STEP-BY-STEP IN OPTIONS TRADING (Pick - 2)

STOCK PICKING

My source is www.advfn.com using CANSLIM screener provided for free. So, I come to this stock with strong earning increases during couple quarters.

Stock Symbol : NE
Stock Price $ 56.10 (April 17, 2008) AMO (After Market Open)

ENTRY PRICE

Open the chain provided in www.optionsxpress.com .

I choose the entry price with IV below 48% (therefore should be ITM), which the strike price is $ 55.

TECHNICAL ANALYSIS

FUNDAMENTAL ANALYSIS

For the earnings date, just klik: http://moneycentral.msn.com/investor/market/earncalendar/

Earnings Date:
4/23/08 Q1 2008 (After Market Close – AMC)
1/23/08 Q4 2007
10/17/07 Q3 2007
7/18/07 Q2 2007
4/19/07 Q1 2007

DETERMINING

Stop Loss:

The premium paid (Ask Price) = $ 4.10
Stop Loss is 25% from the premium paid --> $ 4.10 -25% = $ 3.075
Day to expiration = 64 days – 3 days = 61 days

Input the data into Option Calculator: http://www.cboe.com/LearnCenter/OptionCalculator.aspx :

Target (May 2, 2008):

Target is 60% from the premium paid à $ 4.1 + 60% = $ 6.56
Day to expiration = 64 days – 14 days = 50 days

Input the data into Option Calculator:

SUMMARY

ALERT SETTING

Go to http://alerts.yahoo.com

RESULT