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Starbucks Options Volume Rises Ahead Of Earnings After The Bell

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Volume in Starbucks options is running approximately three times the average daily level for the stock as of 1:15 p.m. ET ahead of the company’s third-quarter earnings report after the close. Shares in the name are up roughly 1.0% just before midday to stand at $79.95. Traders of SBUX options today are more active in calls than puts, with the call/put ratio hovering near 2.0 as of the time of this writing. Much of the volume is in 25Jul’14 expiry options contracts, most notably in the $80 and $83 strike calls which have traded roughly 3,350 and 2,550 times respectively and in excess of existing open interest levels in both strikes. A portion of the volume in the $80 and $83 calls appears to be part of a spread trade.


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Sizable Call Spread Trades On Orexigen

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A large call spread initiated on Orexigen Therapeutics, Inc. (Ticker: OREX) on Monday morning looks for shares in the name to rally approximately 30% by September expiration. The September expiration is noteworthy as the company awaits the results of the FDA’s review of its resubmitted New Drug Application (NDA) for NB32, an investigational medication being evaluated for weight loss, after the review was extended for three months back in June. The upcoming Prescription Drug User Fee Act (PDUFA) date is September 11, 2014, according to a press release issued by the company. Shares in Orexigen today are up roughly 0.40% at $5.34 as of 2:15 p.m. ET.

The largest trade in OREX options today appears to be the purchase of a 10,000-lot Sep 5.0/7.0 call spread at a net premium of $0.72 per contract. The spread positions the investor to make money above an effective breakeven price of $5.72, with maximum potential profits of $1.28 per contract available on the spread in the event that OREX shares rally 31.0% over the current price to hit $7.00 at expiration. Shares in Orexigen last traded above $7.00 on June 10th.


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Dunkin’ Put Options Change Hands Ahead Of Earnings

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Dunkin’ Brands Group, Inc. (Ticker: DNKN) put options are active on Friday as shares slip on a downgrade to “Neutral” from “Buy” (with a 12-month target price of $45.00) at Janney Montgomery, and perhaps ahead of the company’s second-quarter earnings report next Thursday. Shares in the name are down 1.2% just before midday to stand at $43.36 and off the lows of the session. The stock has dropped nearly 20% since reaching a 52-week high of $53.05 in March.

The most traded contracts on DNKN today are the Aug 40.0 strike put options, with nearly 5,700 contracts in play against open interest of just 452 contracts. Most of the volume appears to have been purchased in the first hour of the trading session at a premium of $0.52 per contract, perhaps by an investor seeking to hedge a long position in the shares or as a means to speculate on bearish price action following the company’s earnings release next week. The put options may be profitable at expiration if shares in the operator of Dunkin’ Donuts and Baskin-Robbins restaurants drop roughly 9.0% from the current price of $43.36.


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Bullish Action In U.S. Steel Options As Stock Pops

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U.S. stocks are rallying on the final trading day of the week, rebounding somewhat from Thursday’s selloff in the wake of the Malaysia Airlines MH17 crash in Ukraine and escalation of fighting in Gaza. The S&P 500 Index is higher by 0.65% at 1970.50 as of the time of this writing. Outperforming that Index today is U.S. Steel Corp. (Ticker: X), though the largest U.S. metal producer by volume is no longer in the S&P 500 Index, having been replaced by Martin Marietta Materials Inc. (Ticker: MLM) and added to the S&P MidCap 400 Index on July 1st. Shares in U.S. Steel are up better than 3.5% to stand at $27.55 as of 11:25 a.m. ET.

The metal producer’s shares have had a strong summer so far, with the price of the underlying up more than 20% since the beginning of June, and more than 60% since August of 2013. Options trading on the stock today suggests one or more traders are positioning for the shares to continue to rally in the week prior to the company’s second-quarter earnings report on July 29th. It looks like more than 3,000 of the 25Jul’14 29.0 strike calls were purchased this morning at an average premium of $0.12 per contract. Buyers of the 29.0 strike calls stand ready to profit at expiration next week in the event that U.S. Steel shares rally another 6.0% over the current price of $27.55 to exceed the average breakeven point at $29.12.


