The Stock Playbook : Options

Issue: 6/30/2008

Dave Dispennette — Tue, 01 Jul 2008 01:55:00 GMT

Options

RIMM @ $117.61 (Research in Motion) is a stock that we have been involved with for the last couple of year sand we've made a ton of money in it. We are adding the July $110 Calls @ $9.40 to our aggressive accounts. We feel if the market bounces RIMM could see $125 to $130 a share over the next two weeks. This offers us a shot at a nice percentage return over the next three weeks. We will establish a long position on the July $110 Calls at $9.40 and if and when we get a move to the $125 area, we will write (or sell) the July $130 Calls and collect that premium, which should be about $3 or $4 if it happens during the next week. Any questions, call me at (386)756-9728 and I'll walk you through it.

This newsletter has been sent to you for informative purposes only and in no event should be construed as a representation by The Stock Playbook or its employees as an offer to sell or solicitation of an offer to buy any securities. The factual information given is taken from sources we believe to be reliable, but is not guaranteed as to its accuracy or completeness. The opinions expressed should be given only such weight as opinions warrant. employees and/or family members may have a position in the securities mentioned and may make purchase and/or sales of such securities from time to time in the open market or otherwise Recipients of The Stock Playbook prohibited from, directly or indirectly, distributing, forwarding , plagiarizing or copying any part of this message without expressed written consent from The Stock Playbook. Some content may have been based, at least in part, on material gathered from Investor's Business Daily ® and/or YAHOO!®

Issue: 5/22/2008

Dave Dispennette — Thu, 22 May 2008 02:00:00 GMT

Fallen Stars

EK @ $16.24 (Eastman Kodak) manufactures digital and film imaging systems for the photographic and graphic communications markets. We can't believe we are recommending this stock. It hasn't traded at these levels since 1965. Their trailing 12 month revenues are $10.3 billion, yet the stock trades with a market cap of only $4.68 billion. We realize they are in a dying industry, but they have made in-roads onto the internet with Kodak Gallery and other services. The company pays a 3.1% dividend and appears to have bounced off the $16 level a few times since January. Investors can park some money here, collect the dividend and hope are speculation of a takeover takes place soon. We have no idea who would want to buy Eastman Kodak, maybe an ambitious private equity firm will take them private. Google has entered into crazier businesses, maybe they want to add them to their stable. We have seen heavy upside call activity over the last two weeks and that is what has attracted our attention. Swing traders can enter here with a stop at $15. More aggressive traders can enter here with a stop below $16. We have accumulated the October $12.50 Calls at $4.10 today.

Options

EK JV @ $4.20 (Eastman Kodak October $12.50 Calls) are in the money by $3.74 and only charging us 0.46 cents in time value for five plus months of time. A bounce to $20, which it has done twice already this year will give us a return of at least 80% and a takeover at $25 will yield us 200%. We want to point out that the action has taken place in the June and July $17.50 Calls at 0.50 and 0.65 cents a contract. We added some of these too, but feel these October $12.50 Calls offer a little more safety and time. If you like rolling the dice, add some of the July $17.50 Calls at 0.65 cents to your account. It is basically a lottery ticket on a takeover, so adjust the size of your trade accordingly. If it doesn't pan out, you lose 0.65 cents, if it does, you earn a 1,000% return or more, depending on price.

Issue: 4/13/2008

Dave Dispennette — Mon, 14 Apr 2008 04:46:00 GMT

IPO's and New Issues

SOL @ $12.69 (Renesola) is a Chinese manufacturer of solar wafers for the production of solar cells and modules. Revenues have increased 334%, 182%, 159% and 198% during the last four quarters. Earnings are expected to grow 46% this year and another 67% in 2009 to $1.75 a share. They came public in January at $13 and appear close to completing their first base. With solar stocks heating up again, we will establish a position here and set our stop loss at $11.

Options

CCJ IE @ $12.70 (Cameco September $25 Calls) are currently in the money by $11.76, with CCJ closing at $36.76 on Friday and charging less than a $1 in time value. There has been huge call buying in the April and May $40 an d$45 Calls and with consolidation running rampant in this sector, we felt we'd add these option s to our portfolio. We've been fans of Cameco's stock since last year and like the risk to reward ratio with these options. We will add to position on pull back in Cameco to $33 and close position on move below $31. A move to $50 in CCJ will net us better than a 100% return.

Issue: 4/2/2008

Dave Dispennette — Thu, 03 Apr 2008 14:37:00 GMT

Growth Stocks

LMNX @ $20.80 (Luminex) develops biological testing systems to perform genetic analysis for the development and identification of new drugs and genes. Revenues have increased 28%, 32%, 55% and 51% over the last four quarters. The stock recently cleared the $18 resistance level and volume has steadily increased over the last couple of months. We are establishing a 1/4 position here and will enter the second 1/4 at $19. The remaining half will be bought around $18 or a test of its rising 50 day moving average. Our stop loss will be set at the 200 day moving average.

