Shares in teen retailer Aeropostale Inc. (Ticker: ARO) earlier rallied to the highest level since June 2nd, perhaps after the stock was rated new ‘hold’ at Wunderlich Securities with an 18-month price target of $3.50 a share. The move in the price of the underlying spurred heavier than usual trading in upside call options on the name, perhaps as some traders take positions ahead of the company’s second-quarter earnings report on August 21st. Shares in ARO are currently up 3.5% at $3.49 after earlier rising as much as 9.0% to $3.68.
The most traded options contracts on Aeropostale thus far in the session are the Jan ’15 3.0 strike in-the-money calls, with volume topping 16,000 contracts as of the time of this writing, versus open interest of just 1,412 contracts. Time and sales data suggests most of the volume was purchased for an average premium of $0.89 per contract. Traders long the 3.0 strike calls stand ready to profit at expiration in the event shares in ARO exceed the average breakeven price of $3.89. As the one-year chart below illustrates, shares in Aeropostale are down roughly 75% since this time last year.
Chart – 1-year performance of shares in Aeropostale
FB – Facebook Inc. – Shares in Facebook rallied more than 4.0% on Friday to $40.14, the highest traded price since the company’s IPO in May of 2012. The move in FB shares spurred heavy trading traffic in short-dated upside calls on the stock as some traders look for further upside in the shares in the near term. The most actively traded Aug 30 ’13 expiry options are the at the money calls, with volume in the $40 contracts topping 11,000 lots versus open interest of 5,822 contracts just before midday. Time and sales data suggests most of the volume was purchased during the first half of the trading day for an average premium of $0.60 each. Buyers of the $40 calls stand ready to profit at expiration next week in the event that Facebook’s shares settle above the average breakeven price of $40.60. The Aug 30 ’13 $40.5 strike calls are also changing hands today, with more than 2,000 of those contracts purchased for an average premium of $0.50 apiece. Overall options volume on the stock is approaching 310,000 contracts as of 12:05 p.m. ET, surpassing FB’s average daily options volume of around 265,000 contracts. Trading of Facebook call options is outpacing that of puts, driving the call/put ratio above 2.3 as of the time of this writing.
ARO – Aeropostale, Inc. – Options are active on Aeropostale today with shares in the teen retailer unraveling on the heels of lower than expected second-quarter earnings reported after the close on Thursday. Shares in ARO are currently down 20% at $8.78, the lowest level since 2008, as of 11:45 a.m. in New York trading. Trading in September expiry put options this morning suggests some traders are positioning for further weakness in the price of the underlying in the near term.…
TRIP - TripAdvisor, Inc. – Shares in the online travel company rallied nearly 7% to a fresh record high of $50.88 on Wednesday morning on positive comments and a target share price increase to $52.00 from $50.00 at Deutsche Bank. TripAdvisor’s shares have increased more than 75% during the past four months, rebounding explosively off a 52-week low of $28.63 set back in November of 2012. Options traders positioning for TRIP’s shares to extend gains during the next few months appear to be buying upside calls across several expiries today. Near-term bulls snapped up around 1,600 calls at the Mar. $55 strike for an average premium of $0.09 apiece this morning, and may profit at expiration next week in the event that shares in the name surge 8.3% to top the average breakeven point at $55.09. The $55 strike call options expiring in April and June are also active, with traders picking up around 550 lots at the June $55 strike for an average premium of $0.80 each, and roughly 650 of the June $55 strike calls at an average premium of $2.29 a-pop in the early going today. Finally, it looks like one options strategist has generated substantial paper profits on a bullish spread initiated back on February 12th. The sizable one-by-two ratio call spread, constructed with the purchase of 1,500 Mar. $47 calls at a premium of $2.40 each against the sale of 3,000 Mar. $50 calls at a premium of $1.20 apiece, was purchased flat and makes maximum potential profits of $3.00 per contract if shares in TRIP settle at $50.00 at March expiration next week.
