Categories: Alpha Algorithm HotlinesStock Market News

Booking Double-Digit Percentage Option Gains and Cleaning up Your Portfolio

With the markets entering August — one of the most difficult months of the year — the Alpha Algorithm generated no new names this week with a sufficiently high number of alpha strategies for me to make a new recommendation.

So this week, I want to highlight a couple of recommendations that relate to your existing Alpha Algorithm positions.

First, on Wednesday night, Facebook announced financial results after the market closed that crushed revenue expectations, sending the stock up 4.53% in after-hours trading. This jump will give a big boost to your FB Aug. 19 $120 calls as well.

As a general rule of thumb, anytime a stock jumps this much, this quickly, I recommend you take money off of the table if you hold the options.

With your options expiring in three weeks, and August traditionally a tough month for stocks, I am recommending that you sell all of your Facebook Aug. 19 $120 call options (FB160819C00120000) to lock in your gains. Based on my back-of-the-envelope calculations, and on the prices reported for after-hours trading, your gains should exceed 59%.

Second, your position in The Sherwin-Williams Company (SHW) has fallen out of favor among the Alpha Algorithm strategies rather suddenly, dropping from seven strategies to just three of them.

So, I am recommending that you sell your position in SHW. You should just about break even on this bet.

Third, your position in McDonald’s Corp. (MCD) had a rough week, with the stock selling off sharply. However, as of this morning, the stock is still present in eight of the Alpha Algorithm strategies I track. It is also still trading far from its $113.00 stop price. As such, it still remains in the portfolio. Note that I recommended that you sell your related options in a Special Alert sent out on Monday, July 26.

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Finally, you have one remaining option strategy that expires in August — the O’Reilly Automotive (ORLY) Aug. 19 $270.00 calls. I am keeping a close eye on when we can exit this position profitably, as well.

I will be back next week when I hope to provide a new Alpha Algorithm recommendation.

Sincerely,

Nicholas A. Vardy

Nicholas Vardy

Nicholas Vardy has a unique background that has proven his knack for making money in different markets around the world. He was the Editor of The Global Guru, a free weekly e-newsletter, and also edited the trading services Momentum Trader Alert, which focused on making short-term profits in the hottest markets in the world, and The Alpha Algorithm, which was designed specifically to deliver big, fast triple-digit winners, month after month. He was also the editor of Smart Money Masters, a monthly service focused on longer term investments recommended by the brightest minds in the business. Mr. Vardy has been a regular commentator on CNN International and the Fox Business Network. He has also published articles in The New Republic, The World and I, and The Baker & McKenzie Legal Review. The Global Guru/Nicholas Vardy has been cited in The Wall Street Journal, Newsweek, Fox Business News, CBS MarketWatch, Yahoo! Finance, and MSN Money Central. Mr. Vardy graduated from Stanford with a B.A. — with honors and distinction — in both Economics and History, and he also earned an M.A in Modern European Intellectual History. After winning a Fulbright Scholarship, he earned a J.D. degree at Harvard Law School where he was an editor of the Harvard International Law Journal. When not uncovering investment opportunities for his subscribers and investors, Mr. Vardy is a keep-fit enthusiast and an avid student of classical music.