EOT Position Update – August 5, 2009

| August 5, 2009

August 5, 2009

Market Snapshot

Did you see this headline today?  It’s a thing of beauty:

Pegasystems Announces Record Revenue of $63.9 Million and Net Income of $11.2 Million for Second Quarter of 2009; Increases Guidance for the Year

Our call options are up 266% on the news! 

Returns like this are a perfect example of why we recommend options close to an earnings announcement.  They can be extremely profitable.  It’s easy to see why, and it’s an important part of our strategy.  It’s hard to argue with a 266% winner.

There are risks… unforeseen announcements can derail even the best analysis.

Case in point are STEC and SYNA.  Our analysis was dead on.  But one-off events rained on our parade (see below for more details).

Let’s get back to our big winner… PEGA posts record revenue and net income in Q2 and increases guidance for the year.  They blew away analyst estimates of $0.11 by earning $0.30 per share.

The news has sent the stock and our options flying.

The spike sent the stock through our second resistance level today.  I think the stock should continue to run from here.  Everyone but the most aggressive traders should lock in profits.

Stay tuned, we’re looking for more opportunities for you to profit…

Now for 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 Dec 2009 $25 CALLS (PQMLE)
We covered PEGA in the market update…
Congratulations to everyone locking in a huge 266% profit!

  GT Jan 2010 $20 CALLS (GTAD)
Goodyear is a new trade we sent out today.  Everyone should have an opportunity to get into this option at a great price.  See the trade alert for more details.  Resistance is at $22 and $25.  Support is at $14 and $12.

  STEC Aug 2009 $40 CALLS (SQRHH)
STEC profits soar higher in Q2 (like we thought it would).  Their profit margins increased and sales topped forecasts.  To top it off, they increased their projections for Q3 and full year earnings.

Sounds like the stock, and our options, should be flying high… Unfortunately it didn’t work out that way.

Two executives announced the sale of 7.5 million shares in a public offering.  Clearly the market didn’t like the news.  Actions like these are unforeseeable and will happen from time to time (hopefully not too often).  I believe the shares will bounce back.  But I don’t think they’ll do it before our options expire in a few weeks.  Look to sell the options to conserve capital over the next week.

  SYNA Aug 2009 $37.50 CALLS (QYGHR)
Congratulations to everyone who locked in 135% gains before earnings were announced!  Last week we told you there were whispers their earnings weren’t going to meet the high expectations.  We also told conservative investors to lock in profits before the announcement.  Well, as it turned out, Q2 beat estimates (as we thought it would) but they gave a gloomy forecast for next quarter.  The stock price and our options took a beating on the announcement.  Look to sell into any strength and recoup capital before the options expire in a few weeks.

  INTC Oct 2009 $16 CALLS (NQJQ)
Our calls on Intel continue to set new highs.  We hit a new high of 199% this week! Only the most aggressive traders should still be holding these options.  We still have a few months until expiration.  Aggressive traders may want to hold out for bigger gains.

  RGR Aug 2009 $12.50 PUTS (EXPVX)
As we suspected, RGR’s orders decreased 59% in Q2 from Q1.  I think it’s only going to get worse for the gun maker going forward.  The stock is down sharply on the news. And our puts have seen a nice rally over the last week.  We’re closing in on the expiration date later this month.  Look to exit this position in the next week.

Category: EOT Update

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