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Microsoft Ratio Spread Looks For Further Upside

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A ratio call spread initiated on Microsoft Corp. (Ticker: MSFT) on Wednesday (July 16) suggests one big options market participant may be looking for shares in the software company to extend gains after the firm reports earnings on July 22nd. The stock jumped on Wednesday and is up again today after the company reported it will cut up to 18,000 jobs over the next year. The stock is currently up more than 3.0% at $45.54 as of 9:35 a.m. ET. The trader yesterday appeared to have sold 20,890 of the 15Aug’14 43.0 strike calls at a premium of around $1.04 each in order to buy roughly 3.3 times as many (68,899 contracts) of the higher 15Aug’14 45.0 strike calls at a premium of $0.34 apiece. The trade cost a little more than one nickel per contract to put on and positions the trader to make money if shares blow through the $46.00-level by expiration. The complexity of the ratio spread and the sale of in-the-money call options suggests the strategist may have a position in the stock, though the options trade itself was not tied to stock according to data available at the time of the transaction. 


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Spike In IGT Shares Positive For Put Sellers

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Shares in International Game Technology (Ticker: IGT) jumped more than 9.0% to a near six-month high of $17.00 on Wednesday morning after Italian company GTECH S.p.A. agreed to acquire the maker of slot machines for around $4.7B in cash and stock and the assumption of $1.7B in net debt. According to a joint press release issued by the companies, IGT and GTECH will combine to form a new holding company (NewCo) in the UK.

The sharp move in the share price and effective floor on the price of the underlying following the deal may be boon for one large options market participant who appears to have sold roughly 100,000 of the Aug 13.0 strike put options on IGT last Tuesday at a premium of $0.20 each. The put seller pocketed $2 million in premium by selling the contracts and keeps the full amount of premium in the event the August expiry puts expire worthless with shares above $13.00 next month. Terms of the deal provide IGT shareholders with an aggregate value of $18.25 per IGT share, comprising $13.69 in cash plus 0.1819 ordinary share of NewCo, and well above the $13.00 striking price on the sold put options. Open interest in the contracts currently stands 92,415 contracts and the largest of any series available on IGT.

Chart – Heavy volume in Aug 15 ’14 13.0 strike puts on 7/08/14


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Options Active On Amazon.Com

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Options on Amazon.com, Inc. (Ticker: AMZN) are seeing heavy volume on the final trading session of the week amid strong gains in the price of the stock, which is currently up more than 4.0% on the day at $342.09 and the highest level since April. At last check, more than 127,000 options contracts have changed hands on Amazon or twice the stock’s average daily options volume of around 63,100 contracts. Call options are more active than puts as of the time of this writing, with the call/put ratio hovering near 1.33 just before midday in New York. The bulk of the volume is in the 11Jul’14 weekly options currently in their final day of trading prior to expiration, and in the 18Jul’14 expiry calls and puts. Amazon.com reports second-quarter earnings after the close of trading on July 24th.

Chart – Amazon shares on the rise


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Paper Profits On Potbelly Puts

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Investors in Potbelly Corp. (Ticker: PBPB) suffered a swift kick to the gut on Thursday with shares in the name plunging 25% to $10.95 after the company’s annual profit and quarterly revenue forecast came in lower than analysts’ estimates. U.S. stocks opened sharply lower, but are well off the lows of the session with the S&P 500 Index down roughly 0.30% at 1,967 as of 2:15 p.m. ET after earlier dipping to as low as 1,951.72 near the open.
Trading in Potbelly put options on Wednesday signaled at least one trader was bracing for sizable declines in the price of the underlying shares during the next few months. The most traded contracts on PBPB yesterday were the Oct 12.5 strike puts. All told, it looks like approximately 3,000 of the 12.5 strike puts were purchased yesterday afternoon for an average premium of $0.58 each. The move in the stock price since the bearish position was initiated pushed premium on the now in-the-money put options skyward. At last check premium required to purchase the Oct 12.5 strike put is hovering around $2.05 per contract.
The most traded contracts by volume on Potbelly today look for longer-term recovery in the price of the underlying stock. Approximately 1,000 of the Jan ’15 10.0 strike calls have traded against open interest of just 30 contracts. Time and sales data indicates most of the volume was purchased at a premium of $2.25 each. Buyers of the 10.0 strike calls may profit at expiration in the event that shares in PBPB rally 11% over the current price of $11.02 to exceed the breakeven price of $12.25 by January expiration.


