-- Posted Friday, 24 February 2006 | Digg This Article | Source: GoldSeek.com

Rick’s Picks

Friday, February 25, 2006

For investors who’d rather be smart than lucky 

We picked up some put options in Agnico Eagle Mines and IBM, although an attempt to get short in D.R. Horton as well proved a tad too ambitious. The homebuilder’s shares opened at their best levels of the day, but that was still 62 cents shy of our short offer. Concerning Agnico, it is not often that I recommend shorting the shares of a mining stock, but it has had quite a run-up and was looking especially vulnerable. We bought April 25 puts for 1.15, a dime off the intraday low, and they closed on a 1.45 bid. (an annualized profit of “10,000 percent!!!!”, in the parlance of those who hype stock-market letters). Although we typically try to spread off option positions by short-selling other options against our position, in this case we may simply cash out our chips if AEM continues over the next couple of session to sink as rapidly as it did yesterday.

In any event, my expectation is that we’ll get more bang for the buck than we did with the QQQs, which constitute a rigged game similar to pari-mutuel betting. The relatively small short position we have assumed in IBM is slightly more speculative, since, to reward us, the stock would have to break beneath a shelf of support that has vexed put-premium buyers for more than two weeks. Stochastic signs suggest distribution rather than accumulation has been occurring, but Big Blue nonetheless looks like it could dart in either direction with just a little nudge. If lower, especially over the next few days, my downside target would be a hidden-pivot support at 78.60. That’s a fall of nearly 2%, and it would probably at least double the value of the dozen April 75 puts we bought for 0.35.

***

Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com

-- Posted Friday, 24 February 2006 | Digg This Article | Source: GoldSeek.com

Previous Articles by Rick Ackerman

© 1995 - 2019

Live GoldSeek Visitor Map | Disclaimer