Helen Roper’s Revenge (FAS,GS,TLT,GLD,UUP,GDX,KWHIY)

The old lady’s loose flowing garments were testimony to her growing brood of kids and the tendency, as one gets older, to pay less attention to the body’s need for dietary discipline.

 

We’re speaking, of course, of everyone’s favorite landlady (and Stanley’s wife), Helen Roper, who in many ways characterizes the investment landscape we’re now passing through.

 

Old Peoplle

Helen, you’ll recall was a product of the post-war generation’s affluence and the yearning of many aging folk in the 60’s and 70’s to reconnect with their inner child and lead a more fancy-free, shame-neutral life than their parents.

 

A Generation of Teens

 

So, too, with us today, though we’ve taken Helen’s moral lassitude and free-thinking, love-me-dobedobedo to heights undreamt of in 1977.

 

And that’s also likely why our markets are so disconnected from reality, and will continue to be so until all of us have doffed for good the fat rings and frisky hairstyles of the late mamasita who never managed to get her Stanley.

 

Recovering from Vladimir

 

We’re now going to take a quick run through the trades we missed reporting while we were suspended in a borscht-induced hiatus this last quarter. We now understand that our personal trainer and nutritionist Vladimir hooked us up to that pale-red intravenous apparatus for far too long. The resulting valve dysfunction we experienced was anything but ozone friendly.

 

Our apologies, therefore, that this is so late in coming, and to friends and family for the hurricane. Better, Vladimir says, that we have it over with before the holidays.

 

And so we begin…

 

Our March 24th effort that recommended that you purchase the split-adjusted FAS $32.50 CALLs for $16.00.

 

And…

 

We’re sad to report that the initiative fell flat on its wide derriere, costing us the full price of the trade.

 

We’ll have more on how to recoup those lost funds in next week’s letter. As for today, we press on.

 

Hold Fast!

 

The next trade was our June 16th effort that asked you to buy and sell a combination of PUTs and CALLs on financial giant Goldman Sachs (NYSE:GS). One of those options expired in-the-money. The October 195 PUT was exercised, and we’re now proud owners of 100 shares of GS at 195.

 

As of today, we’re underwater, but only marginally. With Goldman trading for 190.26, we’re down just 2%, so we’re holding tight. We also have a long GS January 215 CALL and a short January 235 CALL from the original trade.

 

Take a look here –

 

GS Technical

Goldman’s RSI and MACD indicators (in blue) have been diverging positively against price since late August, well before the stock eventually bottomed a month later. Since then, price has been moving steadily higher, overtaking her moving averages one-by-one. And we believe she’ll be above all the major MAs by New Year’s, if not before.

 

Stay tuned.

 

TRADE #3

 

On July 16th we initiated a trade that called for selling the TLT October 123 CALL for $1.22 and the GLD October 115 CALL for $1.31.   The GLDs expired worthless, but the TLTs ended up in the money, leaving us short 100 shares of TLT at 123.

 

Today they’re selling for $122.87. Buy them back, take your $13, and add it to the $253 you initially took in, for a net gain of $266 per pair traded.

 

Olive

August 20th was the date we launched a trade that advised you to buy the UUP December 26 CALL for $0.25 and sell the UUP December 25 PUT for $0.40. Your credit on the pair was $0.15, and today we advise you to shut her down.

 

With UUP now trading at $26.02, putting our long CALL slightly in-the-money, we say sell it. It’s fetching $0.30. Add that to your initial credit and you have a profit of $45 per pair traded – if the 25 PUT expires worthless, as we fully expect it will.

 

Three weeks to go. Should be safe.

 

Get along, little dogies…

 

We’re now up to our August 27th bet, a number that had you purchase the UUP December 25 CALL for $0.48 and sell the GDX October 14.50 CALL for $0.44. Total debit per pair was $0.04.

 

And now?

 

The open UUP CALL is worth exactly $1.00, and we advise you to sell it. The short GDX CALL expired in-the-money, putting us short 100 shares of GDX at $14.50. Today, with GDX selling for $13.79, we’re in a profit position, but we’d feel more comfortable just getting rid of the thing. Sell your shares at the market and you take in another $71, for a total profit of $171 per pair initially traded.

 

Huzzah! Huzzah!

 

On September 24th we stuck with the GDX theme, buying the GDX November 13 PUTs for $0.89 each and selling the GDX October 30th 14.50 CALLs for $0.38 each. Total debit per pair was $0.51, and the fallout goes like this –

 

The November 13 PUTs expired worthless. The October 14.50 CALLs, as mentioned above, ended in-the-money, putting us short 100 shares here, too.

 

Close them out today for the same $13.79 and you’re up $20 on the trade ([0.71 – 0.51] x 100).

 

Beats a crack on the cranium with a two by four.

 

Our last trade to report today was opened on the first of October. The letter was called Land of the Rising Gun Trade, and there we urged you to purchase shares of Japanese defense contractor Kawasaki Heavy Industries (OTE:KWHIY).

 

The stock was bought at $13.92 and in the two months that followed it has risen to $16.27. That’s a 17% gain in two months, and it’s enough for us. Sell ‘em if you got ‘em.

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Options Trader Elite recommends you take immediate action on the TLT, UUP, GDX and KWHIY trades, all detailed above.

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Many happy returns,

 

Matt McAbby

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