Stocks look like they might be ready to do an about-face in the coming days, with high-flyer momentum stocks taking the brunt of the hit. Unfortunately this sentiment change has hit our call options. However, that hit is offset by our put credit spreads, which are also bullish positions but much less volatile. As proof of this seven of our put credit spreads are poised to earn full profits after the market closes tomorrow.
Recommended Options Trade: iShares Silver Trust (NYSE: SLV)
SLV has broken below a “head and shoulders” support at $28 and looks like it will continue to move lower if commodities continue to correct. Here is the best way to play more weakness in iShares Silver Trust:
I recommend that you buy the SLV Apr 23 Put at around 50 cents ($50 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $24.20. That should give you an option price of about $1.20, for a 140% profit. Close this position and cut losses if the stock closes above $28.20, when the option price should be about 30 cents. The stock is currently trading at $26.85. The computer-simulated probability of this option hitting its target price is 16%.
Recommended Options Trade: NYSE Euronext (NYSE: NYX)
NYX broke above resistance at $31, then pulled back, then rebounded Thursday. It should continue to move higher if stocks can recover and resume their rally. Here is the best way to play more strength in NYSE Euronext:
I recommend that you buy the NYX Mar 34 Call at around 60 cents ($60 per contract).
After taking the position, enter a good-til-cancelled contingent order to sell this option if the stock hits its target price of $34. That should give you an option price of about $1.20, for a 100% profit. Close this position and cut losses if the stock closes below $31.50, when the option price should be about 30 cents. The stock is currently trading at $32.28. The computer-simulated probability of this option hitting its target price is 24%.
Action to Take on Current Positions: Take-Two Interactive Software (NASDAQ: TTWO), IDT Corp (NYSE: IDT), A123 Systems (NASDAQ: AONE)
Close the TTWO Mar 14 Call, the IDT Mar 30 Call, and the AONE Mar 11 Call. The stocks closed below their stop prices Thursday.
* All of our short-term recommendations can be taken for up to three days after they are recommended. Make sure the stock and option prices are close to where they were when we made the recommendation. If after three days you still have not gotten the position filled, cancel the order and wait for our new recommendations, as the profit probabilities may no longer be valid.
I’ve got plenty of stellar pitches up my sleeves that I’m sending to my Maximum Options subscribers — join us in this service for active options traders and get up to 10 trades per week! Click here and start making options home runs of your own!
