Options Active In Biotechnology Space
by Option Review - January 24th, 2012 3:25 pm
Today’s tickers: IBB, AMAG & AONE
IBB - iShares Nasdaq Biotechnology Index Fund – Shares in the IBB, an ETF that tracks the performance of the NASDAQ Biotechnology Index, an index containing securities of companies classified as either biotechnology or pharmaceuticals, are outperforming the S&P 500 this morning, up 0.40% at $112.73 as of 11:30 a.m. in New York. The Fund’s shares are slightly off their all-time high of $114.87 set last Thursday, and options activity on the ETF today suggests one strategist may be locking in recent gains ahead of a spate of earnings releases from companies in the Index. The top 10 holdings represent more than 50% of the total Index. Amgen, Inc. and Celgene Corp. are the two largest holdings, comprising approximately 8.8% and 6.6%, respectively. Both companies are scheduled to report earnings this Thursday. The strategist responsible for the single largest transaction in IBB options today may be hedging a long position in the index or components, or may be taking an outright bearish stance on the biotech and pharmaceuticals space during earnings season. The trader appears to have sold around 4,500 calls at the Mar. $115 strike in order to partially finance the purchase of a 4,500-lot Mar. $107/$112 put spread, all for a net premium outlay of $0.05 per contract. The sale of the call options greatly reduced the cost of the put spread, which may yield profits – or downside protection – to the investor in the event that shares in the IBB dip 0.70% to breach the effective breakeven price of $111.95. Maximum potential profits of $4.95 per contract are available on the position should shares drop 5.1% to settle at or below $107.00 at expiration. The short calls, if uncovered, could result in losses on the trade in the event that the Fund’s shares rally to new record highs by expiration in March.…
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by Phil - January 11th, 2012 8:21 am
Once again, we're done with our day before you get up.
In my 5am note to Members, I said: "I see nothing in the news to justify this pre-market "recovery" and I hate to sound like a broken record but I like shorting oil (/CL) if we get below that $102 line with tight stops and the Dow (/YM) is right at 12,400, which is a great spot to short. RUT (/TF) is at 762 and below 760 (same as yesterday) will confirm a downturn but 12,400 is a great line so why wait?" By 6:26, I was able to follow it up with:
And wheeeeeeeeeeeeeeeeeeeeeeeee! There go the Futures!
It's 7:07 and we're still going down, with oil at $101.24 (up $760 per contract) and the Dow at 12,340 (up $300 per contract) and, as Dennis said: "Good enough for steak and eggs for me!" Roro got up late but still caught the Dow at 6:16 and that was right on the nose for the oil drop as well as we hit it right on the nose this morning and now we're done and waiting for the next good set-up.
Of course we scale in and scale out of positions as there's no need to get greedy in the Futures, where a single remaining contract catching a $1 move down in oil (now $101.25 again) pays $1,000. This week, we have even stationed our own Craigzooka in New Zealand, where it's tomorrow – which makes it much easier to bet on today's action as he can tell us what happened already! Not that today was all that hard to predict, right? My comment to Members LAST Wednesday was:
It’s been a pretty reliable bet that they tank the markets into the longer-term note auctions because it scares people into T-Bills and keeps the rates low. From this line-up, it seems to me they intend to jack us up on Friday and then zap us on Tuesday as Esther George releases something hawkish ahead of the 3-year and it’s no coincidence that Plosser, by far the biggest Hawk, is given the floor at 12:30 on Wednesday – just 30 minutes before the critical 10-year auction. Coincidence? Surely you cannot be that naive!
