Position Update: AFAM and PHM – February countdown

Apologies for the lack of posts last week, but time worked against me. Fortunately for my current trades, time is working for me! Last week provided some welcome turn-around in the stock prices of Almost Family (AFAM) and Pulte Homes (PHM). Today, we’re giving some back so far. Here’s a snapshot of my open plays as of this afternoon:

Account snapshot midday 2009-02-10

Midday account snapshot, 2/9/2009

I need to provide an update on where things stand and a glimpse at the the remaining two weeks until options expiration. I was thinking about breaking this into a couple posts, one for each security, but in an effort to get this done sooner rather than later, I’ll keep it combined for this go around.

First off, we’ll look at AFAM. This has been on a turbulent ride since shortly after we entered the trade. At this point, it’s just .15 above what we sold it for, with the underlying stock down about 1.50 on the day to the 31.75 range. Somewhat predictably, the stock did essential meet resistance at the 200-day moving average yesterday at about the $35 mark. Our stochastic is still way low, and trying to bend back up. I still see shares holding above the $30 mark by expiration, which allows me to cash-in on all the premium from selling the puts. Get some clearance back above the 200-day MA would be helpful towards that end. Here’s the 5-day chart I captured last night, little out of date now:

AFAM 5-day chart

AFAM 5-day chart

Yesterday, Motley Fool indicated Almost Family is a promising stock that Wall Street ignores. The stock generally flies under the radar, but has very good potential with the increasing need for health care services. However, Fool already published a concerning note for home health investors, which affects AFAM. It discusses potential government impact on revenues of home health organizations. So, clearly there’s a mix of news that will likely lead to some see-sawing for a bit here. We’ll just have to tough it out.

Pulte Homes 5-day chart. See any support?

Pulte Homes 5-day chart. See any support?

Pulte Homes has also had some news of recent. Yesterday, the building sector in general had a bit of a sell-off due after earnings being announced by Beazer Homes USA (BZH) and a downgrade from buy to hold on Lennar Corp. (LEN). Beazer reported a smaller quarterly loss, and rallied, but didn’t bring anyone else with it.

It was also interesting to note that yesterday PHM founder William J. Pulte filed a Form 144 for the sale of 4.75mil shares. Apparently, Mr. Pulte is seeking more liquidity. I’m not actually certain what something like this means, and specifically what it means for Pulte, but dropping about $2 in two days is not thrilling for a stock hovering around $10.50. We’ll see if 10 continues to hold as support for the share, and that last friday wasn’t some sort of exhaustion rally before heading back underwater.

As of right now, the trades are still in net positive territory. That’s a combination of time decay on the options, as well as some positive movement last week. I imagine a little more will be given up today yet, but we should be okay. Tomorrow leaves 7 business days left until expiration, so time is still ticking by. We’ll see if we can hold on until sometime next week to close these out.

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