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Close Superior Energy (SPN) and Intrepid Potash (IPI) Stocks

Dear Fellow Options Traders,

On Friday, we were looking at a 100% loss on our short of the Superior Energy Services Inc. (SPN) Nov 17.50 Puts. On Oct. 30, we initiated this position by selling the puts and collected $1.20. We established this position because we thought the option signals were valid and we liked the fundamentals and valuation of SPN.

Today, the stock rebounded sharply. If you sell SPN at $16.30 or higher, you will have recovered any loss from the option position and will exit the trade for breakeven. This was our goal when we decided to take in the stock last Friday. With our goal achieved, we are recommending executing the final leg of the trade.

Also on Friday, we faced a 100% loss on our short of the Intrepid Potash (IPI) Nov 20 Puts. We recommended shorting the IPI Nov 20 Puts on Nov. 3 for $1.50 or better. And like SPN, we initiated this position because we thought the option signals were valid and we liked the fundamentals and valuation of IPI.

Today, IPI has also moved significantly higher. If you sell IPI at $18.50 or higher, you will have recovered any loss from the option position and will exit the trade for breakeven. This was our goal when we decided to take in the stock last Friday. With our goal achieved, we are recommending executing the final leg of the trade.

It is quite possible that the stocks will go much higher. The stock market last week was a victim of uncertainty regarding the eventual fate of Citigroup (C) and a rising fear that Bank of America (BAC) could be next in line. That fear has subsided in the wake of the recent government action to provide financial support for Citigroup, and SPN and IPI have recovered nicely. Occasionally, expiration does not fall on the best possible day.

We are option traders and are moving on to the next trade, a recommendation in SGR, having recovered all losses from these trades.

Our closing out the long-stock positions today is purely a reflection in our having satisfied our original objective and our continued focus on options rather than stocks.

Have a great day trading.

Nick Atkeson and Andrew Houghton