Feeding Frenzy Erupts In HPQ Options
by Option Review - September 21st, 2011 2:10 pm
Today’s tickers: HPQ, MS, ACI & ARIA
HPQ - Hewlett-Packard Co. – Options covering Hewlett-Packard Co. are densely populated today on news the company’s board is meeting to discuss ousting CEO, Léo Apotheker, less than one year after he was hired to replace former-HPQ CEO and current co-President of Oracle, Mark Hurd. Hope that a shakeup may get HPQ back on track, and speculation that the board may select former eBay CEO, Meg Whitman, to head the company, sent shares in the trodden-down stock up as much as 11.7% today to $25.10. Options implied volatility on Hewlett-Packard earlier rose to 56.05%, but currently stands 20.05% higher on the session at 53.47% as of 1:40 pm ET.
Investors have now exchanged more than 205,000 option contracts on HPQ, with much of the activity taking place in the front month. Calls are trading roughly 1.8 times to each single put option in play thus far in the session. In-the-money calls are popular with buyers positioning for shares to appreciate, while out-of-the-money calls suggest more of a mixed picture. Trading traffic in HPQ calls is heaviest at the October $25 strike, where upwards of 26,100 contracts changed hands against open interest of 11,574 positions. The Oct. $25 strike call was bought and sold in roughly equal numbers. Similar two-way trading is apparent in the Oct. $26 and $27 strike calls, but trading in deep out-of-the-money calls in the October contract was dominated by sellers. Meanwhile, investors positioning for shares to potentially surrender today’s gains in the next several weeks to October expiration, snapped up in- and out-of-the-money puts. Volume in the Oct. $23 strike put soared to 30,000 contracts in early-afternoon trade, trumping previously existing open interest of 3,737 lots. Buyers of the bearish options paid an average premium of $0.89 per…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggStock World Weekly: Deadlocked
by SWW - July 24th, 2011 12:02 am
Here’s the latest Stock World Weekly. Click on this link to read the full SWW: "Deadlocked" and sign in with your PSW user name and password. (Or sign up for a FREE trial to Stock World Weekly.)
Excerpts reviewing the week and looking ahead
U.S. Debt Ceiling Deadlock
One line of reasoning from the “no tax hikes” crowd is the inaccurate premise that the very wealthy, the top 0.1%, are job creators. If they’re the “job creators,” it might be in the public interest to protect them from excessive taxation – thereby allowing these top 0.1% to spend money on creating jobs. This is incorrect. The overwhelming majority of U.S. jobs are ‘created’ by ordinary Americans when they spend their paychecks. Consumer spending drives about 70% of our GDP. When average Americans are struggling with high unemployment, which recently popped back up to 9.2%, they are reluctant to spend money on anything beyond basic necessities. The broader U6 unemployment number – which includes the underemployed and “discouraged workers” – is 16.2%.
Meanwhile, U.S. companies are not stepping up hiring due to weakness in the economy – there is no demand. As Paul Ashworth of Capital Economics wrote, “Businesses aren’t confident enough, and the longer this goes on, the harder it is to convince them that they should be.” (Dearth of Demand Seen Behind Weak Hiring)…
Let Them Eat Cake
Russ Winter of Winter Watch at the Wall Street Examiner discussed the gap between what people think corporations pay in taxes, versus what they really spend. For example, Microsoft “lowers its effective tax rate a full 7% by taking foreign income to $19.2 billion from $15.4 billion, and lowering US income (and expenses) from $9.6 billion to $8.9 billion. Today MSFT is effectively a 68% foreign operation. In return it gets all the benefits of stimulus and minimizes the costs of supporting the US system…
“Mark Kreiger writes a spot on piece regarding the high end luxury bubble that includes this gem - ‘The social crisis facing the country as a result of the most egregious plundering in modern American history will spell the end of the ‘high end’ theme. Buying into this trend now is like getting long Marie Antoinette’s unsevered
…
In this Market of Uncertainty – These Could be a Few Little Gems
by ilene - June 1st, 2010 7:53 pm
In this Market of Uncertainty – These Could be a Few Little Gems
Courtesy of Pharmboy
Here at Phil’s Stock World, we try to offer the best of all possible worlds. Phil has the rounded techniques of using options, covered calls, shorting and overall market direction to a prime. David Ristau gives us one up and one down pick of the day for 2-3% gains (he has been on a roll), and Optrader satisfies the swing trades. And then there is me, Pharmboy. I try to investigate the science behind the scenes to give the best possible chances to our readers on entering stocks we think will be profitable trades.
