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[Weekend Summary]
Dear Member:
This week, I opened a Aug 90 straddle on Burlington Resources (BR)while the implied volatility was quite low (2d percentile). That translates into relatively inexpensive options. The stock gapped up today and usually seems to carry more volatility so I can make money with a fairly good move in either direction and/or a good increase in volatility.
I also bought some $5 LEAPS calls on Tenet Healthcare (THC). THC has had a pretty good slide on an announcement a while back that it was going to restate earnings for a number of years. It looks to me as though the stock may have made a bottom so I took a speculative chance and bought some in the money calls. I like the reward to risk possibilities on this one.
The other stocks on which I have straddles both made nice upside moves this week. Morgan Stanley (new symbol MS) was up $2.93 for the week and Cardinal Health (CAH) jumped $5.54 ($2.12 today alone). Obviously, these moves help the call side of the straddle and I like what I see. Unlike some of the straight directional plays, straddles can take some time to become profitable, but when they do, the profits can be quite good. Of course, risk is limited to what I originally paid for the straddle unless I make an adjustment so there is limited risk and the possibility of theoretically unlimited reward.
EBAY and BBH are in areas of support. SPY is looking strong and I just have to watch to see whether I need to buy back the Feb 129 calls I sold against my Dec '06 120 calls. Micron (MU) was up for the week and came to rest at a resistance.
Each major index closed up on Friday on some strong volume so it may be that the brief retracement is over for now.
Have a wonderful weekend.
Bill
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