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Call Spreads Trade On Electronic Arts

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Call spreads trading on Electronic Arts Inc. (Ticker: EA) today look for shares in the videogame and digital entertainment company to rocket to fresh multi-year highs during the next couple of months. Shares in Electronic Arts are up 1.0% on the day at $35.65 as of 1:20 p.m. ET.
It looks like roughly 10,000 of the Sep 37.0/41.0 call spread was purchased during the first half of the trading session at a net premium of $1.00 each. The strategy starts making money if shares in EA rally more than 6.0% over the current level to exceed the breakeven price of $38.00 and reaps maximum possible gains of $3.00 per contract in the event the stock soars 15% to $41.00 by September expiration. Electronic Arts is scheduled to report first-quarter earnings after the closing bell on July 22nd. Shares in EA are down roughly 4.0% off a 52-week high of $37.26 reached in June, but is up roughly 50% since this time last year.


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Call Options Change Hands On Garmin

www.interactivebrokers.com

Options on Garmin Ltd. (Ticker: GRMN) are more active than usual today amid sharp declines in the price of the underlying. Options volume on Garmin is roughly three times the stock’s average daily reading just 90 minutes into the session, with more than 3,600 contracts traded so far today versus average volume of around 1,100 contracts. Shares in the maker of navigation devices fell more than 6.0% this morning to $56.78 after the stock was downgraded to ‘underperform’ from ‘sector perform’ at Pacific Crest.
Much of the volume in GRMN options is in August expiry call options, perhaps as some traders position for shares in the name to rebound in the near term. The most traded series is the Aug 60.0 strike call, with volume topping 1,600 calls in play versus open interest of 411 contracts. Time and sales data suggests most of the 60.0 calls were likely purchased at an average premium of $1.34 each. Buyers of the call options may profit at expiration next month if shares in Garmin rally more than 7.0% over the current price of $57.10 to exceed the average breakeven point at $61.34. Garmin reports second-quarter earnings on July 30th prior to the opening bell.


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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743"

Thank you for you time!

 
 

Chart School

Small Caps Signaling Caution?

Courtesy of Doug Short.

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

The top line in the accompanying chart represents the Russell 2000/SPY ratio. A 6-year support broke at (1). Soon after that the S&P 500 broke below a multi-year support line at (2), which was followed by softness.

Now the Russell 2000/SPY ratio is breaking a 13-year support line of late.

Should investors "approach the markets with caution?" Will it be any different this time?


Click for a larger image


...



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Phil's Favorites

Who's Winning the War in Ukraine? Answer May Shock You!

Courtesy of Mish.

Here's the question, not of the day, but of the month: Who's Winning the War in Ukraine?

That may sound like a simple question, but it isn't.

That question leads to a second question "In whose eyes?" It also depends on the definition of "war". And it also depends on the definition of "win". And finally it depends on which media source you believe.

Military Aspect

From a military aspect, I have seen reports from both sides. The Western media portrays Ukraine on the march with the rebels surrounded, and losing ground. Is that accurate reporting?

I will let you be the judge. Please consider this video released on Friday.



The caption reads "??? ??? ???????? ?? 72-? ??????? ??? 2...



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Zero Hedge

If Americans Knew What Was Happening In Israel ...

Courtesy of ZeroHedge. View original post here.

Submitted by George Washington.

If my fellow Americans understood the history of Israel and Palestine, their views would change overnight … and they would demand that Israel no longer be given unconditional support and blank checks to do whatever they want:

  • ...


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Insider Scoop

Deckers Outdoor Conference Call Highlights

Courtesy of Benzinga.

