Update on our PALM easy options trade
Update 11 am June 10: PALM is trading at $11.90. Phil is suggesting entering an order to buy back the June $11 calls at .75 cents – this price anticipates further weakness. We have a profit in the trade now (calls between $1.20 and $1.30), and there’s no harm in buying back now.
Recall: proceeds from call and put sales were $2.55. We bought back the June 12 puts yesterday for $0.55. We can buy back the June $11 calls now for $1.30, closing the trade for $1.85, a 25% gain. Or we can risk holding for further gains.
Update 10 am June 9th: PALM is trading at $12.40. The $11 calls are trading between $1.70 and $1.75 and the $12 puts are trading between $.55 and $.65. Assuming the worst prices, we could buy back the calls and puts for $2.40, which is only about 6% so far. Offer to buy the June $12 puts for .55 cents. Hold on to the naked (sold) June $11 calls for now.
Recall the plan: "PALM – As this is not earnings related we are really playing for a non-event on the Pre. My concern is that the actual roll-out is still 2 weeks away and we can’t rule out the possibility that Sprint will conduct a well-coordinated marketing effort between now and then. PALM gained 10% today and was 10% higher than this last Tuesday. With good support at $10 we can take advantage of PALM’s huge premiums to SELL the $11 calls at $1.05 and the $12 puts at $1.50. We are collecting $2.55 and our window of profit is anything under $13.55 on June 19th as long as it’s not lower than $9.45. Max profit on this trade would come at anywhere between $11 and $12 where we would owe a total of $1 back to the caller and putter so we root for a flatline."
According to Yahoo, PALM gapped up and opened on Friday at 14.11 and then proceeded to fall all the way $13.00 during trading – more than a 4% decline. Last week, PALM bounced around between the $12 and $13 dollar range.
How is the Pre launch going for Palm? Here’s a report by Marguerite Reardon, CNET News.
Palm Pre’s big day
June 6, 2009, NEW YORK–The much-anticipated Palm Pre may have gotten almost as much hype as the Apple iPhone over the past six months, but its opening day fell short of the attention iPhones grabbed on their first days.
Unlike the huge crowds of people that formed long lines and camped out in front of Apple and AT&T stores days in advance of the iPhone’s launch, crowds for the Palm Pre were much smaller and tended to arrive in the morning just before stores opened.
Neither Sprint nor Palm have released official figures about how many devices they hoped to sell on the Pre’s first day. But Sprint representatives had been trying to downplay expectations for iPhone-like crowds ahead of the launch. Sprint spokesman Mark Elliott told The New York Times earlier this week that the company not only didn’t expect long lines for the Pre at its 1,100 stores, but that it didn’t want them.
And it looks like the company got its wish. Salespeople at Sprint stores in New York City said a handful of people gathered outside their locations early Saturday morning. But most lines didn’t even come close to the madness experienced on iPhone launch days…
Even though the crowds and the hoopla may not have matched those of the iPhone, the Pre likely had a good first day. Sprint salespeople in Manhattan said they had a steady stream of customers for most of the day. And the Sprint store on Fifth Avenue only had six phones left as of 2:30 p.m. EDT Saturday.
Since the Pre’s debut at the Consumer Electronics Show in Las Vegas in January, smartphone junkies have been closely tracking the device’s progress as it moved toward commercial availability. Many of the people who showed up to Sprint’s pre Pre-launch party in New York Friday said they had been following news and hype of the phone since it was announced…
Pre’s success is considered crucial for Palm, which was a pioneer in the smartphone market. But in the past couple of years, the company has been struggling to compete against other smartphone makers, namely Apple and Research In Motion, which makes the BlackBerry devices.
The Pre’s success isn’t just important to Palm. Sprint Nextel, which currently has an exclusive deal to carry the Pre, also has a lot riding on the success of the device. Sprint, the third largest wireless operator in the U.S., has been struggling to stem customer defections and repair a badly damaged reputation. At an event here Friday, Sprint CEO Dan Hesse called the Pre Sprint’s coming-out party for the company’s enhanced wireless network and much improved customer support.
Full article here.
Photo: CNET
