Post edited 5:45 pm – June 24, 2009 by spreadtrader

I've already gone on record in the lobby as having bought stock in SWC. Sink me if I'm wrong.

Today I jumped on an offer I couldn't refuse. I bought a boatload of SWC January 7.50 calls for .85 each. My target for SWC by year end is 12.00. Why not buy the stock today? For ease in argument's sake let's say I bought the stock instead of options at today's close…..5.69. The stock hits 12.00 by year end and I've more than doubled my investment. But at .85 cents per 7.50 call my break even is 8.35, subtract it from 12.00 and it leaves me with a 3.65 profit. On an .85 cent per share investment that's a home run.

Of course, the risk is that at the end of January your .85 cents could be worthless, whereas you'd still be holding the SWC stock (if you bought that instead). But what if the SWC stock you were holding is at 4.00 in January? You'd be holding a -1.50 loss and worried it might go to 2.00; so knowing when and how to use options can be a valuable tool.

While there's no designated discussion category for options in the new, improved forum………we're still going to talk about 'em, aren't we……… 

Post edited 8:32 pm – June 24, 2009 by spreadtrader

Don’t mind me. What pops in my head pops out my keyboard.

I’m just trying to get some bystanders to say what’s on their mind. But how about a "thumbs up" for my effort………..lol.

Thanks Patches, but as we've discussed before, I try to be very careful with my choice of words. I'm not giving "advice" or "recommendations". I have ideas and suggestions; and I try to disclose what i'm doing and what I intend to do. But I'd like to remind everyone that they must do their own due diligence; and it is especially important to make trading and investing decisions based upon one's own level of knowledge, experience, risk tolerance and comfort level. Stated otherwise, don't do anything you're not comfortable with; and never make a trade where you do not completely understand the risks going into it. If you do not understand the risk, you cannot possibly control it……….and that is the key to successful trading, not picking the right stocks.

You are absolutely right that there is more wiggle room for support here, not just in SWC but in many stocks. The market could surely go either way. I think I've said elsewhere that I'm comfortable buying SWC anywhere between 5.00 – 5.75. I'm just nervous that the market is going to take off at some point and not look back…..for a few months anyway.

But that's one reason I'm using options here. With option IV at reasonably low levels option pricing allows for some margin of error on the timing of entries. Again, I "only" have .85 cents per share in this trade; and I have until January to be proven wrong. That is not to say that if SWC plunges below 5.00 that I'll continue to hold the option. However, if that happens there likely won't be much left of the .85 cents to worry about; but it is still better than holding the stock (some of which I also hold, but at lower levels).

I have some SWC in my IRA, of course I bought it about a year ago so I'm in the red on it. But holding because I thing it is going to come back strong

If you whisper me your email I'll send you some options courses on pdf that are first rate.

SWC is finally moving towards support at $5.09, which would make Spreadtraders options play even more attractive than it was at the original 85 cent price. One thing to keep in mind, there are 2 more solid support level at $4.42 and $3.87, although I doubt we will see the last one. I'm pretty sure we'll see SWC hit $5.09, but watch it to see if it goes lower and you'll be able to get those options for a steal. Otherwise if it goes back up you will still be able to buy in at the original price.

Now I shall sit back and watch SWC have another banner day against my prediction.

Interesting article on silver

http://www.investmentrarities……6-09.shtml

ST (and others), thanks for the warnings on commodities. The cynic and conspiracy theorist in me says that "they" are holding the lid on the inflation/commodities pressure cooker. Be patient. Patient. It may take months. But in the meantime, why fight the market?

I think the Gumshoers have a great record of holding the "Gurus" accountable without crossing any legal or moral lines. Keep up the good work.

Post edited 3:54 pm – July 10, 2009 by dmanson

Hey Patches and Spread,

SWC just keeps dropping since you've posted these.  What do you think about just buying the stock outright instead of options?  Or do you feel the options give the best play?  Which options would you buy and what month?  It's looking like a day to buy for me.  I worry with options because I don't want to be right, but early and lose it all to time decay.

Another good reason to be holding the options. The stock is down over a buck since June 24th…..the options are down .50 cents.

Post edited 4:23 pm – July 10, 2009 by spreadtrader

Not you in particular, Darrell. I said earlier that once the trend gets underway it's more risky to initiate new stock trades than it is to do it with options. This recent pullback in the last month illustrates that.

Hope you're doing well and enjoy the weekend.

……..by the way, I think that soon there will be another opportunity to buy Stillwater stock. That metal isn't going anywhere, some companies (if not GM) will be building cars, and Stillwater will find a market for platinum and palladium whose value will track that of gold and silver.

My old pappy used to play cards with me when I was a kid and I'd start a winning streak that I thought would last all evening. He'd just smile and say "I've seen sicker dawgs get well." Sure enough if he kept me playing long enough he eventually had his turn at winning. Older folks can better appreciate the virtue of patience. Ironically, they don't have as much time as the young.

Back in July we heard the "bad news" about what GM was doing to SWC on its contracts for the platinum used in catalytic converters. Lots of people were thinking that SWC stock was probably not good to hold. Fortunately, these options were reasonably cheap and your risk was limited to their cost.

Now SWC is making a comeback and just hit a new high close for the trend that started in November. I still think this is going to 10.50 – 12.50 before January. But since this has doubled, anyone who bought a lot of these may want to take half off the table and zero out your risk. Then if the market corrects to say 6.00 – 7.00 you can repurchase what you sold while the options that you continue to hold are free of charge. Pretty cool.      

SWC on a tear today. Rose 14% on anticipation that EFF's will be launched soon.

http://www.indexuniverse.com/s…..nears.html

SWC had a P&F quad top breakout on Nov 16. It's a rare pattern worth noting when it occurs.

If Farley were here, I'd think he'd say that there is another bus coming. Better to get on the next bus than to get run over by the current one.