The Money Tree

Safely Generating Income in Retirement

Deep OTM NP Strategy – AUG Week 4

Posted by mounddweller on July 23, 2011

Fellow Traders,

Below is the list of selections for this 4th week of the August option cycle.  You’ll notice it is very slim pickings.  So much so that I have nothing to recommend.

However, before I sign off for another week I would like to briefly discuss the status of the two potential trades I highlighted last week, IDCC and RVBD.  First the good news, IDCC soared this week after it was announced that Google was talking to IDCC about buying the company.   A week ago, Friday (7/15) IDCC closed at $43.01.  Yesterday (7/22) it closed at $72.96.  If you haven’t done so already I highly recommend buying back your puts and closing out the position.  What goes up might possibly fall just as fast.  Take the money and run!

Now, for the bad news (or at least not so good news).  RVBD fell dramatically this past week after announcing they were purchasing a company named Zeus at a sky-high price of 10x sales.  Mr. Market feels RVBD is grossly overpaying and let their opinion be known by selling in earnest.  The stock fell from around $39 last Friday to close this Friday at $32.12.  For those of you who sold the AUG $32 puts I would exercise some patience and see how the situation plays out.  The stock has good support around $32 and has recovered back above our strike price after falling as low as $31.09 on Thursday.  However, it RVBD reverses courses and begins going back down I wouldn’t hang around.  I would buy back the puts for a loss and move on.

Regards,

Troy

 

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One Response to “Deep OTM NP Strategy – AUG Week 4”

  1. Patrick said

    Amazing to see EK at $2.00. A sad story of a company not keeping up with the times. Reminders me of Borders Books. I worked at Borders books in the IT department and left the company back in 1999. I saw the company getting trashed from the inside out. The CEO at the time actually said “A company will never make money selling books on the internet”

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