Written by Patrick McCubbin
Good Afternoon,
The stock market managed a modest gain Friday as investors registered their relief over a banking overhaul bill that is less strict than feared. A stronger euro also lifted stocks. Even with that said, the markets ended the day in negative territory. Although some uncertainty was removed from the minds of investors, we still have a long road ahead of us in this recovery. Couple that with the start of summer, and you get a day like this. We were fortunate enough to lock in over $500 in gains this week.
Our portfolio was rather unchanged today. We entered today’s trading session slightly on the long side. Our current positions include two long calls, two long stock positions, and one short stock position.
We still feel comfortable holding our short on Cognizant Technology Solutions. (CTSH). Take a look at the chart.
We entered a short position on this stock on the first of June at $50.26. When the protective June call option expired we decided to roll it out until July and give ourselves some more time for this stock to retrace. It has come back quite a bit and sold off well above its highs. It has also broken back below the critical 10 day moving average. The 30 day moving average of $51.61 was tested today but held support. If you were not in this position to begin with, this still looks like a good entry point. Just be sure to hedge yourself. A long July 55 call option would work.
Here is a chart on a long call position we hold for Cephalon, Inc. (CEPH)
We took a short position on this stock and coupled it with a July 60 call for protection. After several losing sessions in the overall markets this stock was showing very strong buying pressure. When we finally saw a sell-off in the stock we took a $152 gain and kept the long call. It was evident we made the wrong call on the stock and wanted to limit our exposure. Our total loss potential is $48 if in fact the call expires worthless. We think that if the market moves back up this stock will breakout and we can make considerably more on the option position without the additional risk. Sometimes you have to improvise.
We took on one new position today on Dril-Quip, Inc. (DRQ). Since we were much heavier on the long side of the market we decided to take a different approach on this trade. Take a look at the chart.
Since the end of May this stock has been establishing a definite downward trend line which built resistance for it at the $50 level. It has since fallen an additional 10% and is establishing new resistance around $46. The 50/200 day moving average has now moved into negative territory. Our target on this stock is around $40. We opened an option straddle position on it at $45, and sold short 100 shares of stock. This is a highly leveraged short but still has protection on the upside with the long call.
We go into next week with a well balanced portfolio. Regardless of the markets direction, we can make plays on both sides.
We look forward to another exciting week of trading. Have a great weekend and we’ll see you again before Monday’s open!
June 2010 Recap
6/21/10: Sold short 100 shares of Cephalon Inc. (CEPH). @ $60.50
6/24/10: Bought to cover 100 shares of Cephalon Inc. (CEPH). @ $58.98
Profit – $152
6/22/10: Sold short 100 shares of Nike Inc. (NKE). @ $73.61
6/24/10: Bought to cover 100 shares Nike Inc. (NKE).@ $70.00
Profit – $361
6/1/10: Sold short 100 shares Union Pacific@ $71.96
6/4/10: Bought to cover 100 shares Union Pacific @ $69.68
Protective Call Option: ($41)
Profit – $197
6/11/10: Sold short 100 shares MercadoLibre Inc. @ $57.50
6/11/10: Bought 1 June 57.50 call option
Position Expired
Profit: ($160)
6/2/10: Sold short 200 shares Thoratec Corp@ $44.00
6/4/10: Bought to cover 200 shares Thoratec Corp @ $42.70
Protective Call Option: + $300
Profit – $560
5/27/10: Sold short 200 shares Jinpan Intl Ltd @ $15.83
6/07/10: Bought to cover 200 shares Jinpan Intl Ltd @ $15.14
Profit – $138
5/25/10: Bought 100 shares ConocoPhillips @ $49.00
6/10/10: Sold 100 shares ConocoPhillips @ $52.57
Profit – $357
6/14/10: Sold short 100 shares Concur Technologies @ $43.60
6/14/10: Bought 1 June 45 call @ .25
Position Expired
Profit: ($165)
5/24/10: Bought 100 shares of Baidu@ $72.18
6/10/10: Sold 100 shares of Baidu @ $72.32
Profit – $14
5/20/10: Bought 200 shares Quest Software @ $18.75
6/10/10: Sold 200 shares of Quest Software @ $18.75
Profit – 0
6/7/10: Bought 100 shares Overstock.com @ $19.65
6/11/10: Sold 100 shares Overstock.com @ $21.66
Protective Call Option: ($140)
Profit – $61
6/4/10: Bought 100 shares of Valeant Pharmaceuticals Intl. @ $ 46.54
6/14/10: Sold 100 shares of Valeant Pharmaceuticals Intl. @ $47.50
Protective Put Option: ($85)
Profit – $11
Total June Profit to Date: $1526
TEN Exclusive: Portfolio Update – 6/25/10 is an article from: 
