Quick Position Run-Down

NYX Puts Looking Great

By Bryan Bottarelli
Thursday, February 15, 2007 11:10 AM EST
Thu, 15 Feb 2007 16:10:00 GMT

Dear Bottarelli Research Member,

As the markets are struggling to hang onto the gains over the last two trading sessions, let’s take a quick look at our current positions — starting with our WBMD March 50 Puts (QWB OJ).

WBMD

As you know, we entered these puts for $4.00 and they’re currently trading for $2.70, so we’re off our entry price by $1.30. But that could quickly change by this time next week. You see, WBMD has their Q4 earnings call scheduled for Feb 21st after the close, and if you look at how other Internet companies have been reacting to earnings, it’s a good idea to be positioned to the short side.

Just today, for example, Beijing-based Internet search firm Baidu.com (BIDU – NASDAQ) reported a fourth-quarter profit jumped fivefold, yet the stock is getting hammered. Just look at this chart:

BIDU

And that’s not an isolated incident — just consider reaction to remarkable numbers poted by Google (GOOG — NASDAQ), and you’ll see that the new Wall Street trend is punishing Internet stocks on earnings day, no matter if the numbers are great or not.

GOOG

For this reason, I’d like to maintain our WBMD March 50 Puts (QWB OJ) heading into their earnings report next week. If the recent trend plays out, the stock could be in for a big fall.

Also moving lower today is NYSE Group (NYX — NYSE), which is a good thing for our NYX March 90 Puts (NYX OR). As I mentioned before, the stock is currently in “no man’s land” which means we could see further downside weakness until the 200-day moving average is tested. The fact that these puts are profitable after two straight sessions of big market upside makes me comfortable holding the play. In fact, the puts that we entered for $5.30 have traded as high as $6.10 today, so hold for more gains.

NYX

On the flipside, Las Vegas Sands (LVS – NYSE) may want to re-test the $90 level once again just to prove that it’s a strong support point. If so, I think we’ll see another quick upside push in LVS, which warrants us maintaining our LVS March 95 Calls (LVS CS).

LVS

Although I love the company — and continue to call them the most promising biotech company out there today, Celgene (CELG – NASDAQ) was unable to break through their 50-day moving average, which ultimately stopped us out of our CELG March 55 Calls (LQH CK). For now, the position is closed.

CELG

But good news for Allegheny Technologies (ATI — NYSE), as the stock has extended its upside gains today — which is handing you a second exit opportunity on your ATI April 110 Calls (ATI DX). We entered these calls for $2.75 and they traded as high as $3.40 today, so if you missed yesterday’s sale you have another chance to take your profits today.

ATI

And finally, we have a tricky situation in Transocean (RIG – NYSE). First off, I do not feel the stock has been given credit for their fantastic Q4, which means I feel that there is some pent-up buying pressure still waiting on the sidelines.

RIG

Now, although some members were able to exit their RIG March 80 Calls (RIG CP) at yesterday’s open for $2.30, there are other members who were not able to execute that sale, so I’ll continue to follow RIG for anyone still holding the position. In fact, if you look at the chart, I would consider adding to the calls if RIG finds support at the $75 level. With oil dipping under $57 and RIG not receiving credit for their earnings, I would have no problem adding to this position at the $75 level — so stay tuned for that play soon. Until then…

Lock and load!

Sincerely,

Bryan Bottarelli

Bryan Bottarelli
Editor, Bottarelli Research

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