Tracking Dykstra's Deep In the Money Options Calls: August 14th 2006

Tracking Dykstra's Deep In the Money Options Calls

A Blog that tracks Lenny Dykstra's deep in the money option picks from his column featured on thestreet.com's website. His "Low risk - High reward" system is looked at to determine how successful it is. The strategy involves picking good companies where the stock price is too cheap and buying deep in the money calls for several months out. The call prices will tend to go up dollar for dollar with the stock price since they are already "in the money". Dykstra buys 10 calls and looks for the stock to go up $1 dollar for a $1000 gain. He stresses that this is a short term strategy and to take profits when they come. The "maximum gain potential" is listed just to give an idea of how high the option price could have gone, but profits for this system should be taken as soon as they are made. I don't want to imply that one should wait for bigger gains.

Monday, August 14, 2006

August 14th 2006 - AMAT

Dykstra picked the January 12.50 Call for AMAT Applied Materials Inc.
Read the column here.

Option price: $3.30
Stock closing price on Friday August 11th: $15.17
Approximate premium: 63-cents ($15.17 - (Strike $12.50 + $3.30) = $0.63)

Big volume on this particular option today, most likely due to the fact it is reporting earnings tomorrow after the closing bell. The volume was just over 2000. The option traded today between $3.38 and $3.70 according to Yahoo! finance, so technically Dykstra couldn't have got in at his price target (but benefit of the doubt and maybe Yahoo! is showing me the wrong numbers). Either way, this is a play on earnings. If AMAT reports well tomorrow, I would say there is a good chance it will go up much like CSCO and his other recent picks that were right near earnings. Of course if they miss or give some bad news, this could turn into an AMGN situation where the stock never recovered and the option expired much lower.

August 16th Update - AMAT reported good numbers but gave some soft guidance and the stock closed the daily around even. The option did reach a high of $3.81 today, so made it half way to the target with plenty of time to climb.

September 11th Update - A little behind in updating, but AMAT hit a high of $17.00 on August 30th, putting the stock up well over $1 and therefore increasing the Call option by at least $1. Today the option traded at $4.30, which just happens to be an increase of $1. Another good one from Dykstra...but the question is...why is he not doing thestreet.com anymore!!?!

2 Comments:

At 4:17 p.m., Anonymous said...: As a paid subscriber to realmoney.com, I too was puzzled by Dykstra's absence. I called customer service and was told that Lenny Dykstra was on an "indefinite leave of absence". Reading between the lines, and given the abruptness of his departure, I've come up with some possible explanations:
1. His ghostwriter quit or wanted more money/recognition.
2. His ghostoptionspicker quit or wanted more money/recognition.
3. His successful options calls have fostered jealousy with other columnists who subsequently forced him out.
4. His successful options calls went to his head, so he tried to renegotiate his deal with thestreet.com and it didn't fly.
5. His contract with thestreet.com was up and they couldn't reach a new agreement.

Just my thoughts.
At 6:33 p.m., PENNY STOCK INVESTMENTS said...: Great

Tracking Dykstra's Deep In the Money Options Calls

Monday, August 14, 2006

August 14th 2006 - AMAT

2 Comments:

About Me

Previous Posts