EOT Position Update – January 4, 2012

| January 4, 2012

January 4, 2012

Market Snapshot

Happy New Year!

2011 is now safely in the books.  To say it was a volatile year would be an under-statement.  Hopefully the market gets back to trading on fundamentals in 2012.

If last week is any guide, we may be doing just that…

While investors remain fixated on European woes, two Italian bond auctions last week yielded surprisingly positive results.  The news helped soothe frazzled investors ahead of the new year.  And it gave investors some hope Europe may be improving.

On the domestic front, US housing market data came in better than expected.  And consumer confidence also surged to the highest level since April.

Clearly, 2012 is getting off on the right foot.

That’s good news for option traders.  We’ll continue honing in on individual stocks with the potential to deliver high returns with limited risk through call options.  Plus, we’ll look to profit from troubled stocks with put options. 

Bottom line, I believe 2012 will present great trading opportunities.  And we’ll be in a great position to profit no matter which way the market moves.

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.

  CAT February 2012 $95 Calls
CAT is continuing higher in a strong uptrend.  If 2012 is a year where we’ll see a true bottoming in the housing market, there’s no better stock to own call options on than CAT.  In a short period of time, CAT is approaching our first resistance level of $97. And our CAT calls are up 44%.  However, with the stock market in an uptrend and plenty of time to expiration, there’s no need to jump out of your call options here. Let’s continue to hold them.  Resistance is at $97 and $112.  Support is at $88 and $80.

  TRV April 2012 $60 Calls
TRV shot through our $57.50 resistance level last week.  Congratulations to everyone who locked in 77% gains.  However, the uptrend in TRV continues.  And our call options are now up 88%.  There’s no change in my thesis for buying these calls.  And with almost four months to expiration, our call options won’t begin to show time decay for a while.  If you still own these calls, continue holding for more upside.  There’s still plenty of time for more gains to come our way.  The next resistance is at $61.  Support is still at $54 and $49.

  DNKN March 2012 $22.50 Puts
DNKN is moving sideways as it consolidates the sharp November drop.  However, if we see any type of market pullback or spike in volatility, our put options should increase in value in the blink of an eye.  In addition, the chart remains in a long term downtrend.  We still have plenty of time, so continue holding these puts.  Resistance is at $27.50 and $29.  Support is at $20 and again at $19.

Happy New Year and safe trading.

Category: EOT Update

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