It happens quickly sometimes. UNH has moved up quickly. Up over 6% yesterday. The close above 30 is impressive and I am adding to my position this morning. I will put out a note of caution. The stock has moved up over 10% in a few days. The 30 dollar level is going to be very important to hold now. A failure of this level is possible due to the big move, but the futures this morning are strong, and that could help to support the move. The catalyst is still in place and momentum of a technical breakout is in place. I have see stong option volumes still and there have been several other technical analysts pointing out breakouts from the 30 dollar level. Here is a chart to illustrate the breakout. I will summarize below.
The Position:
Long 5 contracts of the UNH JAN 2010 28 Calls (UNHAT) @ $1.50.
The Trade:
Adding to the current long position by executing the following at the open of the market on 11DEC09. Details of trade execution will be posted on Twitter and post on the blog. A summary post will be in the next update.
Buying 10 UNH JAN 2010 30 CALLS (UNHAF). I will be looking to get into this position less than $2.00. The market looks to be opening higher. This is a bit of a premium to close yesterday, but should be feasible.
Protective Stop Options:
I have two scenerios for stops. I am concerned with a pull back due to the strong move and I will be tight on the stops. I will be looking at the 30 level in UNH to hold and will be monitoring to close there, but I don't want to cut short.
Stop at 30 if aggressive.
Stop at 20DMA if you want to let the volatility subside and see upside
Stop if option position is down 50% (This is always a rule on a directional trade)
Enjoy the day!
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