Amedisys Call Sold For 164% Gain!

The Aggressive portfolio held up well despite the market difficulties. YTD the portfolio is up 5% which is a very good start relative to the -2% loss on the market. Amedisys was the big story as we sold our call option position for a 164% gain. We set our target stop order once we saw the underlying stock start to take off. Our stop order was hit as the stock approached its high in the middle of the week before falling back. By setting a target gain and stop order, we were able to get out just before the market starting pulling back. Stop orders are a great way to manage positions when you can’t watch the market every second of the day. We also bought a call option position on Bank of America last week after watching the underlying stock drop 8% in one day. We think the bank is an excellent long term franchise and consider the current pricing pressures a very short term problem. We purchased an “in the money” call for just $2.67 that does not expire until January 2011. We think the upside on Bank of America stock is very good and we have a full year to wait out those gains. If we get the direction right, our profits will be much higher on our option position than if we had bought the stock outright. We also sold to open a short spread position on the Volatility Index by selling the February 22.50 call and selling the 17 put. We wanted to take advantage by selling the rise in premiums due to the sharp increase in volatility. We think this position will end profitably, but frankly we could have sold for even more money if we had waited just one more day. Rising volatility will increase the opportunities for making money trading options, so we plan to monitor those developments very closely.

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