SKUL calls

[EricSimpson1 5]

I might buy some Oct 12.5 SKUL calls and hold a day or two if the stock continues it's bounce. I don't think it's even worth doing a straddle in this case. It's been knocked down a lot the past couple weeks after a Morgan Stanley downgrade, but it looks overdone. Short float is absurdly high at 70% with a short ratio of 22.

[tjlocke99 18]

I might buy some Oct 12.5 SKUL calls and hold a day or two if the stock continues it's bounce. I don't think it's even worth doing a straddle in this case. It's been knocked down a lot the past couple weeks after a Morgan Stanley downgrade, but it looks overdone. Short float is absurdly high at 70% with a short ratio of 22.

Hi Eric. I've never heard of the term short float? Could you describe it? Thanks.

[Thaze 4]

The short float is the percent of shares that are shorted. Short sellers sell borrowed stocks at market price assuming a future price decline to buy back at a cheaper price, keeping the difference as their profit. For example, SKUL has a short float of 70% - meaning 70 out of everyone 100 shares sold is being sold short.

[EricSimpson1 5]

Hi Eric. I've never heard of the term short float? Could you describe it? Thanks.

To add on to what Thaze was saying, any good news can cause stocks with high short floats to shoot up in a very short period of time(the "short squeeze"). Check out the chart on Volkswagen (VOW.DE) in late 2008. That was the biggest short squeeze ever. A ton of hedge funds and big traders were short the stock. When it was revealed that Porsche had been quietly buying up shares and had built up a large stake in Volkswagen, all the shorts panicked and bought to cover. Volkswagen's stock price went up a few hundred percent in just several days and became the most valuable company in the world for a very brief period. Obviously a short squeeze of this magnitude is a very rare event, but there is always a small short squeeze occurring in some stock every day. Another thing to be aware of is that when you have a classic short squeeze, they are usually followed by large drops.

[EricSimpson1 5]

And I'm in the Oct 12.5 calls at 1.20.

[Kelly Park 10]

I like the thesis, Eric. I'm following you on this one. I'm in the Oct 12.5 call at 1.13. I also decided to try a bit more ocnservative Dec 11 Call at 2.50. Less time value, less theta, lower commissions. Won't be as good ROI, of course, but wanted to compare the two.

[trhanson 617]

I think this one is a good trade. If we can catch them in a squeeze, this one could go to the moon very quickly (and then come back down even quicker). Could be a 2 way play. Catch a ride up, buy a straddle somewhere near the top (if we miss the top, we may be able to roll the straddle at BE or better) to ride the wave back down to earth.

In at 1.10

[Thaze 4]

Followed @ 1.10 also.

Ended up skipping the OMX trade due to the wide spreads.

Edited September 17, 2012 by Thaze

[Thaze 4]

Shorts had a massive sell-off from 13.25 to 12.30~ and my stop-loss kicked in and killed me on this one. OUCH.

Another important lesson in portion sizing.

Edited September 17, 2012 by Thaze

[Guest listolyman]

Thaze, can you reenter at a lower price than the stop?

[Thaze 4]

Not currently - Might try to but I doubt it... Had my stop set @.95 and the massive sell-off caused a MASSIVE drop. Stop loss got screwed and ended up cashing out a .65. Think I'm gonna stay away from the short squeezes for now, that was painful. 41.7% loss in 10 minutes, FML. Go figure the 10 minutes I'm away to eat is when the sell-off would occur.

Edited September 17, 2012 by Thaze

[EricSimpson1 5]

That selloff was bizarre. It might be one person playing around with the stock. Doesn't take much to move it. I'm just going to hold my calls until I get a pop. Could be a week from now. Could be never. I didn't use stops and don't mind losing 100% in this case since I put very little in the trade.

[Thaze 4]

I over-allocated and got smacked for it, lesson learned. Oh well, positive spy calendar trade has offset the majority of the loss.

[EricSimpson1 5]

Ouch. Sorry to hear that. I've been there before.

[trhanson 617]

I'm going to hang tough, the bulls have put a 12.50 floor on this badboy. I'll hold it for a couple of weeks and see where we are at.

[Thaze 4]

I think it should be a good trade for those willing to hold, but after this selloff and loss from today I think I might skip out on re-entering. Best of luck to everyone else.

