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Return Update - Did you make money this week?
Posted On Wednesday, October 22, 2008 at at 11:09 AM by Chris
It has been 2 days since my advice of positions to take and although it may seem like it's too soon to discuss big returns, this is the market we are in today. On Monday, I said to look at getting into FXP (an ETF that shorts the China market) at $90. With the help of one of the largest China banks getting hammered for credit failure warning, after two days FXP has shot up to $124.16, currently. This giving us a return of about 36%! Only in 2 days.
Now on top of that, I also advised to buy into an Apple call option prior to earnings report. I bought several April expiring contracts at a strike price of $110 yesterday for $9.10. Today, en light of the solid earnings, they got as high as $14.50 (.QAADB), this being with the NASDAQ being down 3.24%. I am holding on to them, because I think Tech will rally in either Thursday or Friday. And with a rally, I believe we should see Apple (AAPL) anywhere between $110-$120. So if you did sell out at $14.50, you would have earned a return of 59%.
The bonus with these two positions, is you had hedge to your risk. You had a short position in the market as well as a long position and best case scenario worked out where both were profitable.
So if you would have invested $10,000 ($5,000 in each investment), your current investment would be worth $14,750! Of course both circumstances acted profitable, which may not always happen, but for me, it does, frequently. So what next???
We have experienced two down days in a row in the market. Mostly due to bad earnings and fears of a global recession. Commodities have been crushed the past week and oil has reached its lowest point since June of 2007. I think this brings an excellent opportunity for us to make some money.
Currently, DIG (an oil long ultrashare) is trading at $27.86 (down 19.6%). OPEC, the governing body for oil distribution, meets on Friday to discuss production supply. Many people are predicting a supply cut, which in turn, should lower demand pushing the price up. I think if OPEC cuts supply by 10%, we should see a 10% bump on Friday. Currently, .DPBLN, an option for DIG at $40 expiring in Dec is trading for $2.80. I am going to try and snatch this up in the $2.20 -2,50 range. If we see this supply cut and a healthy pop in stock price, we should see this option go to the $5 plus range (if all works to plan of course). So keep your eye out and you may want to pull the trigger.
Please keep in mind though that options are much more volatile than stocks and should not be played unless you have experience in option trading. Happy Trading and we will discuss tomorrow.
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