Take Ariad (ARIA), which I wrote about in August 2009. We had several different approaches, but the favorite was buying the stock at $1.30, selling and equal amount of the February 2010 $2.50 puts and calls which if the stock was $2.50 or above on OPEX, one would have made 68% ( in other words, 100 shares of stock with 1 call and 1 put sold would have gained 68% of the original $1.90). Where did ARIA finish up on the February OPEX…. $2.54. Lucky, somewhat on the OPEX play, but ARIA has been one of the core biotech holdings at PSW, along with DCTH (we jumped on this stock at about $5), CRIS (in at $1.21), KERX, and QCOR. Now, not all are perfect, as we have had a few that have gone south on us, most notably GILD. (Actually, Optrader correctly picked the direction on them a week back and I should have paid more attention to his 5d MA strategy.)
PSW has a great group of traders and investors that are willing to offer advice and point to better option and stock plays for all to benefit. As Phil notes, the more eyes on the charts and the market gives us the distinct advantage to play the game with them, not against!
Next, on to a few picks that could have us very happy in the next 6-18 months….
The picks I am outlining today are a bit more risky than past posts, but I believe they have the potential to make it to the game. They may not be a market leader, or the next Genentech, but I believe they have the right ‘products’ in place if management acts…
Cancer Treatments: The New Frontier
by ilene - April 18th, 2010 2:51 pm
Cancer Treatments: The New Frontier
Courtesy of Pharmboy
Cancer is characterized by a group of abnormal cells that grow and replicate uncontrollably. These cells’ rapid replication allows them to invade adjacent tissues and organs and even spread to other parts of the body. As they replicate, they can crowd out organs, preventing the body’s essential processes from occurring normally. Cancer, if left untreated, can hinder the body’s organs from performing their functions enough to cause death.
Cancer is the second leading cause of death in the U.S. in 2009. Figures 1 and 2 show the Male and Female breakdown of different cancer types from the CDC (as of 2006) and we can understand why now prostate and breast cancer research top the list. Next comes lung, and Figure 3 shows a adenocarcinoma in the lung.
Number of deaths for leading causes of death:
- Heart disease: 631,636
- Cancer: 559,888
- Stroke (cerebrovascular diseases): 137,119
- Chronic lower respiratory diseases: 124,583
- Accidents (unintentional injuries): 121,599
- Diabetes: 72,449
- Alzheimer’s disease: 72,432
- Influenza and Pneumonia: 56,326
- Nephritis, nephrotic syndrome, and nephrosis: 45,344
- Septicemia: 34,234
Figure 1. Top 10 Cancers: Male
Figure 2. Top 10 Cancers: Female
Figure 3. Adenocarcinoma – Lung cancer
For about 40 years, the pharmaceutical and government sponsored research have waged a war on cancer, and many think that it has been a failure as the age-adjusted mortality rate for cancer is essentially unchanged over that time. But that’s a deceptive metric. S. Dubner points out that the "flat mortality rate actually hides some good news. Over the same period, age-adjusted mortality from cardiovascular disease has plummeted, from nearly 600 people per 100,000 to well below 300. What does this mean? Many people who in previous generations would have died from heart disease are now living long enough to die from cancer instead."
BusinessWeek had an article on the costs of life, and as the population ages and the baby boomers start to retire, how are we to think about the costs associated with fighting cancer?
Eric C. Sun et al. (“An Economic Evaluation of the War on Cancer” (link) 2010) attempt to measure the degree to which R&D spending on cancer has benefited not only the life expectancy, but also the social and economic value to the economy.
For decades, the U.S. public and private sectors have committed substantial resources towards cancer research, but the societal
…
Savient-Bull Buys Ratio Call Spread
by Option Review - December 18th, 2009 4:13 pm
Today’s tickers: SVNT, JBLU, ROST, RVSN, MRVL, RYL, ARIA, WLP, S, BCR & ORCL
SVNT – Savient Pharmaceuticals, Inc. – A ratio call spread implemented on biopharmaceutical company, Savient Pharmaceuticals, this afternoon indicates shares may shift higher by expiration in January 2010. SVNT’s shares increased 1% during the session to stand at $12.80. The spread involved the purchase of 2,400 calls at the in-the-money January 12.5 strike for an average premium of 1.34 apiece, marked against the sale of 4,800 calls at the higher January 14 strike for 62 pennies each. The net cost of the trade amounts to just 10 cents per contract. The investor responsible for the bullish play stands ready to accrue maximum potential profits of 1.40 per contract if the stock jumps to $14.00 by expiration. The increase in demand for option contracts on the stock boosted Savient’s option implied volatility reading 15% during the trading day from an opening reading of 75.22% to an intraday high of 86.56%.