SWHC - Smith & Wesson Holding Corp. – Gun manufacturer, Smith & Wesson, raised its profit and sales forecast for fiscal 2013, reported third-quarter net income that more than tripled versus the year ago quarter on a near 40% rise in sales for the period, yet shares in the firearms maker are selling off today, down 6% at $9.60 as of the midday…
ARO - Aeropostale, Inc. – Shares in teen retailer, Aeropostale, Inc., are up 6.2% this morning at $13.87 in sympathy with Abercrombie & Fitch after that company raised its guidance for full-year earnings and reported better-than-expected third-quarter results before the opening bell on Wednesday. Aeropostale, which acquired online women’s apparel and shoe retailer GoJane.com yesterday, is scheduled to report third-quarter earnings after the close of trading on November 29th. ARO call options are buzzing with activity today, with some traders adjusting existing positions, while others take profits and establish bullish stances on the stock ahead of earnings in two weeks. One strategist responsible for the purchase of approximately 2,000 Nov. $14 strike calls for a premium of $0.10 apiece back on October 31st appears to be selling the calls today for three times that amount, or $0.30 in premium per option contract. Meanwhile, the purchase of more than 2,000 upside calls out at the Dec. $14 strike for a premium of $1.00 apiece looks for shares in ARO to extend gains in the near term. The trader or traders picking up the Dec. $14 strike calls may profit at expiration next month if shares in Aeropostale rally another 8% to surpass the average breakeven price of $15.00 at expiration. Call buying spread to the Dec. $15 and $16 strikes as well, with more than 500 contracts purchased at each strike earlier in the trading session. Interest in the Dec. $14, $15 and $16 strike calls today adds to positions established during the prior trading week.
WYNN - Wynn Resorts Ltd. – Trading traffic in call options on casino resort operator, Wynn Resorts Ltd., this morning suggests one strategist is positioning for shares in the name to rally substantially by year end. Shares in Wynn Resorts are down 1.2% this morning to stand at $105.67 as of 11:50 a.m. ET. The most active contracts on WYNN by volume so far today are the…
EXPR - Express, Inc. – Specialty retailer Express, Inc.’s shares are getting hammered today, down more than 20% at $11.90 as of 11:10 a.m. in New York, after the company lowered its third-quarter earnings forecast and said same-store sales will decline in the mid-single digit range. Express, Inc. shares, publicly traded since the company’s May 2010 IPO, have not yet managed to catch a bid in today’s session as the stock continues to hit fresh record lows. Options traders betting shares in the name will rebound by the start of the new calendar year snapped up January 2013 expiry call options this morning. Contrarian bets are heaviest at the Jan. 2013 $15 strike where approximately 975 calls were purchased at a premium of $0.45 apiece. Call buyers may profit at expiration next year in the event that EXPR shares jump 30% over the current price of $11.90 to top the effective breakeven point at $15.45. Getting long the Jan. 2013 $15 call has been painful for one or more options traders who appear to have purchased at least 550 of the contracts back on September 4th for a premium of $2.20 per contract. The value of the call options has collapsed in the four weeks since then, down nearly 90% so far to the current asking price of $0.30 apiece.
ARO - Aeropostale, Inc.– Shares in teen retailer, Aeropostale, Inc., are moving lower this morning, perhaps in sympathy with Express, Inc., after the specialty retailer cut its third quarter profit forecast. ARO shares are currently down 2.3% at $13.05 as of 11:00 a.m. ET, and it looks like some options traders are positioning for the price of the underlying to extend losses in the near term. Trading traffic in Aeropostale options is heaviest in the Oct. $13 strike put where more than 8,000 contracts have changed hands versus open interest of 1,239 positions. It looks like most of the…
DOW - Dow Chemical Co. – Bearish trading in DOW options this morning suggests some traders are positioning for the price of the underlying to decline further this summer. Shares in Dow Chemical fell 1.6% to $31.73 on Tuesday following a downgrade to ‘Neutral’ from ‘Overweight’ at JPMorgan. Upwards of 4,500 puts changed hands at the Aug. $31 strike in the first half of the trading session against open interest of 1,413 contracts. It looks like most of the puts were purchased at a premium of $1.33 apiece, including a large block of 1,568 contracts that traded within minutes of the opening bell this morning. Put buyers may be taking outright bearish positions on the name or hedging long positions in the underlying shares ahead of the company’s second-quarter earnings report on July 26th. Profits – or downside protection – kick in on the long put positions should shares in the manufacturer of plastic materials and chemicals slide 6.5% to breach the effective breakeven price of $29.67 by August expiration.
