P - Pandora Media, Inc. – Shares in Pandora are spiking today, up as much as 8.3% in the early going to a one-month high of $17.78, after the stock was raised to ‘Outperform’ from ‘Market Perform’ at Cowen with a 12-month target price of $22.00. Options traders snapped up July expiry calls straight out of the gate this morning, initiating bullish positions that benefit from continued gains in the price of the underlying during the next few weeks. The Jul $17 strike options attracted the most volume in early trading, with roughly 3,600 calls in play versus open interest of 2,722 contracts as of 11:00 a.m. ET. Most of the calls appear to have been purchased by one strategist for a premium of $1.25 per contract. The call buyer makes money at expiration next month as long as Pandora’s shares rise 2.6% over today’s high of $17.78 to exceed the effective breakeven price of $18.25. Pandora bulls are also buying Jul $18 and $19 strike calls this morning, with roughly 900 of the $18 strike contracts purchased at an average premium of $0.72, and roughly 500 of the $19 strike calls picked up at an average premium of $0.37 apiece. Shares in Pandora are up 95% since the start of 2013.
APOL - Apollo Group, Inc. – Declines in new enrollments and slumping third-quarter profits reported by the University of Phoenix operator after the close on Tuesday sent shares in the name down substantially on Wednesday. The stock, which will relinquish its spot in the S&P 500 Index and make its way into the S&P Midcap 400 later in the week, fell as much as 8.9% to $17.66 in early trading. Contrarian traders positioning for shares in Apollo to snap back in the near term appear to be buying July expiry calls today. The Jul $19 and $20 strike calls were active in the early going this morning, with roughly 950 of the $19 calls purchased for an average premium of $0.71…
APOL - Apollo Group, Inc. – Shares in for-profit education provider, Apollo Group, are up the most in the S&P 500 Index today after the operator of the University of Phoenix posted better-than-expected second-quarter earnings and sales prior to the opening bell this morning. Apollo shares increased as much as 15% during the first half of the trading session to touch an intraday high of $19.63, the highest level since mid-February. Trading traffic in APOL calls suggest some traders are positioning for the price of the underlying to continue higher in the near term. Weekly call volume is greatest at the Mar. 28 ’13 $20 strike, where upwards of 1,300 contracts changed hands against open interest of 103 lots. It looks like most of the volume was purchased at an average premium of $0.15 apiece, thus positioning call buyers to profit should Apollo’s shares rally another 9.5% over the current price of $18.41 to settle above $20.15 by the end of the shortened trading week. Bullish traders also picked up around 600 calls at the April $20 strike for an average premium of $0.40 each. Shares in Apollo are off their highs of the session, trading up 8.0% at $18.41 as of 11:50 a.m. ET, but are down roughly 60% since this time last year.
DELL - Dell, Inc. – Weekly puts on PC maker, Dell, changed hands on Monday morning amid a 3.0% rally in the price of the stock to $14.56 on news that Blackstone Group LP and Carl Icahn submitted proposals to purchase the company. Put buyers may be locking in gains on the stock’s more than 40% run since the start of the year, or positioning for shares in Dell to falter during the next few trading sessions. The most actively traded weekly options on Dell are the Mar. 28 ’13 $14.5 strike puts, with volume topping 3,500 lots versus open interest of 610 contracts by midday in New York. It looks like most of the put options…
IPXL - Impax Laboratories, Inc. – Upside call options are active on specialty pharmaceutical company, Impax Laboratories, Inc., this morning, with shares in the name up better than 1.5% on the day at $21.89 as of 11:20 a.m. ET. Shares in Impax, which last week announced it has resumed shipping pain medication, Oxymorphone Hydrochloride Extended Release Tablets, through its generics division have increased 7% since the start of the New Year. Traders betting the stock has more room to run in the near term snapped up February expiry calls this morning. The Feb. $22.5 strike calls are most active, with upwards of 5,900 contracts in play versus open interest of 851 contracts. It looks like most of the calls were purchased for an average premium of $1.32 apiece, thus positioning buyers to profit at expiration next month should Impax shares rally another 9% to exceed the average breakeven price of $23.82. Bullish traders also looked to the Feb. $25 strike where some 690 call options were purchased in the early going at an average premium of $0.54 each. The drug maker reports fourth-quarter earnings ahead of the opening bell on February 26th, more than one week after the February options expiration.
