EOT Position Update – March 3, 2010

| March 3, 2010

March 3, 2010

Market Snapshot

Investors are feeling bullish.  The stock market’s quickly recovering the ground it lost in the last few weeks of January.

The bullish momentum continues to build as good news out of Greece and positive economic data eases investors’ fears.

Greece has agreed to $6.5 billion worth of spending cuts.  It’s nice to see a government make the right, but unpopular, decision for a change… That’s a good sign the sovereign debt issues won’t spill over into other countries and threaten the global economic recovery.

On the economic data front, the Institute for Supply Management (ISM) reported positive readings on the manufacturing and non-manufacturing industries this week. Readings on both reports indicate economic expansion.

We’re also getting positive reports on employment.  It’s looking like the few bad reports in January will amount to a minor blip on the road to recovery.  Overall the steady pace of economic recovery continues.  That should keep stocks rallying for now.

Over the last few weeks, the market rally is being led higher by the small and mid-cap stocks.

In fact, the S&P mid-cap 400 and the S&P small-cap 600 have already surpassed the highs they set in January.  That’s a clear sign investors are willing to take on more risk for the potential higher reward.

I’m looking for a new trade to take advantage of investors increased appetite for risk.

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.

  VZ July 2010 $30 CALLS
VZ has started to rebound.  I’m expecting a slow and steady climb back into the mid-$30s.  Our option is responding well.  It’s up 29% today.  Hold tight for bigger gains ahead.  Resistance is at $31.25 and $33.  Support is at $28 and $27.

  INTC July 2010 $20 CALLS
INTC made a quick run from $19 to $21 in February.  But over the last few weeks, INTC hasn’t been able to push through the selling pressure at $21.  This price was a sticking point in the past.  I wouldn’t be surprised to see INTC consolidate under $21 for awhile longer before breaking out to new highs.  Hold tight for the breakout. Resistance is at $21.50 and $25.  Support is at $18.50 and $18.

  SWKS May 2010 $15 CALLS
SWKS’s management updated their Q2 and full year 2010 outlook.  They’re expecting stronger revenue and earnings than analysts were projecting.  That’s great news for the stock and our option.  SWKS is at a new all-time high, over $16, and our option hit a peak gain of 80% today!  We’re closing in on our first resistance level but the rally looks like it could be running out of steam.  Conservative traders may want to lock in their profits now.  Aggressive traders who can handle a little volatility could be rewarded handsomely for sitting tight.  Resistance is at $16.50 and $18. Support is at $12.25 and $11.50.

  CSCO April 2010 $24 CALLS
CSCO continues to forge its way higher.  But it could soon run into resistance of the previous high around $25.  Here’s the bottom line.  The market correction in late January derailed CSCO’s momentum.  Our April option may not give us enough time for CSCO to reach our resistance at $26 and $29.  I’ll be keeping a close eye on CSCO as it approaches $25.  The price action over the next few weeks will tell me how we should handle these options.  Hold tight for now.  Support is at $22.50 and $20.

***Editors Note***

Option Symbology changed on February 12, 2010.  That means a new method for identifying options is now in place.

What does this mean for you?  The old five character option ticker is a thing of the past.  It’s being replaced by a new option ticker format.

Here’s what it breaks down to.

The new option ticker will be expressed as:  Root + Expiration + Strike + Type.

Root = the ticker symbol of the underlying stock.
Expiration = the expiration date of the option.
Strike = the strike price of the option.
Type = call or put.

The good news is we already give you all of the information for the new ticker in the trade alert.  The bad news is the new ticker is going to be longer.  And to top it off, individual brokerage firms may generate their own tickers for use only on their platform. So make sure to check with your broker.

Category: EOT Update

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