The case for long LEAP calls

The case for going long on LEAP Calls

• Massive downturn over the past year
• Should lead to a broad rally within the next couple of years
• Lots of company stock prices are sure to rise

• Identify sectors that have been beaten down and are likely to rise due to mega-trends
• Find good names in each that have been beaten down but will be in demand
• Find ones with cheap LEAP Calls
• Go long: 2012 Calls, < $1
• e.g. HomeBuilders, Financial companies, Healthcare (esp. related to epidemics which are likely to rise), autos?

Punished sectors likely to rise again: XLF,ITB
- Find the recovery leaders of each sector

Other sectors, stocks likely to rise:
Technology: MOT (handheld computers), YHOO (new CEO), XRX (new CEO)
Disease mgmt/Epidemics
Energy storage/Battery
Transportation

Trend-Following Strategy

Strategy for capitalizing on a major stock uptrend:

Screening

• Find a serious uptrend starting in the last 3-6 months, supported by high volume
• The increase must be sustained or must be explained by a good reason; preferably new product or service coming in from below
• Stock price between 10 and 50
  

Activity

• Find a good entry and exit point
• Use tight Money Mgmt; Cut short losses and let profits run
• Use contingent orders to sell on downturns

With this activity, it then comes down to a question of good screening approaches for trending stocks.