GMCR Puts Explode … get ready to buy the Calls

Hi all.  Just stopping by to update you on our advanced options play on GMCR.  Remember, we are playing what I call a bias-timed-put-strangle.  For those of you who don’t remember…

1)  buy PUTS early

2) buy CALLS few weeks later at about 25% principle of your PUTS position.

So, to recap, we already bought the GMCR far out puts which, if you got in at a good price (we nailed it just above 95-97) in “anticipation that the crowd was expecting GMCR to get above 100.”  Therefore, critical step #1 was initiated.  It was important to place your bet before earnings because after earnings the options pricing changes dramatically.   Right now, if you are trading with me your PUTS have doubled or tripled depending on your aggressive entry points.  Mines are about triple digits since a few days ago.  😉

Anyway, now with earnings out the way, and GMCR, our Ipicurean coffee stock giving us a weak outlook, we can buy some CALLS now (the genius behind a “timed-strangle”… use news and events to your advantage for entry points!  Don’t just blindly buy both the call and put on the same day.)   My original target to buy the calls was <80, so, now that we hit that point, I don’t have to think much.  I can just buy 25% of the principle invested in my PUTs (why 25%?  Because, this is a “biased put-strangle”, meaning we buy MORE puts.).   I won’t tell you what I will buy, but the Jan @100 is trading around 4.80 which shows a 30% discount from its last trade.  Sweet deal! 

So there you have it.  Hope yall are banking coin! 

Meanwhile, I have to apologize for not blogging on the main site these past few days.  Right now my father is in the hopsital so I’ve been sleeping over giving him company.  I thought he was going to get out yesterday, but they are keeping him for a few more days.  I tell you, it makes you nervous, if you know what I mean.  Doctors telling you he’s fine, then the next day they tell you they changed their mind.  So, yeah, they don’t give me a bed to sleep on there so I have to sit on a stupid chair… imfrickingpossilbe to sleep on that thing.  That hospital pisses me off.  Anyway, I’ll try to post intraday if I can, but I come home and don’t wake up until 12:00pm which is like 6pm in New York, and by then I have about 3 angry clients to deal with.  Right now, I have the most screwed up schedule sometimes it just makes me laugh.

The Dow dropped 1.9%, the S&P 500 2.3%, the Nasdaq 2% and the NYSE composite 2.8%.  What was more distinct was the volume.  Actually yesterday marked a distribution day, so the follow-through on today is something to be concerned about.  So, make sure you marke yesterday’s highs as a pivot point.  For simplicity, let’s use 11,200.  It’s odd, once again, the the Dow would close just a few points under 11k.  I’m sure there’s much more room for the market to drop.  So don’t rush in and buy this dip.  What makes this a “retro-reversal” is that if you noticed, the market attempted to reverse back and make a rally in second half of the day, but then volume came pouring in on the sell side igniting an even worse close.  It’s usually difficult to gauge an intraday chart to dictate a longer term trend, but these types of failed rallies brings us back to bearish tapes, which seems a little retro.  Anyway, the point is, watch out for these distribution days, they are the biggest signs of long term trend reversals.

Stocks for day trading tomorrow: 
–  Panera Bread Company [[PNRA]]

– Buffalo Wild Wings [[bwld]]

– Green Mountain Coffee Roasters Inc. [[gmcr]]   …I’m looking forward to seeing these puts explode.

Netflix, Inc. [[nflx]] is just amazing.  I can’t believe I don’t own this stock.  I mean, all you see is a bunch of BlockBuster videos closing down.  And with innovative hardware being released month after month, NFLX is becoming a killer app across all kinds of technology.

Got a Wii?  You can play NetFlix on that.

Got a PS3?  Load up some Office Season 4 on your NFLX account.

Oooh, new iPad!  Pimp it out with a NetFlix app.

I just wanted to point out that these are the kinds of companies you want to “invest” in, not trade.  From a trader’s perspective, you would have shorted in the 40s, 60s, and 80s.  That’s why I would have done HORRIBLE trading this stock.  But investing on a “new” company that literally changes the industry (and puts the other big boys out of business) is the more sound and sane thing to do. 

There are only about 10 other companies that I can name right now that have these authentic and rare qualities of a company that shook up the industry.  Here’s a few to get you started…

1.  eBay  –  the internet changed the way we buy, eBay changed the way we buy and sell.  I’d mention Amazon, but it just does what every other retailer does… it just does it better and it got there first.

