Saturday, October 27, 2007

LULU Under $50

Looks great for an entry next week but the options aren't cheap. I remember buying the Dec. 55 calls for 40% implied volatility less than a month ago but now they are twice as expensive at 80%. Probably the best way to play LULU here is to short the 50 puts or just go long the stock. However, being the option addict that I am I'll probably just buy some November or December 60 or 65 calls (I sold my previous position). Check out the daily chart above and the implied volatility below since LULU's IPO a few months ago.

Be aware that this is a volatile stock partially due to the growing bear camp on this stock. Technically it could fall as far as its rising 50 dma at $41.3 before ending the current uptrend but there are multiple support levels between here and there. In my opinion the best spot to load up on LULU would be around $47.50 but word is spreading about this stock and people want in so it might not get there. I think any price under $50 is worth nibbling, but really hope I'm not being too greedy here. As always YOU are responsible for your own investment decisions, I'm just telling you what I like.

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