Stocks Under $10

AEHR @ $8.65 (Aehr Test Systems) manufactures wafer test and burn-in systems used to analyze memory and logic IC's for the semiconductor industry. Revenues have increased 18%, 7%, 55% and 90% over the last four quarters. Earnings have grown 86%, 33%, 90% and 400% over the same time frame and are expected to increase 116% this year and another 44% in 2009 to $1.18 a share. This stock is cheap and not followed by anyone on Wall Street. We are establishing half a position here and will enter the remaining half on a pull back to $7.50. We feel this is at least a $20 stock in a year or two and are treating it accordingly by adding it to the Stock Playbook 100. Just an FYI, we didn't list a stop loss level because we plan to accumulate more if we see the $6 level. Every once in awhile, we break our own rules and fall in love with a stock, which you should never do. We won't consider bailing on this stock until we see a move below $5.25 and we'll re-evaluate there depending on volume.

Options

For the options traders, we feel SLB and MOS are both ready to roll over and have a defined downside.

We like the SDB PT (Schlumberger April $100 Put) with a stop set on a move above $93 by SLB.

We also bought the MTJ PE (Mosaic April $125 Put) with a stop set on a move above $110 by MOS.

Issue: 3/19/2008

Dave Dispennette — Wed, 19 Mar 2008 20:01:00 GMT

The Playbook 100

CELG @ $57.68 (Celgene) develops therapies to treat cancer and immune-inflammatory related diseases. Revenues have increased between 43% and 76% during each of the last four quarters. Earnings have increased between 72% and 136% during the same time frame and are expected to grow 43% this year and another 50% in 2009 to $2.28 a share. We've made money a few times in this company over the last few years and feel a good risk to reward is being offered by establishing a position here with a tight stop at $53. Our option players have a nice option listed below.

IPO's and New Issues

V @ $56.50 (Visa) gapped higher, so we didn't chase it. We will wait for a pull back toward the $45 level for now and until then, feel Mastercard (MA) offers us a better value.

ETF's

FXI @ $123.69 (Ishares Xinhua China) is an exchange traded fund seeking performance corresponding to the FTSE/Xinhua China 25 Index. We will establish a position on continued weakness that allows us an entry at $115 and will place a tight stop at $110.

Options

VCS AF @ $29.90 (Celgene January 2009 $30 Calls) are only costing us $2.22 in time value and could be a huge winner on a Celgene breakout above $60. Otherwise, we risk $4 to the downside for potentially $20 plus to the upside.

Issue: 3/3/2008

Dave Dispennette — Mon, 03 Mar 2008 15:37:00 GMT

The Playbook 100

ACI @ $52.11 (Arch Coal) is engaged in the mining, processing and marketing of coal with low Sulfur content in the Eastern and Western U.S. Earnings are expected to grow 97% this year and another 41% in 2009 to $3.36 a share. We are establishing half a position here and will add the remaining half on a pull back to the $47 level. Our stop loss will be set at $45. We like the LEAP listed below, for those that like to invest in options instead.

IPO's and New Issues

ATAI @ $10.36 (ATA Inc.) is a Chinese provider of test-based educational programs, computer-based testing services and test preparation software. They came public last month at $10 and we feel establishing half a position here, with the remaining half purchased on a pull back to $9 with give us a great opportunity to make money going forward. We will set our stop loss at $8.50.

Options

OSE AF @ $24.10 (Arch Coal January 2009 $30 Call) is in the money by $22.11 and charging less than $2 in time value for the next ten months. We are buying these instead of the stock due to the compelling risk to reward ratio and will entertain writing calls against our position once Arch breaks out to new highs above $55. Once the stock gets to the $60 level, we will write the near term $65 or $70 Calls to increase our return.

Issue: 2/21/2008

Dave Dispennette — Fri, 22 Feb 2008 15:02:00 GMT

Market Summary

The market finished with a loss today after bleak readings on the economy heightened investors' fears of recession. Wall Street was disappointed when the Philadelphia Federal Reserve reported that regional manufacturing fell more than predicted. Another piece of bad news was the Conference Board's January index of leading economic indicators, which posted its fourth straight drop. The Dow fell 142.96, or 1.15 percent, to 12,284.30. The S&P 500 shed 17.50, or 1.29 percent, to 1,342.53, while the Nasdaq fell 27.32, or 1.17 percent, to 2,299.78.

Growth Stocks

WGOV @ $30.92 (Woodward Governor) manufactures energy control systems and components for aircraft and industrial engines and turbines. Revenues have increased between 20% and 25% during each of the last four quarters. Earnings have increased between 36% and 52% during the same time period and are expected to grow 26% this year to $1.59 a share. We are establishing a position here and setting our stop loss at $29.

