DO Sale Triggers

Plus More on GS, CHK, ISRG, FRNT

Dear Bottarelli Research Member,

I’m beginning to like the idea of setting sell orders into the following trading day — because orders like this allow you to profit off any quick and sudden price jumps in a moment’s notice.

In yesterday’s position update, for example, I instructed you to maintain your $3.30 sell order on the DO December 75 Calls (DO LO) and your $5.00 sell order on your FLML December 20 Calls (FLU LD.Today’s movement in Diamond Offshore Drilling (DO – NYSE) played this pre-set sell target perfectly.

Although DO opened $0.50 lower, at exactly 11:00 ET it jumped higher by more than $1.20. This sudden price jump moved your DO December 75 Calls (DO LO) right up to our $3.30 sell price — and the orders filled! Moments later, DO once again turned negative on the day, and these same calls dipped back to $2.75 to $2.85 per contract. Thus far, we pegged today’s top perfectly! As a result, I’ll start issuing you more automatic sell targets. And of course, maintain your $5.00 sell on the FLML December 20 Calls (FLU LD).

So far we’re looking good on our GS November 200 Calls (GPY KT), as the stock has come off its early session lows and pushed our calls up to a high of $2.20 per contract. Although any one-day jump in GS could easily make this play a 100% gainer, the $2.50 level would represent a nice 42.86% gainer. If you’re like to set that sell price ahead of time, feel free to do so.

In the meantime, I’d like to point out some various stock movements today that could have a forward-looking effect on our trading tactics and positions. We’ll begin by looking at Chesapeake Energy (CHK – NYSE), the biggest U.S. natural gas producer. This morning the stock is up 2.5% after posting a sharply higher third-quarter profit. As you know, we recently had success playing Southwestern Energy (SWN – NYSE) based around a similar thesis. Today’s positive news in CHK could make me revisit this strategy via longer-dated calls on SWN or CHK early next week.

Secondly, Frontier Airlines (FRNT – NASDAQ) is down 1.4% today on news that their second-quarter net income fell from $6.91 million to $509,000. That’s quite a sizable drop!I bring this to your attention because it makes me feel comfortable holding our CAL December 35 Puts (CAL XG). As you know, we profited off the airline sector’s upside with our ALK calls, but now a jump in oil prices could make for a quick airline sector down-turn and I wan to be positioned to profit when it happens.

Thirdly, there has been some absolutely crazy trading in shares of Intuitive Surgical (ISRG – NASDAQ).The Sunnyvale, California company makes the remarkable da Vinci Surgical System, which are robots that allow surgeons to perform operations from a remote console based off a doctors’ hand movements.

Yesterday after the closing bell, shares of ISRG were up 2% at $114.18 after the company reported third-quarter net earnings of $17.3 million. But then this morning, the stock completely reversed those after-market gains and actually dropped $12.24, a 10.9% decline!

Some blame the incredible reversal to a downgrade from Jefferies & Co., who said the stock is fully valued at current levels — but I consider this a classic example of “buy on rumor, sell on the news.”

Now I understand we just experienced a volatile trade on Google (GOOG – NASDAQ), and I consider Intuitive Surgical (ISRG – NASDAQ) in that same league. Let’s keep an eye on the ISRG November 100 Puts (AXQ WT), currently trading between $2.90 and $3.00, for a potential quick double. If selling pressure takes over, ISRG could move all the way down to $90 in a heartbeat.

Lock and load

Sincerely,