Alene (NYSE: CDE)
Option / Symbol: Jan. 09 $2.50 call (ZYB AZ)
Date Purchased: 4/17/07
Current Price: $1.75
Comment: Hold.
Company / Symbol: Nasdaq 100 Index (Nasdaq: QQQQ)
Option / Symbol: Jan. 08 $40 put (WD MN)
Date Purchased: 11/27/06
Current Price: $0.55
Comment: Hold.
Company / Symbol: Microsoft (Nasdaq: MSFT)
Option / Symbol: Jan. 08 $30 call (MSQ AK)
Date Purchased: 8/8/05
Current Price: $2.83
Comment: Hold.
Company / Symbol: S&P 500 MITT (AMEX: MCP)
Date Purchased: 7/18/03
Current Price: $13.59
Comment: Hold. Raise sell stop to $13.
Company / Symbol: Chesapeake Energy (NYSE: CHK)
Option / Symbol: Jan. 08 $35 call (CHK AG)
Date Purchased: 4/25/06
Current Price: $3.80
Comment: Hold.
Company / Symbol: Advance Micro Devices (NYSE: AMD)
Option / Symbol: January 2009 $35 call (VVV AG)
Date Purchased: 6/21/06
Current Price: $0.25
Comment: Hold.
Bull & Bear Spreads
Company / Symbol: Freeport (NYSE: FCX)
Option / Symbol: Jan. 09 $60 call (OMT AL)
Date Purchased: 3/5/07
Current Price: $20.70
Comment: Hold.
Company / Symbol: Freeport (NYSE: FCX)
Option / Symbol: Jan. 09 $70 call (OMT AN)
Date Purchased: 3/5/07
Current Price: $15.60
Comment: Hold. Sold call against January 09 $60 position.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $30 call (OPJ AF)
Date Purchased: 6/9/06
Current Price: $2.80
Comment: Hold.
Company / Symbol: GoldCorp (NYSE: GG)
Option / Symbol: Jan. 09 $40 call (OPJ AH)
Date Purchased: 6/9/06
Current Price: $1.25
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: $4.00
Comment: Hold.
Company / Symbol: Teva Pharmaceutical (Nasdaq: TEVA)
Option / Symbol: Jan. 08 $45 call (WTX AI)
Date Purchased: 5/23/06
Current Price: $1.70
Comment: Hold. Sold call against January 08 $40 position.
