Dear Bottarelli Research Member,
One of my all time favorite vacation spots is Beaver Creek Resort located in the Colorado Rocky Mountains. The owner and operator of Beaver Creek — and four other ski resorts — is Vail Resorts (MTN – NYSE), so when MTN appeared as a candidate that was threatening to break below its 50-day moving average, I started to think about the business-aspect of owning a ski resort. And the more I thought about it — the more I realized that the perception of global warming could be a very negative catalyst for MTN.
First and foremost, the National Oceanic & Atmospheric Administration has ranked this December as the fourth-warmest on record in the United States — dating all the way back to 1895. This has been a big problem for ski resorts in the Northeast, as most of them have not been running at full capacity. Some are not even open at all.
But MTN operates primarily in Colorado, with resorts on Vail Mountain, Breckenridge Mountain, Keystone Resort, Beaver Creek, and Heavenly Mountain in the Lake Tahoe area of California/Nevada. And as you know, Colorado was hammered with snow this year. They received so much snow, in fact, that it could actually deter vacationers from taking any ski trips.
You see, the national exposure of the massive airport delays, road closings, and traffic accidents caused by the snow could actually reduce ski capacities. At the same time, I’ve heard reports that MTN’s Lake Tahoe resort in California/Nevada is not getting nearly enough snow to support their operation — and all it takes is one struggling resort to push shares of MTN lower. And if that weren’t enough, the mere perception of global warming could force investors to stay away from MTN, making it difficult for the company to extend its upside run.
When you combine all the factors, it seems logical to add some longer-dated put options on MTN. But looking at the MTN options string, it’s clear that MTN isn’t a heavily-traded stock, so I’ll probably wait until next week to make any new plays. Keep this one on your radar.
Looking at our other positions, our Las Vegas Sands March 120 Calls (LVS CU) have officially stopped out at $2.00. But as you know, LVS makes very big upside moves, so I’ll look to re-enter on any strength — and we can make up for this trade in spades.
At the same time, we’re seeing a nice upside day in China Life Insurance, which is why I’d like to add to our LFC February 50 calls (LFC BJ). Currently trading between $0.50 and $0.55 per contract, I continue to feel that the calls are worth the speculation price and could handsomely pay off in the next 2-3 weeks. Although some members may have gotten stopped, I said that I would continue to monitor this play — so add to your position at current levels.
PLAY: Buy the LFC February 50 calls (LFC BJ) at market, good for the day.
We’re also seeing some weakness in our longer-dated Blockbuster calls — so I think it’s prudent to lock in our gains now and look to re-enter the position once the up-trend begins to form again. We entered these calls for $0.40 and they’re currently trading for $0.55, so let’s temporarily lock in the gains and look to re-enter at a later date.
PLAY: Sell your BBI January 2008 10 Calls (YCQ AB) at market, good for the day.
We could also be witnessing a potential downside gift gap today in Amgen (AMGN – NASDAQ), as the company’s surge in fourth-quarter earnings fell short of bottom line analyst expectations. As a result, the stock is down $3.75, and it’s pushing all other biotech names like Celgene (CELG – NASDAQ) and Genentech (DNA – NYSE) down with it.
I would expect AMGN to keep falling — as the chart indicates that $68 to $69 is the next support point. So perhaps we’ll play near-term puts in the biotech sector next week — and then look to quickly play upside calls once the near-term weakness comes to an end. As always, I’ll keep you fully updated. Until then…
Lock and load!