EOT Position Update – May 12, 2010

| May 12, 2010

May 12, 2010

***Editor’s Note***  Watch for a new trade in the next 48 hours.

Market Snapshot

What a wild week on Wall Street.  The mini-crash last Thursday played havoc with the option markets.

The bid-ask spread on many options became so wide, option traders didn’t even have a chance to profit from the chaos.

Market makers simply quit making a market for many options during the crash.

Maybe their eyes were glued to CNBC as the Dow plummeted 1,000 points in a matter of minutes just like the rest of us.

As I look at the charts of the options and their underlying stocks, there’s a big disconnect.  Many options didn’t trade during those 20 minutes the markets plummeted.  So the options don’t look as volatile as the stocks… Clearly this is an unusual situation.

Now the markets have stabilized and they appear to be resuming their bullish momentum.

It’s like I said last week…

The good economic news and strong earnings should get the market back to its winning ways quickly… as long as the European debt markets don’t implode and bring everything down with it.

It looks like we’re going to get both… a market implosion followed by a quick recovery.

The recent market chaos sent UTX and CTSH, two of our recent recommendations, past both of our support levels.

While I still believe there are good things ahead for both companies, we should stick to our exit strategy and sell these positions.

If you have a question, email me at customerservice@hyperionfinancial.com.

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.

  UTX August 2010 $80 CALLS
UTX was caught up in the market panic last week.  We got whipsawed right out of this trade.  UTX violated both our support areas in a wild day of trading.  Although, it’s already recovered most its losses.  In a crazy turn of events, the stock traded more wildly than our option did… But nevertheless, everyone should be out of this option. We’ll chalk this one up to bad timing.  But I still think UTX could surge higher as the investors move back into stocks.

  WYN November 2010 $30 CALLS
WYN slid past our first support at $24 as investors panicked last Thursday.  But it’s rebounded nicely over the last few days.  Aggressive traders should sit tight.  WYN is building momentum again.  If it can clear resistance from the previous high at $28, the sky is the limit.  Resistance is at $30 and $35.  The next support is at $21.

  CTSH October 2010 $60 CALLS
CTSH got whipped around in wild trading this week.  It triggered both of our support areas before rebounding the last few days.  The option itself briefly dipped below our buy price, but has held up extremely well.  Again, everyone should be out of this position.  I may revisit the stock in a few months.

  ASEI July 2010 $85 CALLS 
ASEI reported earnings yesterday.  As I expected, they delivered record revenue and earnings.  The solid quarter beat analyst estimates for both revenue and earnings.  The stock surged to $81 today before falling back a little later in the day.  I’ll be watching how investors follow through.  ASEI looks really cheap after delivering strong earnings.  That should lead to a higher stock price.  Hold tight for now.  Resistance is at $82.25 and $87.  The next support is at $70.

Category: EOT Update

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