EOT Position Update – April 30, 2008

| April 30, 2008

April 30, 2008

Market Snapshot

Today the Dow Jones Industrial Average closed at 12,820.  For the first time since early January we actually traded above the 13,000 level.  But the nearly 200 point rally couldn’t hold on, we ended up closing down 11 points today.

Today’s big news was centered around the Fed rate cut.  Interest rates are now sitting at 2% after the Fed cut by 25 basis points.  But the real news is the lack of guidance on future cuts.  Has the Fed paused?  Are they going to cut more?  Only time will tell.

Also in the news was Warren Buffett.  He’s teaming with Mars to buy fellow candy maker Wrigley.  The deal is estimated at 23 billion.

Now for the trade updates.

Position Updates

Bearish Put  UAUA June 2008 $15 Puts (UALRC)
This is a new trade for the week.  I wish I would have put this trade on sooner.  High oil prices are going to crush the airlines.  Resistance is 17.50 and 20.  Support is 14 and 13, though I’d expect the stock to set new lows over the course of the next few weeks. 

  VNO June 2008 $95 Calls (VNOFS)
Thursday we had a monster rally in VNO trading up over 94. A few days later we traded, intraday to 95, then gave up some of those gains. Resistance is 100 and 105. Support is 85 and 80.

  CBI May 2008 $45 Calls (CBIEI)
CBI managed to climb well into the 49 range this week.  Then they announced earnings.  The bad quarter was a disappointment and the stock took out both of our support levels.

   RRC May 2008 $65 Calls (RRCEM)
RRC broke our original resistance levels moving to new highs a few weeks ago.

   COP May 2008 $75 Calls (COPEO)
COP crossed the 85 level, breaking both our original resistance levels.  Everyone should have very nice profits on this trade.

   NSC June 2008 $55 Calls (NSCFK)
The stock broke our original resistance levels a few weeks ago.

Parting Shots…

Here’s another subscriber question:  What’s a bull call spread and will you ever use them?

Bull Call spreads are an advanced options trading technique. They allow you to lower the cost of an option that you’re looking to buy.  The problem is it also limits your potential profit.

How it works.

First you buy a close to the money call option.  Then at the same time you sell a call option at a higher strike price.  Your maximum profit would occur when the stock trades above the higher strike price.  It’s a way to potentially put on a position at a reduced cost.  But remember, if the stock doesn’t move in the right direction, you can lose your entire investment.

The same type of trade can be done with put options as well.  As with any option trade there are risks.  Make sure you’re comfortable with and fully understand the risks and rewards of every trade – before you open a position.

In Elite Option Trader, we won’t be using any types of spreads.  There’s nothing wrong with them per se, it’s just not the strategy we’re following with this particular service.

Category: EOT Update

About the Author ()

Comments are closed.