JBLU – JetBlue Airways Corp. – Investors initiated bullish stances on JetBlue this afternoon despite the 2% decline in value of the underlying shares during the trading session to $5.48. Fresh call positions were taken in the March and June contracts by traders preparing for a JBLU-rally. A chunk of 5,000 calls were purchased at the March 6.0 strike for a premium of 40 cents per contract. The investor responsible for the transaction breaks even if shares of the airline increase 17% over the current price to $6.40 by March’s expiration. Option traders purchased at least 1,700 calls at the June 6.0 strike for 65 cents premium apiece. Profits accumulate if and when JBLU’s shares rise 21.5% to surpass the breakeven point at $6.65. The increase in investor demand for option contracts on the stock lifted option implied volatility 13.57% to an intraday high of 55.55%.
ROST – Ross Stores, Inc. – The second-largest off-price retailer of brand-name apparel and home accessories in the U.S. appeared on our ‘hot by options volume’ market scanner in late-afternoon trading. One investor established a ratio put spread on the stock in the February 2010 contract. Shares are down 1% to $43.88 with approximately one hour remaining in the trading session. The option trader purchased 2,000 puts at the in-the-money February 45 strike for 2.60 apiece, and sold 4,000 puts at the lower February 42.5 strike for 1.40 each. The investor…
Iron-Ore Bull Excavates Massive Credit Spread on Vale S.A.
by Option Review - December 8th, 2009 4:08 pm
Today’s tickers: VALE, ANF, ARIA, GCI, S, KR, SYY, AZO, TLB & RAI
VALE – Vale S.A. – Option volume on iron-ore producer, Vale, exploded this afternoon after one investor exchanged 102,200 puts in the June 2010 contract. The put activity actually implies bullish sentiment on Vale despite the 3% decline in shares this afternoon to $27.36. It appears the contrarian trader sold 51,100 in-the-money puts at the June 29 strike for a premium of 4.45 each, and purchased 51,100 puts at the lower June 23 strike for 1.75 apiece. The iron-bull receives a net credit of 2.70 per contract on the trade, which he keeps if VALE’s shares rally above $29.00 by expiration in June. Shares closed at $29.40 just last week on December 2, 2009. The investor is exposed to losses to the downside if shares decline through the breakeven price of $26.30. Maximum potential losses of 3.30 per contract accumulate for the trader if the stock sinks 16% from the current price to $23.00 by June’s expiration day.
ANF – Abercrombie & Fitch Co. – A number of large-volume put transactions on fashion retail store operator, Abercrombie & Fitch, indicates investor pessimism on the stock through expiration in January 2010. Abercrombie’s shares slipped 1.5% during afternoon trading to $35.11. Perhaps bearish option traders were dismayed by the firm’s weaker-than-expected November sales report. ANF posted a 17% decline in same-store sales for the month, which was far worse than the 9.3% decline anticipated by analysts. It appears one investor initiated a four-legged combination play aimed at protecting against near-term declines in the value of ANF shares. First the investor established a ratio put spread by purchasing 15,000 puts at the January 35 strike for 2.10 apiece, marked against the sale of 30,000 puts at the lower January 32 strike for 95 cents each. The net cost of the ratio spread amounts to 20 cents per contract. Next, the trader effectively created an uneven butterfly spread by rolling a previously established put position in the January 2010 contract up to a higher strike price. It seems the trader originally purchased 15,000 puts at the January 29 strike for roughly 2.50 apiece on October 2, 2009. Today the individual took a loss on that position by selling the puts for 40 cents apiece to buy the same number of put options at the higher January 31 strike for 80 cents…
Pharma’s Green Shoots
by Phil - September 15th, 2009 6:43 am
Courtesy of Pharmboy
Hello all! Not a bad month since our first plays in the Pharma and Biotech space. Phil summed up last week the positions and the nice profits on our picks, and I think it is time for a few more companies to focus on for our virtual portfolios (e.g., 100K), after all, it’s about tilling the soil and making some money on our Pharm….
First, the healthcare debate is going to rage on after the holiday weekend, and I am expecting this sector to take some lumps with our good ride up. I would expect the economies of scale to weigh in, as even though price may be lower, picking up more coverage (patients) is what it is all about. Those dependent upon high priced biologics may be the ones that take the biggest hit, as the costs are quite different than popping a pill every day for a few $$$. Just things to ponder and we will react as developments take shape on the horizon.
Mid-summer and early fall are the times for the biotech and pharma segments to provide the greatest returns. I cannot decide if it is the cyclical nature or if more clinical data are being released during this time. Looking at XBI and XPH over a five year period, the biotech fund (XBI) has done a bit better on overall return, but the two charts follow the same overall pattern. Thus, we are entering the final stretch for this sector, and should be prepared for a slight pullback during the holidays.
5 yr XBI and XPH Chart Here >>
Now, on to the good stuff….