Related DECK Deckers Trends Up On FQ2 Beat; Analysts Upgrade, Boost Targets Benzinga's Top Upgrades Ex-KPMG Partner Sentenced for Insider Trading (Fox Business)

Deckers Outdoor (NYSE: DECK) reported its first-quarter earnings on Thursday. Shares of the company are up more than six percent...



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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Digital Currencies

BitLicense Part 1 - Can Poorly Thought Out Regulation Drive the US Economy Back into the Dark Ages?

Courtesy of Reggie Middleton.

An Op-Ed piece penned by Veritaseum Chief Contracts Officer, Matt Bogosian

This past weekend (despite American Airlines' best efforts), Reggie and I made it to the Second Annual North American Bitcoin Conference in Chicago. While there were some very creative (and very ambitious) ideas on how to try to realize the disruptive Bitcoin protocol, one of the predominant topics of discussion was New York Superintendent of Financial Services Benjamin Lawsky's proposed Bitcoin regulations (the BitLicense proposal) - percieved by many participants at the event as an apparent ...



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Option Review

Starbucks Options Volume Rises Ahead Of Earnings After The Bell

Volume in Starbucks options is running approximately three times the average daily level for the stock as of 1:15 p.m. ET ahead of the company’s third-quarter earnings report after the close. Shares in the name are up roughly 1.0% just before midday to stand at $79.95. Traders of SBUX options today are more active in calls than puts, with the call/put ratio hovering near 2.0 as of the time of this writing. Much of the volume is in 25Jul’14 expiry options contracts, most notably in the $80 and $83 strike calls which have traded roughly 3,350 and 2,550 times respectively and in excess of existing open interest levels in both strikes. A portion of the volume in the $80 and $83 calls appears to be part of a spread trade.

...

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Sabrient

Sector Detector: Bulls remain unfazed by borderline Black Swans

Courtesy of Sabrient Systems and Gradient Analytics

Despite a highly eventful week in the news, not much has changed from a stock market perspective. No doubt, investors have grown immune to the daily reports of geopolitical turmoil, including Ukraine vs. Russia for control of the eastern regions, Japan’s dispute with China over territorial waters, Sunni vs. Shiite for control of Iraq, Christians being driven out by Islamists, and other religious conflicts in places like Nigeria and Central African Republic. But last Thursday’s news of the Malaysian airliner tragically getting shot down over Ukraine, coupled with Israel’s ground incursion into Gaza, had the makings of a potential Black Swan event, which in my view is the only thing that could derail the relentless bull march higher in stocks.

Nevertheless, when it became clear that the airline...



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OpTrader

Swing trading portfolio - week of July 21st, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's the latest Stock World Weekly. Please use your PSW user name and password to log in. (You may take a free trial here.)

#452331232 / gettyimages.com ...

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Market Shadows

Danger: Falling Prices

Danger: Falling Prices

By Dr. Paul Price of Market Shadows

 

We tried holding up stock prices but couldn’t get the job done. Market Shadows’ Virtual Value Portfolio dipped by 2% during the week but still holds on to a market-beating 8.45% gain YTD. There was no escaping the downdraft after a major Portuguese bank failed. Of all the triggers for a large selloff, I’d guess the Portuguese bank failure was pretty far down most people's list of "things to worry about." 

All three major indices gave up some ground with the Nasdaq composite taking the hardest hi...



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Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



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Promotions

See Live Demo Of This Google-Like Trade Algorithm

I just wanted to be sure you saw this.  There’s a ‘live’ training webinar this Thursday, March 27th at Noon or 9:00 pm ET.

If GOOGLE, the NSA, and Steve Jobs all got together in a room with the task of building a tremendously accurate trading algorithm… it wouldn’t just be any ordinary system… it’d be the greatest trading algorithm in the world.

Well, I hate to break it to you though… they never got around to building it, but my friends at Market Tamer did.

Follow this link to register for their training webinar where they’ll demonstrate the tested and proven Algorithm powered by the same technological principles that have made GOOGLE the #1 search engine on the planet!

And get this…had you done nothing b...



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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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