The casino stocks powered higher again on Friday and are showing some good momentum right now. Wynn Resorts (WYNN, $60.40, up $13.90) kept the ball rolling by announcing good 3Q results despite lousy Las Vegas revenues.

The company reported a profit of $51 million, or $0.49/ share, up from $45 million, or $0.41/ share, a year ago. Revenue jumped nearly 18% to $769 million, helped by the surge of nearly 37% at the properties of Wynn Macau (China) which contributed $475 million. Overall, Wall Street had expected earnings of $0.59/ share on revenue of $747 million.

Although Wynn missed on their numbers, the conference call was upbeat, and again, the short positions in some of these stocks are huge. The call options for Wynn Resorts have exploded over the last few days and some of you have made some nice gains. The November 40 calls (UWYKH, $18.50, up $11.40) jumped another 160% while the January 2010 40 calls (YPWAH, $23.20, up $8.00) could have been purchased for $2.35 and $10.20, respectively. Obviously, the November calls have performed much better than the January 2010 calls but the longer-term calls were used as insurance in case the November calls didn’t go our way.

In other news, MGM Mirage (MGM, $16.46, up $1.09) priced $750 million of senior secured notes, which wil help reduce liquidity worries. The November 10 calls (MGMKB, $6.90, up $1.20) were profiled at $2.00 and have also been a huge winner for us. The January 2010 10 calls (YDMAX, $10.00, up $1.25) were going for $4.00 in my original write-up of the casino stocks and they have also done well.

Las Vegas Sands (LVS, $14.19, up $3.81) was perhaps the most heavily shorted stock of the group, and man, did we hit the jackpot with these call options. The November 10 calls (LJJKB, $5.00, up $2.40) were going for 50 cents, yes 50 cents, and are up 10-fold. The January 2010 10 calls (LNUAB, $8.35, up $2.75) were going for $2.20 and they are up nearly 300%. Wow.

Boyd Gaming (BYD, $6.80, up $1.05) also chipped in with some incredible returns. The November 5 calls (BYDKA, $2.25, up $1.00) were going for 20 cents and were up another 80% on Friday. The January 5 calls (WWAAA, $3.60, up $0.95) were going for $1.60 and have easily doubled.

Pinnacle Entertainment (PNK, $5.60, up $0.75) has also done well but I had mentioned that those options are thinly traded.

If you are in any of these positions, scale back on the November calls by closing 50%-75% of your contracts and at least half of your January positions. The ride has been fun but you have to protect your profits and start preparing for the next trades. These options may continue to do well and we will still enjoy even more gains if the casino stocks extend their rally this week.

Rick Rouse
Rick@OptionsMentoring.com

Words can’t describe the excitement we’ve seen in the market over the past few weeks and Friday was a classic example of what could be described as “running for the hills”. Wall Street was in full fledged panic mode Friday as the Dow went back and forth in a 1,000-point range, hitting a low of 7,882 and a high of 8,901.

The last hour of trading was a toe-to-toe battle between the bulls and the bears that left both sides bloody. It was awesome. By the final bell the market had mixed results as the Dow fell 128 points to 8,451, while the S&P 500 slipped 11 points to 899. The Nasdaq held its own and managed to finish in the green, up 4 points to 1,649.

The final score for the week was a clear victory for the bears, however, as they hit the Dow and S&P 500 for 18%, while the Nasdaq slid 15%.

As a result, a lot of companies went on sale, at least in my mind. More on that in a minute. While it is extremely hard to predict a market bottom, there are signs that at least we are getting close. I still don’t trust October but as bad as the month has been historically, it is often the best time to buy when looking at long-term stocks or options if there has been a correction.

Yeap, it’s gonna be hard to go long right now, but with a game plan you can advantage of everyone’s elses fear. Take a look at how some of these big names traded on Friday.

Microsoft (MSFT, $21.50, down $0.80) hit a low of $20.65. Are you kidding me? Back in April when Microsoft was trading at $30 did you ever think you would have the chance to buy it at $20?

Back in May, Google (GOOG, $332.00, up $3.02) was at $600. Yesterday it traded as low as $310. At half-price, is it a Blue-light special?

How stupid does Yahoo (YHOO, $12.29, down $0.36) look now for not taking Microsoft’s $30+ a share offer? Yahoo may not be worth $30 but it does look cheap at $12.

Johnson & Johnson (JNJ, $55.85, down $1.73) was at a 52-week high less than a month ago and hit a 52-week low of $52. Crazy. Just crazy, man.

