EOT Position Update – August 11, 2010

| August 11, 2010

August 11, 2010

***Editor’s Note***  Keep an eye on your email.  I’m working on a new trade… you’ll see it shortly.

Market Snapshot

Did you know we’re going nowhere fast?

To show you what I mean, take a look at this weekly chart of the S&P 500 so far this year…


You can see there have been plenty of ups and downs.  But we’re right back where we started the year.  (Thanks for nothing!)

As if that’s not enough, volatility has accelerated since the flash crash in May.  One week we’re up, the next we’re down.  It’s enough to drive even the most hardened investor a little nuts.

The result?  Big money players who drive market momentum are sitting on the sidelines (or in Treasuries).

But that’s just part of the story.

We can still make a ton of money in this market.  With all this volatility, our options can rack up huge gains quickly.

But without momentum, you need to understand something.  You can either take profits quickly on the initial move or you can ride out the market swings.  And those swings are bound to be wild.

Both methods can generate spectacular gains.  There’s no right or wrong answer.  It’s up to you to decide which way works better.  If you’re riding out the ups and downs, remember to be patient.

Let’s move onto 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.

  DCO September 2010 $20 Puts
DCO fell off a cliff today.  It’s fallen from $21.54 two days ago to close at $19.38 today.  It pushed our put options into the money.  The plunge happened without any significant news.  Maybe other investors are starting to listen to us!  Revenue is falling and defense budget cuts are going to hurt DCO.  Aggressive traders should sit tight for now.  Resistance is at $22.50 and $24.25.  Support is at $18 and $16.

  BRCM November 2010 $39 Calls
BRCM took a hit this week.  An analyst covering the semiconductor sector said orders from PC makers “are falling off a cliff”.  Investors responded by selling off the entire semiconductor industry.  I think everyone’s overreacting.  But it’s a story I’m keeping close tabs on.  Hold tight for now.  Resistance is at $40 and $45.  Support is at $32 and $29.

  JNJ October 2010 $62.50 Calls
JNJ rallied to around $60 before pulling back a little the last few days.  The company hasn’t been able to put the recall of their health products behind them yet.  But it’s only a matter of time until they do.  Once these concerns are fully in the rearview mirror, the stock should gain momentum.  We still have plenty of time on these options.  Hold tight for now.  Resistance is at $62.50 and $65.  Support is at $57.50 and $55.

  ENS September 2010 $22.50 Puts
ENS reported earnings today after the markets closed.  They were in line with analysts’ estimates.  But revenue was down $15.5 million from last quarter.  That’s never a good sign.  But it’s great news for our put options.  Hold tight for now. Resistance is at $25.50 and $27.  Support is at $20 and $19.

Category: EOT Update

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