YUM - Yum! Brands, Inc. – The restaurant operator’s shares kicked off Wednesday’s trading session in recovery mode, rising modestly following a more than 4% decline in the price of the underlying on Tuesday. The rally has so far proven to be short-lived, however, with shares in the name now down 0.80% at $64.19 as of 12:00 p.m. ET in New York. A three-legged bearish options spread initiated on the operator of KFC, Pizza Hut and Taco Bell today looks for shares in Yum! Brands to potentially drop to the lowest level since October 2011 by this time next year. It looks like one strategist sold 2,500 calls at the Jan. 2014 $70 strike in order to offset the cost of buying a 2,500-lot Jan. 2014 $50/$62.5 put spread. The spread traded flat and positions the options player to…
BRCD - Brocade Communications Systems Inc. – Options volume is heavy in switcher-maker Brocade after a broker note predicted that it fits the bill for a bid from Dell. Shares in Brocade reached a 52-week high after the analyst noted that cash-rich Dell filed a debt-shelf earlier in the week of $3.4 billion or just about enough to buy Brocade if it wanted to change course and enter the networking market. One investor appeared to sell 11,400 put options expiring July at the $6.00 strike presumably on the assumption that its shares remain a hotbed of speculation for the next several weeks. The analyst’s note put a price tag on the stock of $10.00 underpinning a surge in the stock, which rose to $7.20 at the day’s best. Call options expiring next month were also well bid with the $8.00 strike proving most popular. Around 25,000 options granting the right to buy were exchanged with a current price of just 20 cents indicating a one-in-four chance of success over the next five weeks.
IP - International Paper – Notable activity in options on the paper-maker indicate one investor giving up on a good idea. Options volume of 20,935 on Thursday was made up of just two trades involving 10,000 lots each in what appears to be the closure of a losing calendar spread. On May 19 when shares in International Paper were trading one dollar higher than today at $31.67 an investor bought the same amount of call options expiring in July to buy calls expiring in January. The trade involved the $32 strike price in July and the $36 strike in January with the investor hoping for a steady climb in IP’s shares in the meantime. At the time the trade cost the…
XRT - SPDR S&P Retail ETF – The retail sector may be poised for a pullback according to one options strategist who initiated a three-legged bearish combination spread using call and put options set to expire in March. Shares of the XRT, an exchange-traded fund designed to replicate the performance of the S&P Retail Select Industry Index, fell as much as 0.93% during the session thus far to touch an intraday low of $46.64. The three-legged bear sold out-of-the-money calls in order to partially offset the cost of buying a put spread. Legs of the spread include the sale of 7,500 calls at the March $51 strike for a premium of $0.40 each, purchase of 7,500 now in-the-money puts at the March $47 strike at a premium of $1.64 per contract, and the sale of 7,500 puts at the March $41 strike for premium of $0.42 apiece. The net cost of establishing the spread amounts to $0.82 per contract and positions the pessimistic player to profit should shares in the XRT decline another 1.00% from the current price to breach the breakeven point on the downside at $46.18 by March expiration. Maximum potential profits of $5.18 per contract are available to the investor in the event that XRT shares plummet 12.1% in the next couple of months to trade below $41.00 by expiration day. The outright bearish transaction contrasts with what appears to be a short straddle at the March $47 strike. It looks like the 3,500-lot short straddle provided the investor with gross premium of $3.87 per contract, which he keeps in full as long as shares settle at $47.00 at expiration day. The trader responsible for the short straddle could suffer devastating losses if the fund’s shares break out of the share price range dictated by the premium received, or buffer against losses through expiration. Losses start to accrue should shares rally above the upper breakeven point at $50.87, or if shares slip beneath the lower breakeven price of $43.13 before the contracts expire in March.…
Today’s tickers: DSW, LNCR, VGZ, S, APOL, CAL & JCG
DSW – DSW, Inc. – Options traders are picking up put options on the footwear retailer ahead of the firm’s second-quarter earnings report, scheduled for release ahead of the opening bell on August 31, 2010. DSW’s shares fell 2.5% to $24.09 in late afternoon trading. Pessimistic players purchased approximately 3,400 put options at the October $22.5 strike for an average premium of $1.53 a-pop. Put buyers are poised to profit should DSW’s shares plummet 12.95% from the current price of $24.09 to breach the average breakeven point to the downside at $20.97 by expiration day in October. Options implied volatility on the stock is up 5.2% as of 3:30 pm ET.