[Kelly Park 10]

Sorry, Thaze. I've had it happen to me too. Stop loss orders are so TOUGH to deal with. It seems like it takes more analysis to figure out an approiate stop-loss than it does to find good trading candidates in the first place. And they so often trigger on a quick bounce and not the dramatic crash we set them for. Frustrating!

[Thaze 4]

Thanks for the consolation. We win some and lose some, so lets just hope some others make up the loss. Learned my lesson to lower my allocation next time.

[csensen13 1]

Eric, the stock was briefly above 13 and then began drifting about 60 cents lower - do you think the short squeeze is yet to come, in your estimation? I'm holding a few Dec calls, so there is still plenty of time, but was curious as to what you were thinking.

[EricSimpson1 5]

Well

Eric, the stock was briefly above 13 and then began drifting about 60 cents lower - do you think the short squeeze is yet to come, in your estimation? I'm holding a few Dec calls, so there is still plenty of time, but was curious as to what you were thinking.

There hasn't been any short squeeze yet. The jump last Friday may have been shorts taking profits after it got hammered earlier last week but I'm not really sure. Most stocks with a high short float go down in the long run because they are usually bad companies. But in some cases such as this one, the stock has been shorted to a point where it would be insane to short more in the near term. I know the market doesn't always behave rationally but I think this is a risk worth taking assuming you allocate very little. I also don't really like technical analysis and I don't believe that past performance guarantees future performance, but 5 of the past 5 times SKUL has gone below 13, it rebounded to at least around 14 within the following few weeks.

[csensen13 1]

thanks for the insight Eric - I have a pretty small position, since it's a new strategy for me, but it's fun to be along for the ride. We'll see...

[trhanson 617]

I doubled down this morning @ .65. We've had 4 days where it knocked on $12.30s door and couldn't break. Averaged in to .85 per contract. If it breaks $12, i'm going to take my lumps. If we hit $14 next week (which I really think could happen), I'll probably sell most.

[trhanson 617]

SKUL up 2.4% on the day. Could be the start of something. If the bulls can take control, squeeze could be imminent. Resistance around $13. If we can pop that on Monday or Tuesday, I could see this hitting $14 very shortly thereafter, but $13 has been the roof for the week thus far.

[csensen13 1]

Is anyone still holding these? - I had a limit order on Dec 12.50 @ 1.60 which just hit for a very conservative (but nice) 11% return on a small position. But the stock looks like it's bouncing back nicely

[Kelly Park 10]

Is anyone still holding these? - I had a limit order on Dec 12.50 @ 1.60 which just hit for a very conservative (but nice) 11% return on a small position. But the stock looks like it's bouncing back nicely

I still have my Oct 12.5 and Dec 11 calls. Both back to BE today. You kinda split the difference between the two with your position. Good call. (pun intended.) I'm still holding. I still think there is more potential upside.

Edited September 27, 2012 by Kelly Park

[trhanson 617]

I've still got them. On the fence about selling. Volume wasn't very high today, which is not indicative of a really good squeeze. Chart pattern are looking VERY promising of continuation. Yesterday there was a well formed hammer (bullish indicator) after a bunch of congestion (which is like a spring compressig). Assuming we close around 13.4 or up, we have another bullish candle today called a marabozu. Its basiclly where you open at the low and close at the high with a decent white body. It shows that the bulls are in control. If there weren't the 2 bullish candles back to back, I would have sold mine for a 35% profit, but I really think this is a good hold on point. That being said, I'm prepared to take up to a 20% loss on this trade, but in my opinion, the reward here far outweighs the risk. Next week, I'll be out one way or the other.

Edited September 27, 2012 by trhanson

[trhanson 617]

We did end at the top. In fact ended exactly at the high. I'm full bull on this one right now. Almost a perfect marabozu candle. Look for this one to window up tomorrow .10 and watch what it does. If the bears don't attack, squeeze may be in full effect and we could see 30, 40, maybe even 50 cents again.

[Guest listolyman]

Skul is doing well today. I think it will pass $14 next week and maybe hit 1.80.

[EricSimpson1 5]

I'm still holding. I'm probably not going to sell until it gets up to the 14's.

[trhanson 617]

Skul is doing well today. I think it will pass $14 next week and maybe hit 1.80.

I've got a sell order for half +1 of my position at 1.7 which would BE on the whole trade for me, and I'm going to let the rest ride until I see something I don't like in the chart.

