SPLS 42% gain in one day on Jan 2013 Call $17.50 Strike

Thought it would be good to inform everyone as to the options I am currently holding in interest of full disclosure as well as to let you know the stocks I think have long term positive moves ahead of them. But most of all I wanted to show the 1 day gain that happened on SPLS today!

How about a 42% return in one day of trading! A 5% gain in the stock price gave a 42% gain in the option price! Again, the amount of money I am trading is miniscule ( student, no job, no income ) but if I traded out now I would net about 31% on my total investment. Of course with trading commissions that would be cut in half, so I'm holding on for a long term play with the stock moving toward $19.

Remember, options are risky. A bad day of 5% down can have just as large a negative effect as today was up. But I will take a 42% day any chance I get!

As for the other holdings, PEP continues to look very promising. I got in on the initial drop so my returns are down for now. This is a long term play so I'm not really worried if this one takes a year to show profit, but PEP is still showing 6 days of momentum after the bounce I wrote about last Tuesday. At the time I wondered about lowering my cost basis and doubling down, had I done that I would be close to profit already.

Thanks for reading,

 Straight From The Chart!

Disclaimer:
Just to be clear, nothing that I'm posting on this blog is in any way advice that should be followed by anyone else. All investment decisions should be made carefully by all individuals taking into account their own financial situation and appropriate levels of risk. Do not take anything I say for anything more than it is, opinion, speculation, and woefully undereducated guesses as to how I think a few stocks are going to perform.   

SPLS - Breaking Out / The Good and Bad of Trading Options

 

Can't deny the great trend happening with SPLS (Staples) right now. SPLS has gained a hefty 3% plus today in early trading, I'm expecting that to pull back a bit as investors take profits on a great day of trading. But I'm not as happy about the 3% day as I am with the trajectory of the stock price. Its been on a solid trend for months and continues to show breakout patterns that have held true. I'm watching for resistance around the $16.50 level but if it gets past that number it could be smooth sailing to around $19.00.

Today is a great example of how trading options can be a great way to make (or lose) money on strong trends. I am holding one Jan 2013 Option on SPLS with a $17.50 strike price. I got the option at $.80 / share and it is now trading at $.95 / share most of which came from today's move. With options you get rewarded, or destroyed, based upon momentum and a strong uptick in a positive momentum stock can mean big movement in the options. For example, a 3% move in SPLS stock price today gave a 26% gain in stock price today alone. Today's movement gave a $20 gain on an $80 investment.

Now my investment numbers are tiny because all I have is $1000 and a dream. But any investor with real figures to invest could have netted 26% gain on a relatively tiny 3% move. HOWEVER, the pendulum swings both ways. Getting in an option heading in the wrong direction could lose 26% on a 3% downward shift just as easily. That's why it is so important to pay attention to trends before buying, know the company, know the chart.

That being said I'm holding on to SPLS for the time being, I think the stock goes to $19.00. We'll watch it and see what happens. They are reporting 4th quarter results tomorrow, if it goes well - which I'm expecting - it could go even higher. The move today is likely the result of Office Depot reporting higher than expected numbers. Look for the same from Staples.

Disclaimer:
Just to be clear, nothing that I'm posting on this blog is in any way advice that should be followed by anyone else. All investment decisions should be made carefully by all individuals taking into account their own financial situation and appropriate levels of risk. Do not take anything I say for anything more than it is, opinion, speculation, and woefully undereducated guesses as to how I think a few stocks are going to perform.