So that's how we've been playing the past 7 days and it culminated in pressing our…
Staples Firm – Proctor & Gamble Options Suggest Further Upside
by Option Review - November 6th, 2009 4:53 pm
Today’s tickers: PG, CTXS, LINTA, HIG, CVS, UUP, VIX, AONE, SWKS, CLX, BCSI & NVDA
PG – The Proctor & Gamble Co. – Bullish action on Proctor & Gamble today suggests one investor expects shares to continue to rally ahead of expiration in November. Shares are currently trading 1% higher to $61.13. The trader purchased 10,000 calls at the now in-the-money November 60 strike for 1.39 each, and simultaneously sold 10,000 calls at the higher November 62.5 strike for 26 cents apiece. The net cost of buying the call spread amounts to 1.13 per contract and yields maximum potential profits of 1.37 each if shares rally up to $62.50 by expiration. Shares need only rally another 2.2% from the current price to reach the $62.50-level.
CTXS – Citrix Systems, Inc. – Software developer, Citrix Systems, attracted bullish option traders to the November contract today amid a 1% increase in shares to $38.80. Investors displayed optimistic sentiment on the stock by selling approximately 10,600 puts at the November 35 strike for 10 cents premium apiece. Put-sellers retain the full dime-per-contract as long as shares remain above $35.00 through expiration this month. Shares of CTXS have traded above $36.00 since September 4, 2009.
LINTA – Liberty Media Corp. – Shares of the broadcasting and entertainment company rallied 1% during the trading session to $12.14. Plain-vanilla call buying action on the stock today suggests some investors expect shares to rise significantly by expiration in January 2010. Traders purchased about 11,800 calls at the January 15 strike for an average premium of 25 cents apiece. Call-buyers will accumulate profits if shares surge at least 26% from the current price to surpass the breakeven point at $15.25 by expiration.
HIG – Hartford Financial Services Group, Inc. – Medium-term investors placed bearish bets on the insurance and financial services firm today. Shares are currently trading less than 0.25% higher to $24.16 after suffering significant erosion throughout the week. One pessimistic trader initiated a bearish risk reversal in the January 2010 contract. The investor sold 4,500 calls at the January 27 strike for an average premium of 78 cents apiece to partially finance the purchase of the same number of put options at the lower January 21 strike for 1.68 each. The net cost of the transaction is reduced to a more palatable 90 cents per contract, but does leave the investor exposed in the event of…
Mad Hedge Fund Trader’s Global Market Comments
by ilene - September 30th, 2009 7:53 pm
Here’s a MadHedge post originally written last Wednesday when the market all at once started dropping after the Fed’s statement. – Ilene
Mad Hedge Fund Trader’s Global Market Comments
Courtesy of the Mad Hedge Fund Trader
Featured Trades: (SPX), (AONE), (IRDM)
1) Wow! Risk reversals can be such a bitch! It was like someone flipped a switch at precisely 3:30 p.m. in New York, and suddenly the rally was over. The sell recommendations from market timers poured out like confetti at a New York ticker tape parade. The pundits, talking heads, and faux financial reporters offered many possible explanations. Was it the disappointing housing data, a waffling Fed statement, end Q3 profit taking, or the autumnal equinox? Perhaps it was the Business Week cover the saying the market would continue going up. The harsh reality is that the market fell simply because of its own sheer weight. PE multiples of 20 in the face of flat revenue growth, tightfisted banks, a catatonic consumer, imploding commercial real estate market, an approaching tsunami of new home foreclosures, and a whole raft of government stimulus programs about to expire, is not exactly a springboard for even high prices. What is fascinating is how all global risk assets fell in unison, from gold, to stocks, to private debt, to currencies, as I have long predicted. The only place to hide is cash. The market may take another run at the highs before year end. But the burden of proof has shifted from the bears to the bulls.
2) The spectacular debut of the IPO for A123 Systems (AONE), a maker of high powered, quick recharging lithium ion phosphate batteries using advanced nanophoshate technology, put a great shining spotlight on a sector I have been harping about all year (search my data base for “Butch Cassidy” by clicking here ). The initial price talk was at $8, the IPO came out at $13.50, and the first day of trading took it up to a meteoric 43% to $19.20 on the first day! I had a flashback to the dot.com boom. Where are the gold flecks on the sushi, my free IPO hat,…
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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...
Ilene is editor and affiliate program
coordinator for PSW. She manages the Favorites backup site
(