NEWSLETTERS & RECOMMENDATIONS - November 21, 2010

Dear Friends and Fellow Traders,

We have SO much to be thankful for. Please remember all the wonderful people in our lives, our friends and family and have the Happiest Thanksgiving ever!

I must say with the utmost humility when I'm right it really feels great. Last week I wrote one of biggest reasons I thought the market had limited downside was the fact there would be so many all cash deals in the near future (6-12 months). Monday morning we started out of the box with two all cash $11 billion deals lead by CAT's $8+ Billion takeover of BUCY. Then we ended the week with 2 more all cash deals totaling over $6+ Billion. The first had I believe, a sector consolidation in the coal business. The second looks like an LBO of DeMonte by KKR. There was some concern that the huge $22 GM deal would suck the life out of the market but I believe all the expected deals will keep the markets rather buoyant.

We're having a little correction or as I like to say - the pause that refreshes. We had a mild 2-3% pullback these last two weeks but are right back near the highs. Meanwhile, China is down 12-13% over the same span. Everyone worries over China's slowing growth. Ok, so China only grows 7-8% and not 10%+, it's no big deal. The "big deal" will come further down the road with China seeking both military and economic dominance of the known universe. Have you seen those TV commercials where we work for China? China claims in the ads they own us - not today but tomorrow?

I fully expect the market to trade in a range with an up bias. This time of year there is little in the way of major market moving news. However, that said, my first reaction is we are in for more of the same old same old. Neither party now wants to give in. Just when we thought Obama would bend on tax cut extensions, he reverses and moves off center and caves into the demands of his friends, especially the unions, who have much to be thankful for since Obama handed them a small fortune with their equity in GM that should have gone mostly to the bond holders. Speaking of which brings us to my first Alert Email of the week.

Monday I sent an alert Email telling Net traders to try and get as much GM shares they could buy if the deal came between $26-30. I mentioned the trade was a great play on the emerging markets. However, if the stock traded above $35 sell all shares. Later we found out the deal would be increased significantly and re-priced to $32-33. My next Alert Email on Wednesday said to now to sell all shares above $35 period. GM opened above $35, hit $35.99 and all shares were sold. Almost the entire deal changed hands opening day.

GM should become a great intraday trading stock. I see a very limited downside no lower than $30 given the expectations GM will be put in any number of indexes, especially the S&P 500 down the road. We can trade options on GM come Monday, November 29th, for even more profits. I will focus on selling puts into weakness and not taking delivery but rolling down and over into further out puts.

Trade of the Week:
I sent an Alert Email shortly after 10:00 Friday near the lows suggesting that the calls were not attractively priced given a narrow expected trading range. Remember in earlier blogs, I mentioned the OEX strike pinning that goes on in quiet Monthly (not the Weekly) expirations. This week would be no different. The 540 calls were $0.50 and should expire worthless. I even tried to short these later in the NET Chat Room over $0.50 but that never happened. The 535s were ITM and trading over $2.00 - too much risk versus reward. I was both right and wrong at the same time. The $2.00+ 535 calls closed exactly at $5.00, the 540s were worthless with the OEX pinned at 539.99. This has become known as "MaxPain" to option buyers. It's covered extensively in my new book The Definitive Trading Bible. (No NET Weekly Money Chart this week.)

Biotime:
BTX continues to surprise me. Instead of coming down after a mild short squeeze the stock almost traded to our Target #2 near $7.80. BTX closed at $7.40 after hitting a new multi-month high of $7.50. There was a large seller of BTX 7.5 strike calls across all months. These are exactly the calls I'm recommending to buy. I personally bought close to 800 of the 7.5 calls across all strikes. A new short seller introduced himself in the Yahoo message boards. I'm guessing maybe he's much smarter to be short over $8.50 than $7.00. I estimate the seller, whatever his core strategy, sold over 2,000 calls. This is equal to 200,000 shares. Maybe I'm wrong and BTX is just an attractive Buy/Write idea near $7.00. If BTX trades anywhere near $7.50 the conservative writer can earn $1.50-.75 depending on the month while protected down to $6.00, a good support level. If you use margin or put up say $4.00 you can earn say $1.50+ over 6 months. That’s nearly a 40% return or 80% annualized! I don't know of many places that can offer those returns with good downside protection but, personally, I'm much more aggressive than that.

We have much to be thankful for with BTX - only 4 months ago with the stock at $7.00 going into the Russell 3000 I suggested sale of a portion of your BTX holdings then a month later I wrote here in the blog BTX trading $4.00+ not to get sore just buy more. Yes, I bought back higher but I did not get sore and loaded the boat with even more BTX and over 600 options, shorting puts and using the money to buy calls.

Thank You BTX for giving Net traders a most profitable Thanksgiving and very profitable year so far – BTX has gone up handsomely. I'm looking for BTX to trade somewhere between $10 and $20 next year. I will continue to recommend selling puts on any weakness and using the $s to buy calls as BTX becomes more expensive.

Let's not forget yet another (there were quite a few others as well) big winner over these last 2 years - Huntsman Corp AKA HUN. I first recommended HUN nearly 2 years ago at $3.00. Over 6 months ago I re-recommended HUN as a great long term trade idea. We were going to buy HUN near $8.50, collect seven $0.10 quarterly dividends or $0.70 until Jan 2012. In addition, we were to sell the $12.50 strike put near $5.00 at the time and a $15.00 strike call near $0.75. Today, HUN is trading near $13.60 now after hitting $14.50 a few weeks ago. I expect we will roll-up and over to higher strikes to extend our long term gain even for more profits. I fully expect HUN will be sold for over $20 sometime in 2012. The $5.00 put money in your pocket was a nice bonus too and should expire worthless.

I have recently learned of another really good economic reason for Ben's QE2 program but it's too much for us to contemplate just before Thanksgiving and plain scares the hell out me down the road. I'll save that for next week and those in the Chat Room.

However, again, I am disappointed in our stupid government officials that gave rise to the new pat downs that would be considered a sexual assault in any other situation. The terrorists are winning. I'm fully hopeful that another Tea Party ground swell will arise to end this farce with the battle cry of “Don’t touch my junk”. We all know what the terrorist look like and we know who there are. El Al, the Israeli national airline, has never had an incident. They know how to do the job and on many occasions they have offered to help to no avail.

I'll leave you with one last thought. Again, let's be thankful for everything we have today, our loved ones, good friends, relatives and especially those protecting us overseas.

Keep those cards and letters coming. I read them all.

Good trading,

Stan Moore
702.558.1814