Email – #520

Flying High While the Market Crumbles

I couldn’t be more pleased by how well our portfolio is performing, given this period of intense volatility. Consider for a moment what we’ve done while the market was selling off…

We took massive profits on our China Put LEAP.

And we set ourselves up for a quadruple-digit profit in the months ahead with absolutely NO risk.

Speaking of quadruple-digit profits, our US Air position got a huge boost in the right direction after just being upgraded. Shares soared by more than 25% this week, while the market tanked on an upgrade and lower oil prices.

Again, we’ve already taken big profits on US Air and still carry a position that could return us in excess of 2,000%, with no risk on the table.

And for the record, US Air is the fourth position in our portfolio to be upgraded this past week, joining Apple, Sprint and Citigroup.

Sprint, our most recent position soared this week taking our call options with it.

As I wrote just two weeks ago, the future for Sprint looks brighter. It moved up more than 20% at one point while its two largest competitors, AT&T and Verizon languished. We have more than 600 days left on this play. And our upside looks to be in the triple digits.

Our Apple Spread is pretty much treading water despite the fact that Apple shares have fallen hard and recovered even harder. Such is the beauty of a spread. We’re protected to some extent from down moves since we’re both long and short. Morgan Stanley came out this week and set a $400 price target as a “best case scenario” for next year, fully $40 higher than the upper end of our spread.

Not to be left out, Citigroup was upgraded by two separate firms this week, Goldman and Oppenheimer… no small potatoes!

After taking profits of more than 100% on this position recently, our remaining position is free and clear. And there’s plenty of upside in the picture. If Citi hits my target price of $10 next year, we’ll rack up gains of more than 1,000% on this position… without the aid of a spread.

Market volatility will continue. We have both long and short positions. We also have a bevy of spreads like Akamai and Yamana, which I have not talked about but are sitting pretty as well.

Akamai looks to return us close to 5,000% on the capital we have at risk if it closes above $20 (it’s in the mid $30s right now).

I’m looking at a few more positions right now. When the time is right, you can be sure we’ll pull the trigger again.

Karim

Current Portfolio:

Company / Option: Sprint(S) Jan. 2012 $5 call
Option Symbol: S120121C00005000
Current Price: $1.89
Comments: Hold

Company / Option: Citigroup(C) Jan. 2012 $5 call
Option Symbol: WRV120121C00005000
Current Price: $0.85
Comments: Hold

Company / Option: China ETF(FXI) – bear spread
Jan. 2012 $30 put (bought)
Jan. 2012 $25 put (sold)
Option Symbol: FXI120121P00030000
Option Symbol: FXI120121P00025000
Current Price: $4.05
Current Price: $2.67
Comments: Hold

Company / Option: Apple(AAPL) – bull spread
Jan. 2012 $300 calls (bought)
Jan. 2012 $360 calls (sold)
Option Symbol: AAPL120121C00300000
Option Symbol: AAPL120121C00360000
Current Price: $35.00
Current Price: $19.20
Comments: Hold

Company / Option: US AIR(LCC) – bull spread
Jan. 2011 $7.50 calls (bought)
Jan. 2011 $10 calls (sold)
Option Symbol: ZTG110122C00007500
Option Symbol: ZTG110122C00010000
Current Price: $2.70
Current Price: $1.65
Comments: Hold

Company / Option: Yamana Gold(AUY) – bull spread
Jan. 2012 $12.50 calls (bought)
Jan. 2012 $15 calls (sold)
Option Symbol: WNZ120121C00012500
Option Symbol: WNZ120121C00015000
Current Price: $2.12
Current Price: $1.60
Comments: Hold

Company / Option: Dryships(DRYS) – bull spread
Jan. 2011 $7.50 call (bought)
Jan. 2011 $12.50 call (sold)
Option Symbol: ZDU110122C00007500
Option Symbol: ZDU110122C00012500
Current Price: $0.38
Current Price: $0.13
Comments: Hold

Company / Option: Pulte Homes(PHM) – strangle
Jan. 2011 $7.50 put (bought)
Jan. 2011 $15 call (bought)
Option Symbol: OPN110122P00007500
Option Symbol: OPN110122C00015000
Current Price: $0.60
Current Price: $0.65
Comments: Hold

Company / Option: United States Natural Gas(UNG) – bull spread
Jan. 2011 $20 call (bought)
Jan. 2011 $25 call (sold)
Option Symbol: ZZM110122C00020000
Option Symbol: ZZM110122C00025000
Current Price: $0.10
Current Price: $0.07
Comments: Hold

Company / Option: Yamana Gold(AUY) – bull spread
Jan. 2011 $10 call (bought)
Dec. 2011 $12.50 call (sold)
Option Symbol: VPP110122C00010000
Option Symbol: VPP110122C00012500
Current Price: $2.05
Current Price: $1.05
Comments: Hold

Company / Option: Akamai(AKAM) – bull spread
Jan. 2011 $15 call (bought)
Dec. 2011 $20 call (sold)
Option Symbol: OMU110122C00015000
Option Symbol: OMU110122C00020000
Current Price: $23.22
Current Price: $20.25
Comments: Hold