Email – #455
Our US Airways (NYSE: LCC) spread is up for partial expiration after the market closes today. If you recall, we entered into a Calendar Spread on this play, taking much of our cash off the table. With oil prices plunging, US Air shares have surged, providing us with the opportunity to either sell another option when our December options expire, or to cash out for a nice triple-digit profit. I will look at the situation on Monday and issue a recommendation then.
Akamai (Nasdaq: AKAM), our most recent pick, soared just days after our recommendation. The move was fueled in large part by the insider buying of shares that followed our recommendation. Insiders loaded up to the tune of a few million dollars and the market actually reacted positively for a change!
Here’s what we are going to do with this windfall…
If you can enter into a bull spread, SELL the Akamai January 2011 $20 call option (OMU AD) at current levels of $4.40 to $4.60 to take 95% of your cash off the table. That would leave us with a cost of around $0.10 to make the $5 spread – another potentially massive quadruple-digit profit trade.
If you can’t engage in a spread, go ahead and sell your Akamai January 2011 $15 call option (OMU AC) and lock in your profits. The option is currently trading over $6.
In this market, we’re unfortunately going to have some losses. And there are a few positions in the portfolio that do not look like they have a chance at returning us a profit. Our saving grace is that we did not risk a lot of capital, compared with investors who bought the shares. And with our spreads, we mitigated some of the loss by selling options against our buys. Liquidate the following positions:
Bank of America
WBA AK (sell)
GE Bull Spread
Option Symbol: WGE AG (Sell these)
Option Symbol: WGE AI (Buy these back)
MGM
Option Symbol: YDM AI (sell these)
Option Symbol: YDM AL (buy these back)
Valero Energy
YPY AL (sell)
Karim
Current Portfolio:
Company / Option: Akamai Tech. Jan. 2011 $15 calls
Option Symbol: OMU AC
Current Price: $5.80
Comments: See above instructions.
Company / Option: Yamana Gold Jan. 2011 $11 calls
Option Symbol: VPP AB
Current Price: $2.45
Comments: Hold.
Company / Option: Powershares QQQ Trust Jan. 2010 $40 calls
Option Symbol: WD AN
Current Price: $1.55
Comments: Hold.
Company / Option: Sanofi Jan. 2010 $30 calls
Option Symbol: WFK AF
Current Price: $5.20
Comments: Hold.
Company / Option: Valero Energy Jan. 2010 $60 calls
Option Symbol: YPY AL
Current Price: $0.15
Comments: Sell.
Company / Option: Pfizer Jan. 2010 $25 calls
Option Symbol: WPE AE
Current Price: $0.41
Comments: Hold.
Company / Option: Bank of America Jan. 2010 $55 calls
Option Symbol: WBA AK
Current Price: $0.10
Comments: Sell.
Company / Option: Mylan Labs Jan. 2010 $20 calls
Option Symbol: WYQ AD
Current Price: $0.35
Comments: Hold.
Company / Option: Petrobras – bull spread
Jan. 2011 $30 call (bought)
Dec. 2011 $45 call (sold)
Option Symbol: VDW AF
Option Symbol: VDW AI
Current Price: $8.40
Current Price: $4.40
Comments: Hold
Company / Option: MGM Grand – bull spread
Jan. 2010 $45 call (bought)
Dec. 2010 $60 call (sold)
Option Symbol: YDM AI
Option Symbol: YDM AL
Current Price: $0.10
Current Price: $0.20
Comments: Close out position.
Company / Option: Motorola – bull spread
Jan. 2010 $7.50 call (bought)
Dec. 2010 $10.00 call (sold)
Option Symbol: WMA AU
Option Symbol: WMA AB
Current Price: $0.62
Current Price: $0.37
Comments: Hold
Company / Option: USAir – bull spread
Jan. 2010 $10 call (bought)
Dec. 2008 $12.50 call (sold)
Option Symbol: LUL AB
Option Symbol: LCC LV
Current Price: $3.20
Current Price: $0.10
Comments: Hold
Company / Option: General Electric – bull spread
Jan. 2010 $35 calls (bought)
Jan. 2010 $45 calls (sold)
Option Symbol: WGE AG
Option Symbol: WGE AI
Current Price: $0.16
Current Price: $0.10
Comments: Hold
Company / Option: Tenet Healthcare – bull spread
Jan. 2010 $5 call (bought)
Jan. 2009 $7.50 call (sold)
Option Symbol: YTX AA
Option Symbol: THC AU
Current Price: $0.12
Current Price: $0.05
Comments: Close out position.