2.  Intuitive Surgical  –  changing the medical field as we speak with robotic surgery.  ISRG is paving the way for other medical companies, like SIRO.  ISRG hasn’t quite had that “put other competitors out of business” trait yet.

3. Ford –  father of the assembly line production.  This is in history books.

4.  PriceLine – not sure who came up with it first, but I think we don’t have to think too far back to remember buying airplane tickets on the phone.

These are just a few examples.  Of course, there’s Apple with the iPod, Dell with customization (but not so great when you think about it), and other great ones.  The point is, when you invest long term, use these companies in their growth stages (when no one believed in them) as a good example of what to invest in.  Thank me in 20 years.

Went over some of my stocks in after hours and I’m glad to see SIRO finally picking up steam.  SIRO hit a new 52 high intraday then pulled back a little.  Of course, now that I blogged it, it will sell off tomorrow (crosses fingers).  I think SIRO is in a class of its own, in a sector that consists of… basically itself.  Interesting.  With SIRO trading above 40 we can buy more soon with a stop set to something on the 5-day support, let’s say something above 39.40.   Meanwhile I have to go find a new dentist under my new insurance plan.  I don’t quite get all this stuff, but when you have messed up teeth like me, it’s something of high priority.

Oh and one more note, SIRO trades closely with ISRG, an old ground-breaking company, so in reality, SIRO is a speculation stock for those who trade the high tech medical industry.  Just a thought to put under your pillow… maybe it will turn to cash?

Okay, back on my trading computer and I realized I want more monitors.  Monitors are so cheap lately.  I’m going to get me some monitors.  Anyway, I’m a little rusty at trading.  Everything moves so fast… well, not really.  Considering how low volume is on some of the big caps, the market does seem to be drifting again. 

Meanwhile, our GMCR put-call strategy is still in play.   If you noticed, whenever a stock drops about 5-7% after a huge run (ie, GMCR), the calls drop hard on the first day, and if it drops 4-6% on a consecutive day, the calls will NOT drop that far.  Therefore, if you want, you can buy your calls here.  I did plan on “low-80s” so I can wait a few more points.  Remember, we already bought our puts in the high 90s in anticipation of a sell-off before 100 psychological spot. 

Oh btw, I did sample the iPad at BestBuy yesterday… so irritating!  No, not the iPad, all the little kids playing with each iPad on display.  They were all playing Mahjong and getting their snotty fingers all over the display.  Anyway it’s a great looking device.  I can see why Apple’s stock has been rising and rising these past 3 months.  It did seem like a giant iTouch, but I can see many useful ways to use an iPad. 

So far, one of my favorite iPad related video can be found here.  Awesome guy.

Hi guys and girls!  Well, now that the big 15th tax deadline is done with I’ve got good news for you and me.    Well, for you I get to open up the trading office again.  And for me?  I get to claim my annual April bonus I made up just to make myself feel better for all the crap I put up with from March to April.  So, I need your help since I can’t decide.  What should I reward myself with?  Vote in the comments section.  Thanks!

a)  iPad

+  I don’t have an iTouch, so getting an iPad will simply destroy all those arrogant iTouch elitest.
+  Sexiest piece of technology since Catherine Zeta Jones held a cellphone.

+  I can write it off
–  Many of my friends are Apple haters.
–  What will I do with it?
–  It will be stolen in 4 months time

b)  2 shares of AAPL:

+  I could if I wanted to, cash it out in 13 months, and by then AAPL would be up 20%, and the iPad would be 10% cheaper, thereby making me save about 30% off.
–  By then, they will come out with an iPad with a USB port.
+  I get to tell my friends, “What?  You have an iTouch?  I frickin own AAPL son.”
–  AAPL stock could go down too.  :/

c)  3 nights on Lanai at the Lodge or at the 4 Seasons:

+ Getting away from the office, paper stacks, copy machines, ugly interns (sorry dude.  haha.), empty StarBucks cups, and ringing phones can be one of the most rewarding ways to spend a weekend.
–  End up spending more money on food and old-people entertainment

d)  Party at Dave n Busters

+  Something about including your friends in your rewards that makes it… rewarding.
–  Someone will drink too much, and the night will be remembered for someone revealing too much of what we don’t want to hear… or see.
+  We can all combine our tickets from the $100 worth of games played on Deal or No Deal and Skee Ball, and exchange it for a shot-glass or a whoopy cushion.

e)  Other  (you tell me!  Keep it at $500ish please.)