EOT Position Update – November 2, 2011

November 2, 2011

Market Snapshot

It’s the same old stuff driving the market action this week…

The ebb and flow of news out of Europe is largely driving the market.  But when the fear of another credit crisis recedes, we can see there are some bullish elements at play.

Namely, corporate earnings aren’t as bad as once feared.  And economic data is coming in better than expected.

If Europe can get its act together, I can see the markets ending the year with a strong rally.  And that’s great news for our call options.

In fact, we’ve seen a big upswing in a number of our call options.  So, let’s jump right into the updates…

Position Updates

Just a quick note:  Remember, we won’t update every open position every week.  I try to focus on the positions that have some significant news or price movement.

   PEGA December 2011 $40 Calls
PEGA pulled back to support at the 50-day moving average yesterday.  But it’s moving higher again today.  Looks like we got in at a good time… Next week, we’ll get quarterly earnings.  I believe PEGA will beat the 28 cents the markets are expecting. And even if they don’t beat earnings, I think we’ll see strong revenue growth drive the stock higher.  Continue holding… Resistance is at $41.50 and $47.50.  Support is at $33 and $30.

  CNH December 2011 $40 Calls
CNH clobbered analyst estimates of $0.82 last week… They posted an impressive $1.13 per share.  The stock is up 68% since the early October low.  And our options… well, they topped out at a peak gain of 129%!  The rally brought us within striking distance of our first resistance level.  Conservative traders should look to exit around $39.50.  The 200-day moving average is just overhead at $39.51.  And we’ll often see a stock reverse (at least temporarily) on the initial test of the 200-dma.  More aggressive traders may want to hold on for a bit longer.  The next resistance is at $39.51 and $42.20.

  SBUX January 2012 $38 Calls
SBUX hit a new all-time high of $43.43.  Our options topped out at 128% gain this week.  Tomorrow SBUX reports earnings… The consensus estimate is 36 cents.  And the whisper number is 38 cents.  I think SBUX will beat estimates.  If it does, SBUX should be off to the races.  And our call options should soar!  Continue holding for the quarterly earnings announcement.

Category: EOT Update