LNCR – Lincare Holdings Inc. – The provider of oxygen and other respiratory therapy services popped up on our ‘hot by options volume’ market scanner today after bullish call buying was detected in the January 2011 contract. Lincare’s shares are up 0.50% to stand at $23.51 with just under 30 minutes remaining in the trading session. Investors positioning for substantial share price appreciation by expiration next year purchased roughly 1,100 calls at the January 2011 $27.5 strike for an average premium of $0.86 each. Call buyers at this strike make money if Lincare’s shares jump 20.6% to exceed the average breakeven price of $28.36 by expiration day. Bullishness spread to the higher January 2011 $30 strike where optimistic individuals scooped up more than 2,900 call options at an average premium of $0.45 apiece. Investors long the higher-strike contracts are prepared to accrue profits should LNCR’s shares surge 29.5% to trade above the effective breakeven price of $30.45 by expiration day next year. Lincare’s shares last traded above $30.45 back on July 1, 2010.
VGZ – Vista Gold Corp. – Bullish investors are mining for call options on the gold exploration and development company today, which suggests some traders expect Vista’s shares to head higher by the end of 2010. The Colorado-based company’s shares jumped 20.4% to touch an intraday high of $2.30. Investors in Vista Gold Corp. shares have had a fruitful month thus far. The stock is currently trading at a 76.9% premium over its July 28 low of $1.30 a share. Options strategists hoping to see the good times continue through to December expiration scooped up approximately 2,000 calls at the December $2.5 strike by shelling out…
APOL – Apollo Group – A second day of gains for the online education company has shares touching $50 this morning. The start of July saw the company reach its 52-week low at $42.41. Option trading has centered on call options at the August $50 and $55 strikes but the picture is mixed. At the higher of the two strikes where only about 1,000 open positions exist, a chunk of 5,700 call options traded to the bid of 55 cents leading us to believe that this investor is raising his hand over the likelihood of exponential gains for the stock. This investor has either recently bought the stock in which case is writing a covered call, or is simply skeptical of a further 10% gain in Apollo’s share price from here. Buyers also showed up at the $50 strike expiring next month where buying rights to buy shares jumped from 13 cents to 56 cents. Call volume at the strike of almost 2,000 lots easily tops the prevailing open interest of 1,400 contracts.
ERTS – Electronic Arts – Despite a reduction in one the earnings projection from on analyst today, shares in the video gamer are higher at $14.91 possibly on account a groundswell of bullish call option activity. Investors awaiting an August 4 earnings report have spent premiums of around 40 cents to lock into bullish expectations in the event the company pulls off a decent report or perhaps a new title release in a dull climate for consumer demand. Option traders flocked to the August $16 strike, which currently shows odds of successfully landing in-the-money by expiration of one-in-three. Shares opened lower before today’s rally as call activity hit the screens. Options implied volatility has been on the rise of late and is again higher today by around 10% at 47%. That would indicate rising uncertainty surrounding prospects for the share price and is typical ahead of earnings.