CVH - Coventry Health Care, Inc. – The managed care company popped up on our scanners this morning after a large bearish spread was initiated in the front month options today ahead of a decision from the Supreme Court on the 2010 health care law. Shares in Coventry Health Care are off their lows of the session but remain in negative territory, down 0.60% at $33.33 as of 12:15 p.m. in New York. A large 5,000-lot July $28/$32 put spread appears to have been purchased for a premium of $0.95 per contract. The position, rather sizable next to overall open interest on the stock of 32,696 contracts, could be a hedge to protect a long position in the stock or an outright bearish stance on the near term performance of the shares. The spread is profitable – or yields downside protection – in the event that Coventry’s shares decline…
ARO - Aeropostale, Inc. – Investors are initiating bullish positions on the teen retailer ahead of the company’s first-quarter earnings report on Thursday after the close. Shares in Aeropostale are up 1.25% at $21.41 as of 11:50am, rallying in sympathy with teen apparel company Abercrombie & Fitch Co. following ANF’s better-than-expected earnings report. One options strategist expecting Aeropostale’s shares to extend gains over the next few months sold 9,900 puts at the July $19 strike for a premium of $0.40 each, and purchased the same number of calls up at the higher July $23 strike at a premium of $0.75 apiece. Net premium paid to initiate the bullish play amounts to $0.35 per contract. The trader responsible for the transaction profits at expiration as long as shares in ARO surge 9.1% over the current price of $21.41 to exceed the effective breakeven price of $23.35. Of course, the investor could unravel the position ahead of expiration. He could exit the trade profitably should some catalyst – such as an earnings surprise to the upside – send shares and call premium higher, and put premium lower. The short stance in put options suggests the trader is willing to have shares put to him at $19.00 should the puts land in-the-money at expiration. While the investor runs the risk of having the stock put to him at expiration, it seems the financing received to reduce the cost of buying the calls is worth this risk as ARO’s shares have not traded beneath $19.00 since April 2009. Meanwhile, other bullish players engaged in plain-vanilla call buying, picking up some 3,200 calls at the July $26 strike for an average premium of $0.20 per contract. Call buyers make money if shares in Aeropostale jump 22.4% to top the average breakeven price of $26.20 at expiration in July. The clothing company’s shares were up above $26.20 as recently as April 21, 2011.…
The first thing you will hear this morning is that COST had a 9% rise in sales, with International sales up a whopping 25%. What you are less likely to hear is that COST sells a lot of gasoline, which has doubled in price since last December and, excluding inflation in gas prices, same-store sales are up just 2%, a tremendous miss of the 7.9% expected. Out of the 25% increase in International sales, 15% is attributable to currency exchange so up 10% is the real number.
This is nothing against Costco, I like that company, but it's a caution sign to look carefully at the retail numbers we're going to be seeing today as there are several outside factors that are skewing the results drastically – to the point where the numbers, whether good or bad, are almost meaningless. It's also good to keep in mind that we are comping sales to the WORST CHRISTMAS EVER so anything less than double digit gains over last year is still pretty sad.
Mish did a good job yesterday of pointing out the statistical nonsense known as the Non-Farm Payroll Report, where "Birth/Death" model revisions that were as much as 356,000 a month last year (January) make the data beyond useless for any kind of serious analysis. Nonetheless, analyze it they will and if we manage to avoid posting our 24th CONSECUTIVE month of losses, surely they will be pouring champagne on CNBC and acting like Capitalism has once again triumphed over evil (evil being people without money who still want to live with dignity).