General Motors (GM, $4.89, up $0.13) got chopped in half after after Standard & Poor’s Ratings Services said the company’s credit could drop further.

Energy companies have taken a whippin’ as oil prices fell 10% to a 13-month low of $78 a barrel. That’s the lowest its been in a year. Gas is going for $2.99 a gallon here on the east coast. Remember our Energy Watch list from June?

Arch Coal (ACI, $22.04, up $0.49) was at $70.

Massey Energy (MEE, $20.73, down $1.15) was at $84.

Patriot Coal (PCX, $14.60, down $0.23) was at $154. There was a 2-for-1 stock-split in August at $100. Still, the shares have fallen from $154 to $28 ($14 split-adjusted)? Incredible.

Peabody Energy (BTU, $28.65, down $0.93) was $77.

Joy Global (JOYG, $28.88, down $2.09) was at $85.

I profiled quite a few of them on June 4 and two weeks later they had returns of 100%-300% as the call options exploded when the stocks were hitting new 52-week highs. Click here to view these blogs.

The VIX (^VIX, 69.95, up 6.03) blasted through the 60’s and nearly hit 77. On Tuesday, the VIX was at 52 when I said that the 60’s look like a good bet.

The point I’m trying to make is that some stocks ran too high too fast and now some of them have gone too far to the downside. Somewhere in the middle is where they may be fairly valued but we are more worried about the options on these stocks, not the funadamentals. I still don’t trust the financial stocks but there will be some winners out there once the dust settles.

The credit crunch, President Bush, the press and the talking heads have scared the be-Jesus out of everybody and nothing seems to be working to restore faith in the market. Remember what I have said about not following the herd. Yes, the market is tanking and there’s more downside risk. But everybody needs to quit beating the horse. It’s already dead. Now is the time to start buying for 6-12 months down the road.

I’m working on a “Lottery Portfolio” this weekend and I will be picking some stocks and sectors that may be worth a gamble. The market is open for business on Columbus Day although banks will be closed. Right now Wall Street can’t see the forest for the trees and hopefully by doing a Lottery Portfolio, I will be able to show you the bigger picture.

Rick Rouse
Rick@OptionsMentoring.com

Historic times indeed. Tuesday’s 485 point climb for the Dow was the third largest ever after dropping 777 points on Monday. The Dow’s close of 10,850 puts the index down 18% YTD. The Nasdaq jumped nearly 100 points to close at 2,082 but its 5% jump still leaves it off by 20% YTD. The S&P 500 rallied 60 points to finish at 1,166 and is also down 20% for the year.

NewsFlash. Despite the market’s gyrations, there are a few stock out there making new 52-week highs. Tough times call for tough choices and when you have to sell something for money where do people go? Yeap, pawn shops are hot (no pun intended)…EZCorp (EZPW, $18.80, up $1.32) hit a 52-week high of $19.25. There was a little action in the October 17.50 calls (ULPJT, $1.95, up $0.90) which jumped 85% but open interest is relatively low.

Other stocks to add to our “Pawn Shop” watch list: Cash America International (CSH, $36.04, down $0.06) and First Cash Financial Services (FCFS, $15.00, up $0.27) are a couple of other players but their stock was hit by Hurricane Ike recently.

JPMorgan Chase (JPM, $46.70, up $5.70) did not set a 52-week high yesterday but the 14% surge has me believing it could be the one to “buy” if a bailout is approved. There was heavy action in the October 47.50 calls (JPMJW, $2.73, up $0.54). If you have some “house money” to play with you’re getting 50/50 odds. Either the financial stocks get a short-term lift with the bailout or they plunge even further.

Keep an eye on the HealthCare sector. One of my favorite plays could be UnitedHealth Group (UNH, $25.39, up $4.39) which has been slammed recently. There was huge volume in the October 25 calls (UHBJE, $1.50, up $0.20) but I’d go way out to the January 35 2010 calls (WUHAG) which closed at $2.05 if the stock can hold $20 for a few months. This would give us an entire year to play a rebound.

Other potential names include Aetna (AET, $36.11, up $0.85), Cigna (CI, $33.98, up $0.65), Humana (HUM, $41.20, up $0.50) and WellPoint (WLP, $46.77, up $2.31).

It’s a tough market right now but an exciting one. Novice traders will get “smothered and covered” in these types of markets and it’s best to leverage trades and take profits until we get back to “normal”. That might take a while though.

Rick Rouse
Rick@OptionsMentoring.com