Options

OXY @ $73.09 (Occidental Petroleum) is engaged in the exploration and production of crude oil and natural gas primarily in the United States. We like this stock long term, but feel this is a more interesting way to play it. We will buy:

VXY AJ @ $25.50 (Occidental Petroleum January 2009 $50 Call) that has $2.41 in time value and will sell (or write):

OXY DP @ $1.80 (Occidental Petroleum April 2008 $80 Call). We will collect our premium and then write another call option in 58 days when this expires. We are covered with our LEAP on OXY and if we managed to write a call for an average of $1.80 every two months for the next year, we will gain almost 100% on our investment. If the stock ever gaps up higher and we get called, we will gain at least 30% and possibly much more. If the stock sells off, we gain premium from calls written and will continue to write calls against our longer term option to generate income.

Anyone that doesn't understand this investment can call me at (386)756-9728 and I'll walk you through it. This is a much safer way to own the stock and profit in this market in our humble opinion.

This blog is for informative purposes only and in no event should be construed as a representation by The Stock Playbook, InvestorsInsight or its employees as an offer to sell or solicitation of an offer to buy any securities. The factual information given is taken from sources we believe to be reliable, but is not guaranteed as to its accuracy or completeness. The opinions expressed should be given only such weight as opinions warrant. Employees and/or family members may have a position in the securities mentioned and may make purchase and/or sales of such securities from time to time in the open market or otherwise Recipients of The Stock Playbook prohibited from, directly or indirectly, distributing, forwarding , plagiarizing or copying any part of this message without expressed written consent from The Stock Playbook. Some content may have been based, at least in part, on material gathered from Investor's Business Daily ® and/or YAHOO!®

Issue: 1/09/2008

Dave Dispennette — Thu, 10 Jan 2008 16:26:00 GMT

Market Summary:

The market finished a back-and-forth session sharply higher today as investors sought bargains while also contending with concerns about the strength of the economy and upcoming corporate results. The Dow, which had been down nearly 90 points in the session, finished up 146.24, or 1.16 percent, to 12,735.31. The S&P 500 rose 18.94, or 1.36 percent, to 1,409.13, and the Nasdaq, which had been down more than 1 percent during the session, finished up 34.04, or 1.39 percent, at 2,474.55.

Fallen Stars:

MOT @ $14.79 (Motorola) manufactures wireless handsets, wireless infrastructure communication systems and analog and digital two-way radios. It is no secret that this company has done nothing but lose market share to Nokia since their last hit, the Razor. However, they do have a few exciting products that they unveiled at the Consumer Electronics Show this week. One of which was a hand held device that on top of being a phone, MP3 player, GPS and all the other exciting features that are now standard on all high end devices, it also receives live TV signals. I haven't seen it yet, but it could be the next big thing for Motorola. If we're wrong, we'll end up owning a stock that everyone already hates and probably doesn't have much more downside risk. However, if we're half right and this company regains some of the buzz from the good old days, we have ourselves a stock with the potential to double. This stock is going into The Playbook 100. We will establish half a position here and add remaining half on any weakness that brings the stock toward the $12 level. We also have an attractive long term option (LEAP) listed below as another opportunity.

(INSERT CHART HERE)

Options:

WMA AB @ $6.05 (Motorola 2010 $10 Call) is our LEAP of choice for Motorola listed above. We are paying $1.25 for two years of time on this contract. We would establish half a position here and if we get the pull back mentioned above to $12, we should be able to add remaining half around $3, giving us a cost average of $4.50. If the stock goes to $20 anytime during the next year, we make over 100% return. A move back to $26, the recent high set back in 2006 and we gain almost 300%. This is the type of risk to reward that we like to get involved with. Rather than investing almost $15,000 to own a 1,000 shares, we can control the same amount of stock for $4,500 in this LEAP and make the same amount of money on the upside.

We don't want to get too fancy here, but for those of you that write options, you can wipe out the entire time value by writing (or selling) the WMA AD at $1.25 (Motorola 2010 $10 Call) and collect that premium. This spread will yield you a 200% return with a move to $20, assuming we get second half of option on pull back to $12, otherwise, we'll only make 100%. AS always, call me if you need help with this play.

DISCLAIMER
This newsletter has been sent to you for informative purposes only and in no event should be construed as a representation by The Stock Playbook or its employees as an offer to sell or solicitation of an offer to buy any securities. The factual information given is taken from sources we believe to be reliable, but is not guaranteed as to its accuracy or completeness. The opinions expressed should be given only such weight as opinions warrant. employees and/or family members may have a position in the securities mentioned and may make purchase and/or sales of such securities from time to time in the open market or otherwise Recipients of The Stock Playbook prohibited from, directly or indirectly, distributing, forwarding , plagiarizing or copying any part of this message without expressed written consent from The Stock Playbook. Some content may have been based, at least in part, on material gathered from Investor's Business Daily ® and/or YAHOO!®