On my other prediction, no window today. I would have really liked to have seen an open window as that usually ends up being a support, but can't win them all. Bears look like the are trying (especailly in the last half hour or so), but bulls holding strong at open. I see no reason to sell today :-)

[Hannes Kury 7]

I took profit today at 1.35. 17% gain after comm. It was a wild ride. Thanks Eric for sharing!

[Kelly Park 10]

Sold 4 out of 5 SKUL OCT 12.5 Calls, for just over my basis in the trade. keeping the remainder for a bit to safely squeeze as much out of it as possible.

Still holding more conservative DEC 11 calls.

[trhanson 617]

*claps hands* out at 1.5. Just getting to the point now where I'm thinking about it after hours and such, at which point, it's time to go. 76.47% profit.

Ha, I should have just held strong with my 1.7 limit order. Oh well, a win's a win.

For what it is worth, I still think there is upside here. I just needed to take my win here since I rode it up so high. I may look to reenter with november options at some time.

Edited October 1, 2012 by trhanson

[EricSimpson1 5]

I have a sell order set at 1.65 on the Oct 12.5 calls. I think it'll get there eventually.

[trhanson 617]

I have a sell order set at 1.65 on the Oct 12.5 calls. I think it'll get there eventually.

I think it will as well. The only reason I got out was because the trade was starting to eat at my psyche :-) The way I look at it, I've got the next year and a half of SO covered now, lol.

[Thaze 4]

Anyone thinking about buying puts if it hits a certain range?

[Kelly Park 10]

Anyone thinking about buying puts if it hits a certain range?

Personally, I wouldn't do that anytime soon. We are still well below the highs of August (16.75) and April (17.75). I actually think this will continue upward, which is why I maintained a partial position. But my risk/reward said to take some profits now, especially in a market that (I think) has a significant risk of a sharp correction.

[trhanson 617]

I agree with Kelly, buying puts would be a risky decision right now. I'd rather see less short interest and a higher price. That being said, if it got to $15.5, I'm going to start to look for a reversal pattern (either an evening star, hanging man, or a strong bearish engulfing) before I would look at buying. Right now, we are in between set floors and ceilings, so it could go either way. Personally, I hope it gets to whatever Kelly's sell limit is set at, and then comes tumbling back down to $12.50 so we can do it again, ha ha.

[Thaze 4]

Lesson learned this time for sure - No stop losses for sure... I got out for a 47% loss while you all made off with a nice profit (not hating or anything, just stating my lesson was learned the hard way). I'll be ready for the next round though

[Hannes Kury 7]

Anybody thinking about a straddle? Maybe the Nov 14 strike?

[Kelly Park 10]

My remaining Oct 12.5 calls sold at 1.60, so I'm out of that position. 30% gain. Thanks for the head's up on this one, Eric.

Still holding my Dec 11 calls.

[trhanson 617]

Nice play Kelly. You got an extra dime on me :-D

[Kelly Park 10]

Nice play Kelly. You got an extra dime on me :-D

Just happened to make a good guess on my GTC sell order. If I had done that with all my contracts, my gain would have been a good bit more, but I had already sold some to guarantee at least BE. Nice to be in that position every now and again.

[EricSimpson1 5]

Got filled earlier this morning at 1.70. About a 40% gain after commissions.

[trhanson 617]

Very nice. That was my original goal, but sometimes you gotta get to gettin' when the gettin's good.

[Guest listolyman]

Thanks Eric. Out at 1.65 for an 83% gain. Looks like i could of had over 100% if i had waited.

[trhanson 617]

This was a crazy good situation. If this thing hits 15, I'm going to start hunting for bearish reversal signals and possibly try my luck at a smaller downside positoin.

[trhanson 617]

It looks like we are building a very strong inverted hammer or shooting star here today. I'm considering buying a few puts.

I put a limit order in for only 10 puts at .80 but it didn't get filled. Very bearish candlestick today and should be a short term trend reversal. Watch for SKUL to come back down. My target is 13. That would be a give back of half of the previous run (a measurement that is surprisingly accurate).

Edited October 5, 2012 by trhanson

[trhanson 617]

Too bad I didn't have this on an alert list. It hit 12.5 again today, and then recovered to near 13. I would have bought DEC 12.5 calls at a stock price of 12.50....

Edited October 17, 2012 by trhanson

[Guest listolyman]

Trhanson, i was considering this also. The stock is in the 12.60's today. What price are you targeting?