Shire PLC (SPHGY), founded in 1986, aims to be a market leader in meeting the needs of specialist physicians in targeted segments. Its core therapeutic focus areas are attention deficit hyperactivity disorder (ADHD; within central nervous system, CNS) and increasingly biopharmaceuticals that address specific genetic disorders. Consistent with this strategy, Shire has been made a number of important acquisitions, including the 2007 purchase of New River, the developer of Vyvanse (the successor for Adderall XR ADHD treatment; and a series of biopharmaceutical acquisitions, following the Transkaryotic Therapies entry acquisition in 2005. In 2008, Shire acquired German biotech company Jerini, which brought along Firazyr, a treatment for hereditary angioedema.
Recently, Shire has sent its treatment for Gaucher disease, an alternative to the Genzyme (GENZ) drug Cerezyme, to the FDA for approval.
The Company focuses its drug research…
Wild Weekly Wrap-Up – August in Retrospect
by Phil - August 29th, 2009 8:28 am
It has been a crazy few weeks!
I went back over our Long Shots list from August 9th, thinking all our picks must be doing great but really only C, with a 67% gain, is really outperforming. Long spreads on UYG and BHI are on target for nice gains but haven’t moved much. Looking at our original picks in Pharmboys Phavorites from the same week, GSK is on track and up nicely already, our AZN cover is up 45% and MRK flew up 19% already. On the riskier Biotech side, ARIA’s stock is up 16% and our spreads are all performing well, ONTY has been flat, OGXI is up 33% and the Jan $17.50s are up a rockin’ 63% with that "cautious" spread up a surprising 75% already.
SPPI had a wild ride (as we predicted with TSCM’s failed assassination attempt) and the buy/write is already up 24%, the Feb vertical is up 50% and the naked Jan put sale is up 27% and our Feb hedge play is right on track so all good there and a fine example of how following Cramer and his lackeys and and doing the opposite of what they say can be very profitable! Congrats to Pharmboy for a very fine set of picks, proving once again that there is room for research and fundamentals - not a single loser in the bunch in a choppy market! It was very timely as I had mentioned just that week in my interview with AOL Finance that XLV was my favorite sector and our IHI pick of 8/10 is up 28% on the naked Feb $45 put sale while the Feb $45 calls have already jumped 16%. It was a great call as IHI outperformed XLV and all our major indexes.
So our energy service pick (BHI) and overall financial pick (UYG) have not done much in 3 weeks and those were our leading sectors into my call to cash out our exposed long calls on Aug 13th, ahead of expirations. The Dow was at 9,400 on that day and now, a bit more than 2 weeks later, we’ve gained another 144 points but to listen to the MSM, you would think you are missing the rally of the century the past couple of weeks. This is one of the reasons I’ve gotten a bit more cynical about the rally – there is so much hype and so…
Pharmboy’s Phavorite Phings
by Phil - August 8th, 2009 3:02 pm
Greetings PSW members from Pharmboy!
This is my first shot at writing a formal post for everyone on a few biotech/pharma picks that I believe have promise for nice returns over the next 6 to 18 months. Much of the work here is a compilation of readings elsewhere, summarized for you all to make your own conclusions. Here we go:
Big Pharma
GlaxoSmithKline (GSK) – has a robust pipeline in inflammation, cancer and other therapeutic areas. A few line extensions could do well generic simvistatin (Zocor) + Avandia) for cardio/diabetes. Will compete against Vytorin, and others like it. In the pipeline, GSK has an Orexin antagonist for sleep disorders (very hot area), several drugs for asthma/COPD in Phase II including a PDE-4 and FLAP inhibitor. The asthma/COPD drugs have huge potential as a monotherapy or in some combination, as they are the newest line of therapies that have come along for asthma/COPD in some time (GSKs strength). GSK also has a VLA4 antagonist for multiple sclerosis in phase II.
This is the first I have seen of this in a pipeline for clinical trials. VLA4 is the target of Tysabri from BIIB. One hypothesis is that a small molecule that binds to the receptor but does not completely knock out the receptor like a mAb may be better for MS patients. Remember, Tysabri has a potential of a rare neurological condition progressive multifocal leukoencephalopathy (PML) when administered in combination with interferon beta-1a, another immunosuppressive drug often used in the treatment of multiple sclerosis.
One other note for growth, Amgen (AMGN) revealed its commercialization strategy for osteoporosis treatment, denosumab, one of the most keenly anticipated new drugs set to reach the market for several years, naming GlaxoSmithKline (GSK) as partner in Europe and other countries. GSK has several cancer treatments as well as vaccines in various stages, so it is my belief that their pipeline is rich and diverse. Current yield is 4.8%.
Phi’s Take: 4.8% and Pharm likes the pipeline –
…
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(