MMR – McMoRan Exploration Co. – Investors didn’t stick around to ask many questions following the seventh consecutive quarterly loss at this oil and gas explorer. McMoRan specializes in ultra-deepwater exploration in search of oil and gas, which of course is not the most popular of investments targets following the Gulf of Mexico spill in April. McMoRan emphasized that it doesn’t operate in this segment but does operate in a high-risk operation…
Do I know what the jobs data will be at 8:30? Nope.
Then why would I title a post "Thank Jobs It’s Friday!" – what if the report sucks and we go down? Well, at this point, even if that does happen, I think that will be the end of it. We’ve been building up to this "terrible" jobs number all week and we got a rotten ADP Report and a rotten Unemployment Report so everyone is expecting a rotten Non-Farm Payroll report. When everyone expects the same thing, we like to bet against it. Sometimes we’re wrong and sometimes we’re right but you make some amazing money when you are right. The magnitude of the short squeeze that would follow a significantly BTE NFP Report could send up up 300 points or more on the day, likely with a big finish this afternoon and some follow-through on Tuesday as the rest of the world plays catch-up.
A bad report, on the other hand, is already baked into the cake and we have yet to test S&P 1,000 so we can expect support there. It wouldn’t be pleasant, but we should be able to scramble and protect ourselves if we head lower so the smart move is to play for the mega-move higher, and that’s where we are. Of course, it’s also a balance issue. In our last Weekly Wrap-Up, we had the following open trade ideas going into June 21st (we had gotten bearish at the end of the previous week):
APOL July $40 puts spread at .46, now .60 – up 30%
BBY Jan $37 puts sold for $4, now $3 – up 25%
BP July $30/32 bull call spread at $1, now .70 – down 30%
YRCW at .21, now .15 – down 28%
BP Oct $33/July $33 ratio backspread (3:5) at net $225, now $524 – up 132%
TZA July $7 calls .08 (net of spread), now $1.50 – up 1,775%
SIRI 2012 $1 puts sold at .33, still .33 – even
USO July $33 puts at .51, now $1.08 – up 131%
GLL July $37 puts, sold for $1.30, now .35 – up 70%
TBT July $38 puts sold for $1, now $2.05 – down 105%
OIH June $104.10 puts at $2.02, now $8.70 – up 330%
TZA July $6/8 bull call spread for .55, now $1.48 – up 169%
How can you not have fun when the market does exactly what you expect it to do every day? Why it’s almost as if we stole Goldman Sach’s evil playbook (and the Russell once again is at 666) so we too can make profits EVERY SINGLE TRADING DAY – just like they do! This is a real testament to my famous saying:
We don’t care IF the game is rigged, as long as we know HOW it is rigged so we can place our bets accordingly.
Remember it was last summer that Goldman’s secret trading program was stolen. At the time, Goldman Sachs asserted that: "There is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." I believe this was a misquote and what GS meant to say was that there was a danger someone ELSE could use it to manipulate the markets in unfair ways. Was it just a coincidence that the indictment of computer thief Sergey Aleynikov on Feb 11th coincided with the beginning of this year’s massive rally or was that the day GS regained sole control of their pet program?
Does this sound conspiratorial? Well perhaps then you haven’t read Tim Lavin’s "Monsters in the Markets," where he points out: "Algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete… At least a few high-frequency traders have learned to make a killing by detecting the more simplistic algo strategies deployed by basic pension funds and mutual funds, buying the next stock the funds plan to buy, and then selling it to them at a higher price. This may not be illegal, but it’s almost certainly unfair to the funds’ investors. “It is increasingly clear that there are quite a number of high-frequency bandits in the high- frequency-trading community who pump up volume statistics, front-run investor orders, increase transaction costs, and hurt real liquidity,” according to former NASDAQ vice-chairman David Weild."
We certainly know better than to trust our money to fund managers! Last Friday ("Pattern Recognition 101"), we determined that the TradeBots were following the rally pattern we now call Omega III and that meant we expected the day to finish…
Wow – what a lot of work to get back to last Tuesday’s high!