Speaking of dignity – if you know 100 people in Nevada then, statistically, 3 of them went bankrupt this year, up 61% from last year as our economy "recovers". In Tennessee, Georgia and Alabama, just 2 of your 100 friends filed while California, surprisingly "only" had one in 66 households file for bankruptcy so you can go almost a whole day and not run into someone who lost everything in California – too bad the same can't be said for the State overall! California needs $21Bn over the next 18 months to keep the lights on. This doesn't seem so bad, GMAC is losing $13Bn this quarter and we're bailing…
GLD – SPDR Gold Trust ETF – Surprise, surprise…shares of the gold exchange-traded fund reached another record high by climbing up to $119.42 today. We observed one investor initiate a contrarian play in the January 2010 contract. The trader established a bearish risk reversal by selling 4,000 calls at the January 120 strike for 3.65 apiece, spread against the purchase of 4,000 puts at the same strike for 4.60 each. The net cost of the spread amounts to 95 cents per contract. The trader, if long shares of the underlying, enacted downside protection to hedge against potential declines in the price of gold through expiration in January. Perhaps this investor believes gold has peaked, at least as far as the next couple of months are concerned. In contrast, longer-term trading in the September contract was decidedly bullish. The trader sold 5,750 puts at the September 117 strike for 9.35 apiece in order to finance the purchase of the same number of calls at the higher September 140 strike for an average premium of 5.88 each. The investor banks a net credit of 3.47 per contract on the transaction, which he retains in full as long as shares remain higher than $117.00 through expiration. Additional profits amass if shares jump 17% to surpass the $140-level by expiration in September.
MGT – MGIC Investments Corp. – Bullish investors populated MGIC Investments Corporation with various optimistic option strategies throughout the trading day. Shares surged 20% to $5.10 after its Wisconsin regulator waived minimum capital requirements for two years. This permits the company to continue selling coverage despite nine straight quarterly losses. Investor reacted by picking up nearly 5,000 calls at the now in-the-money December 5.0 strike for an average premium of 30 cents apiece. Call-buyers will profit if MTG’s shares surpass the breakeven price of $5.30 by expiration. Additional bullish transactions appeared in the January 2010 and March 2010 contracts. Optimistic individuals shed 3,000 puts at the January 5.0 strike for 60 cents premium apiece. Investors retain the premium received on the sale if shares remain above $5.00 through January’s expiration day. Put-sellers stand ready to have shares of the underlying stock put to them at an effective price of $4.40 per share if the puts land in-the-money. Finally, another chunk of 5,000 puts were sold at the March 5.0…
In yet another slap in the face for an already reeling Europe, moments ago Austria's Constitutional Court ruled on Friday that the presidential runoff election must be held again, handing the Freedom Party's narrowly defeated candidate another chance to become the first right-wing head of state in the European Union. Norbert Hofer of the anti-immigration FPO lost the May 22 vote to former Greens leader Alexander Van der Bellen by less than one percentage point, or around 31,000 votes, all due to mailed-in ballots.
Quick take: At the end of June the inflation-adjusted S&P 500 index price was 82% above its long-term trend, up slightly from 81% the previous month.
About the only certainty in the stock market is that, over the long haul, over performance turns into under performance and vice versa. Is there a pattern to this movement? Let's apply some simple regression analysis (see footnote below) to the question.
Below is a chart of the S&P Composite stretching back to 1871 based on the real (inflation-adjusted) monthly average of daily closes. We're using a semi-log scale to equalize vertical distances for the same percentage change regardless of the index price range.
By Jacob Wolinsky. Originally published at ValueWalk.
John DeVoy, a long time analyst at Seth Klarman’s Baupost Group has left the hedge fund for a position at Loomis Sayles. Devoy formerly worked at Loomis before spending close to ten years at the Boston based hedge fund. The news was announced via a press release from Loomis. The statement says that DeVoy will be returning to the company “as a dedicated credit strategist for the flagship full discretion team.”
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I have mixed feelings about Brexit today. Clearly the European institution need reforming. The addition of so many countries in the last 20 years has created a top heavy administration. The Euro adds more complexities to the equation as the ECB policies cannot fit every country's problem. On the other hand, a unified Europe has advantages as well – some countries have benefited from the integration.
For Britain, it's hard to say what the final price will be. My guess is that Scotland might now vote for independence as they supported staying in Europe overwhelmingly. Northern Ireland might be tempted to leave as well so possibly RIP UK in the long run. I was talking to some French people and they were saying that now there might be no incentive for France to stop immigrants from crossing over to the UK like they do now and simply allow for travel there and let the UK deal with them. The end game is not clear to anyone at the moment....
One week ago, when bitcoin first crossed above $700 on the seemingly insatiable Chinese buying which we forecast last September (when bitcoin was trading at $230) would take place as a result of China's capital controls (to much pushback by the "mainstream" financial media), we tried to predict what may happen next. We said that "it could go much higher. That said, anyone who bought last September when the digital currency was trading at $230 may be advised to take some profits, and at least make...
After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
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 email@example.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.
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