Does anyone on this board follow Lenny Dykstra's call options investment strategies? He has had a trade on PDS Dec. $22.50 call options since May. His strategy calls for averaging down if the stock and options price declines. He has had tremendous success investing this way as indicated by the results published in his weekly stat. book. Currently he has a position of 110 contracts with an average purchase price of $1.76. Does anyone think that there is a chance for a win here on these contracts before expiration?
There have been a few situations like PDS where his average cost was way underwater with the expiration date closing fast. All except for one, he has pulled victory out of the jaws of defeat. Just look at Massey Energy as the latest. I have had success with his picks that I have chosen to take a position on, but I feel that I am going to lose on this one. I would be interested to hear from anyone else who is following his column on TheStreet.com and has entered this same trade.
I think the March-08 DITM $12.5 Calls are a real gift here. At $5.50 you get a high delta return in PDS (almost dollar for dollar) for any close above $18.00. Nat Gas usually goes up (sometimes quite a bit) during the winter, which will help PDS's price next spring.
Full disclosure - I have purchased these calls.. and I will average in more if the price drops further, since I think PDS is bottoming..
I too have followed Dykstra's columns and noticed this was one of the few times (if not the only time) he curiously profiled an option that was not in the money when he recommended it.
One note - is that if you look at his stat book for Wed, Oct 10th he actually increased his target sell price to $2.20 from the $2.10 sell price listed Oct 3rd.
Given the low trading volume I am wondering if he thinks there is some specific catalyst that he believes will move the stock up?
Oh Yeah. Lenny's Call calls have been very very good. Xcept PDS. Unless we see ANY upside, not chasing. Chalk it up on the balance sheet and move on. Averaging down works until the market goes against you. October 1987 would not have been a good time to be holding all this baggage.
Every options seller needs a corresponding buyer and the floor traders like to eat lunch.
If PDS resurrects before Dec, Lenny needs to be voted into the Hall of Fame for market savvy as well as baseball.
Actually, when he first recommended it on May 24, 2007, it was a DITM call because at that time the share price had just closed at $26.43. Here the the link http://www.thestreet.com/newsanalysis/investing/10358719.html?puc=_tscs
But that does bring up a good question about why, after so much decline in share price, does he keep adding to this position with the expiration date coming up quickly vs. opening a new position at a lower strike price and an expiration date further out?
I too have the Dec. $22.50 Calls on PDS, (PDSLX). I have 90 contracts with an average price of $1.30 / contract. I follow Lenny's picks and have a blog devoted to his DITM calls - www.blog.twelve02.com I write about all my options activity and post Lenny's scorecard every week. I am a but worried with PDS but am holding on for now. The stock doesn't want to move up at all, it just trades in a range and then goes lower. Only time will tell.
Thanks for the blog URL. Interesting stuff here. Did you just start a few weeks ago posting the weekly stat. book or do you just keep 1 months worth on-line? Having the history of the stat. book on one page like that is handy.
Also, you mention in your blog that you would need the share price to reach approx. $20.50 to get back to par and that your average purchase price is $1.30 / contract. Wouldn't you need the share price to get close to $22.50 + $1.30 = $23.80 to get back to par assuming time value has about fully decayed (which of course is what we are all concerned about here)? I am fairly new to options trading, maybe I misunderstand something.
I to am like you, i had a nice win with MEE. I have been watching him average down on PDS for some time now and finally decided to buy. I got 10 contracts @ .95. My thinking is that i will sell @ around 1.70. Good Luck i hope it reached its low and steadily goes up from here