Thrift Savings Plan

Last week I made a decision to lower my sell price on my Apple calls to $24.30 per contract. That order executed on Friday afternoon netting me a return, not including Uncle Sam’s cut, of 12.4% in just under eleven trading days.

Today I could kick myself in the ass for changing the sell price. If you recall from my previous post on this trade, I was setting my sights for a limit of $30.20 or around a return of 39.8%. However, I have a near-term opportunity in which I needed the cash. So instead of waiting, I lowered the price to something more likely to execute sooner rather than later.

I usually never look back after a trade has executed. But in light of today’s stock upgrades on Apple, I just had to see what I left on the table. The call traded as high as $28.00 per contract. That means I left roughly $1,480 on the table by selling on Friday. On the other hand, no one knew with certainty on Friday that the options would get that high on Monday. Therefore, I took the sure thing given what information I had available at the time.

Knowing that still doesn’t make me feel any better, damn it.

I couldn’t stand to see Apple get slammed along with the rest of the market on Friday. Since Apple was getting hit, so were my Apr 135 calls that I bought at $25.10. I was reminded by my co-workers to look at the opportunity as though Apple’s stock was on sale, the proverbial “Blue Light Special.”

Therefore, I did what every good contrarian investor would do. I doubled down by buying more thus reducing my overall cost basis. I picked up two more contracts at $18.00 a piece. This lowered my cost basis to $21.60 per contract. However, instead of shooting for the $1.00 profit per contract, I’ve set my sell limit order at $30.20 per contract. If executed, that would give me a return of approximately 39.8%. Crazy? Maybe. But Apple, and the market in general, has been so volatile lately that it’s quite possible it could trade that high.

I’ll monitor the situation closely. We have the Federal Open Market Committee meeting on September 18 with the Street damn near certain the Fed will cut interest rates. If they do, the market will be up. If not, I think the market could sell off in a big way! Any negative news of this magnitude will require an adjustment in my sell order.

Today my standing limit order to sell the FLEX Jan 7 1/2 call contracts triggered at the set price of $4.75 per contract. That assured me a $1.00 per contract profit.

The contracts were initially purchased on August 29th. My holding time was only six trading days. After all commissions, but not counting Uncle Sam’s take, I made a return of 25.7%.

I also had a standing order to by additional shares of Countrywide Financial, the troubled mortgage lender. In an earlier post, I suggested looking into this stock. That order, too, triggered today. The order was to pick up additional shares if the price dropped to or below $18.50. I’m now officially knee-deep in the subprime slime.

If you haven’t heard by now, Apple released a line of revamped iPods and cut the price of the iPhone by $200. This is all good news, right? I mean, consumers and the media balked when the iPhone was released at a whopping $599.

But wait! Now that the phone is more affordable to a larger audience, this means more potential sales for Apple which should translate into greater profits. Stop me if I’m wrong here. So then, why the hell did the stock drop 5% on the news?

Being the impatient sort, after I heard Steve Jobs utter something along the lines of, “And there’s one more thing…” I jumped at the chance to buy some Apple Apr 135 Calls at $25.10 per contract. The stock was already down for some unknown reason. This seemed like a no-brainer to me. Oh, was I wrong. You see, I bought before he announced the iPhone price cut. Wall Street took this negatively and drove the stock down even more.

To make a long blog entry short: I bought too early and now I’m down over 11% in a matter of minutes. On the other hand, I’m a strong believer that the price cut and the new iPods will only add to Apple’s bottom line.

Come on Apple… daddy wants a new iPod Touch!

On August 29th I picked up some Flextronics (NASDAQ: FLEX) January calls with a 7 1/2 strike price at a cost of $3.75 per contact. This represents an in-the-money call with the stock closing at $11.39 per share on Friday, August 31st.

FLEX is a major provider of electronics manufacturing services (EMS) with a 15% market share. Some of their services include printed circuit board and flexible circuit board fabrication, systems assembly and manufacturing, logistics, and design and engineering. Customer names include the likes of Sony-Ericsson, Hewlett-Packard and Motorola.

FLEX has been on an acquisition binge lately snapping up companies like electronics maker Solectron and medical equipment supplier Avail Medical Products. Each deal is expected to be positive for earnings and growth going forward.

While these events sounds good, one reason I jumped on board is the Standard & Poor’s Research Report. Their analysis suggests a 12-month price target of $14.00 per share. They also rate the stock 4 out of 5 stars. I trust the S&P reports due to their supposed unbiased research.

A quick review of their financial statements in the report also indicate positive attributes I like to see in companies.

If the research holds true, there should be more upside to the stock than downside. Therefore, I placed my sell limit order should the option trade at or above $4.75. If, on the other hand, the stock drops to $10.14 or less before January, then I also have an order on the books to buy more options which lowers my overall cost basis.