Good afternoon,
Stocks erased big gains Monday after investors lost some of their enthusiasm about China’s decision to let its currency appreciate against the dollar. Sounds like the markets in general were pretty unappreciative.
This is the fourth session in a row the Dow Jones Industrial Average has failed to close more than 25 points from its open. The bulls and the bears are having a very difficult struggle trying to gain ground in this low volume, low volatility setting.
ExactStockPicks Portfolio Update
We were able to make on one play today. We shorted 100 shares in Cephalon Inc. (CEPH) Take a look at the following chart.
As you can tell over the last 12 months this stock has shown tremendous resistance at the $60 level. It did break out and had a nice run between Dec – April as the overall market was very strong at the time as well. It has since retraced and finds itself back in a predictable pattern. The 50/200 day moving average has also converged, and with our feeling that the overall market is overbought short-term this could be a quick play.
To protect ourselves, as we do in all situations, we accompanied this trade by buying a July 60 call option. What this does is protect us on the short side anywhere above the $60 price. Anything we lose on the short stock position we make up for with the long call. Our total exposure on this trade is only 2.4% with nearly unlimited upside. The way we figure our loss potential is as follows. Our total position taken dollar wise was $62.50. This is the total of the stock as well as the $2.00 we paid for the call option. Since we short sold the stock at $60.50, and can call the stock away at $60.00 with the option, we have a built in profit already of .50. We paid $2.00 for the protective call, so our total loss potential on the trade is $150. If you divide this by $62.50 you get approximately 2.4%
This is the approach we will take to all of our trades. We will listen to our analysts and pick stocks which they feel have the potential for quick moves either up or down. We will then match that with a put or call option to limit our risk while allowing for the greatest profit potential. When one of our stocks makes a big move we will either close out the entire position (stock and option), or we will just closed out the stock position and let the option run. We will only do this if we cover the option cost with the stock profit. We like no-loss potential trades and playing on house money. We picked up nearly a dollar to downside after we entered this trade.
Limit your risk when you put on a trade. You will have plenty of opportunity and time to make plays.
Jos. A. Banks (JOSB), our long position, was down with the overall sell-off in retail. They did offer a stock dividend though so that is a positive sign for all shareholders.
Our other two stocks were fairly flat with no news to report on either.
We will be adding 1-2 new positions to our portfolio to bring it back up to the recommended 25k level.
Have a nice evening and we’ll see you again before market opening.
June 2010 Recap
6/1/10: Sold short 100 sharesUnion 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 Union Pacific @ $57.50
6/11/10: Bought 1 June 57.50 call option
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
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: $1013
TEN Exclusive: Portfolio Update – 6/21/10 is an article from: 
