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Joined: 28 Dec 2005 Posts: 11965
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Posted: Wed Sep 06, 2006 2:35 pm Post subject: Thu: Buys EBAY RMBS Sells DIA Others to Watch: KBH |
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Thu: Top Buys EBAY RMBS Top Sells DIA Others to Watch KBH
Primary Trades:
EBAY Oct 27.5 or 30 calls are buys on pullbacks and Oct 30 puts can be used to hedge on bounces (volatility should also be opportunities to sell, because of time value decay). RMBS Nov 20 or 22.5 calls are buys and Nov 20 puts can be used to hedge. EBAY has the potential to rise into the low 30s quickly. So, Sep 30 calls at 0.15 or less may also be buys. RMBS has a best case price target of 68 on news in Sep and Oct. So, it may rise above 30 before Nov options expire.
DIA held up relatively well. However, if a steep sell-off takes place, DIA will also fall sharply. DIA Oct 112 to 114 or Nov 110 to 112 puts may be best on market bounces.
Secondary Trades:
KBH reported an earnings warning and fell below 39 in afterhours (HOV rose over 1/2 point in afterhours on better than expected earnings). If KBH falls to around 38 (the yearly low is 37.89), Oct 40 calls may be a buy.
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Primary Trade: An intermediate or long term trade. Timing can be off substantially. Volatility not a factor. Risk is low to moderate. Potential return is often moderate.
Secondary Trade: A short term trade. Timing must be accurate or volatility must be high. Risk is high. Potential return is high.
Secondary Trades should be generally avoided, although considered. Note: If Secondary Trades are taken, they may affect Primary Trades. |
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