As usual, the vast majority of gains came in pre-market trading and the rest came in light-volume, early morning trading while the rest of the day was dominated by every buyer finding a willing seller for 75% of the day’s volume. We saw what happened on Thursday when someone big wants to sell and there are no buyers so we’ll see how long the bull’s luck (manufactured or otherwise) will hold out as we begin to get economic data along with some early earnings reports.
The Ag sector popped 2% yesterday ahead of tonight’s earings from MOS with MON checking in tomorrow morning so we’ll see how wise those last-minute bets were in short order. SONC also has earnings tonight and we like those guys long-term. SONC makes a decent buy/write candidate as you can buy the stock for $10.29 and sell June $10 puts and calls for $2.25 for a net entry of $8.04 with a very nice 24% profit if called away at $10 and an average entry of $9.02 (a 12% discount) if more stock is put to you below $10 in June.
FDO and WOR also report tomorrow morning. FDO will be interesting but a weak dollar probably hurt them last quarter. Tomorrow night we hear from BBBY, BLUD, OHB and Sonic competitor RT, who seem a bit pricey at $7.50. Thursday we get our first real builder, LEN along with STZ and TXI. After the bell on Thursday we hear from APOL, CRI and SCHN with GBX and PSMT on Friday. AA officially kicks of earnings season next Monday with GAP, INFY, KBH, BGG, SCHW, SHFL, INTC and JPM highlighting the reporters.
We have plenty of data this week including Factory Orders and Pending Home Sales at 10 am along with December Auto Sales throughout the day (did you get a new car for Christmas?). Tomorrow is jobs day, with the ADP Report and Challenger Job Cuts ahead of the bell followed by ISM Services (yesterday’s ISM was a nice beat) and, of course, Crude Inventories at 10:30 which are unlikely to sustain $82 oil (USO Jan $40 puts for .80 are a good way to play this). We talked about the other stuff yesterday so I won’t repeat it – suffice to say we have plenty of data this week to see if we justify these lofty levels.
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 firstname.lastname@example.org 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.
The S&P 500 set record highs on Wednesday and Thursday, but by week's end the index had gone nowhere. It ended the day with a 0.48% loss and the week with a miniscule 0.01% advance from Friday's close. The 500 fared a bit better than key Eurozone indexes: Germany's DAX fell 1.52% and France's CAC 40 gave up 1.82%.
The yield on the 10-year note ended the day at 2.48%, down 4 bps from yesterday's close. It is now 4 bps above its interim closing low of May 28th.
Here is a 15-minute chart of the week. The S&P 500 is up 7.03% year-to-date.
Volume on today's losing trade was lighter than the two record closes that preceded it.
For a longer-term perspective, here is a pair of charts based on daily closes starting with the all-time high prior to the Great Recession....
C’mon Alan! Bubbles Are Caused By Central Bankers, Not “Human Nature”
Alan Greenspan just cannot give up the ghost. During his baleful 18-year reign, the Fed was turned into a serial bubble machine—and thereby became a clear and present danger to honest free market capitalism and an enemy of the 99% who do not benefit from the Wall Street casino and...
The grim economic news from France keeps piling up. Today, Europe Online reports Number of Unemployed in France Hits New High. The number of unemployed people in France has hit a new high as the country grapples with the fallout of the financial crisis and a sluggish eurozone recovery, the Labour Department reported Friday.
At the end of June, there were 3.398 million people who were registered as being without a job in the eurozone‘s second-largest economy - 0.3 per cent more than in the previous month.
Compared to June of last year, the number of jobless was up 4 per cent.
In a glimmer of positive news, the number of unemployed youth was down compared to last year: those under 25 without a job d...
An affiliated company of Advanced Semiconductor Engineering (NYSE: ASX), Universal Scientific Industrial, has reportedly received SiP module orders from Apple (NASDAQ: AAPL) for the iWatch according to industry sources, as reported by DigiTimes. Each SiP module costs approximately $60, which is 20% of the iWatch's rumored $300 price tag.
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.
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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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.
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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...
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...
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.
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