Options volume on Best Buy is almost three times the average daily reading for the stock today, with more than 20,000 contracts traded on the consumer electronics retailer versus average daily volume of around 7,600 contracts. Shares in Best Buy are suffering this afternoon, down more than 5.0% at $24.66 as of 2:15 p.m. ET on a down day for U.S. stocks. Much of the options action in BBY today is in puts on the name, with the put/call ratio hovering near 3.1 as of the time of this writing.
Near-term bearish positioning in Best Buy options suggests some traders may be looking for the price of the underlying to extend losses, perhaps leading up to and following the retailer’s first-quarter earnings report on May 22nd. The 23May’14 24.0 strike puts traded upwards of 3,300 times so far today, with much of the activity occurring in the first hour of the session. Time and sales data suggests most of the 24.0 puts were purchased at an average premium of $0.41 each. Traders long the contracts may profit at expiration in the event that Best Buy shares drop 4.0% from the current level to trade below the average breakeven price of $23.59.
Also active this morning were the Jun 20.0 strike puts, which traded more than 3,000 times, albeit against sizable open interest of 7,131 contracts. The 20.0 strike put options appear to have been purchased at a premium of $0.12 each. These far out-of-the-money put options may be profitable at expiration next month if shares in BBY drop nearly 20% to $19.88, the lowest level since March 2013.
BBY – Best Buy Co., Inc. – Weekly options changing hands on Best Buy this morning suggest some traders are looking for shares in the consumer electronics retailer to continue higher during the next few trading sessions. Shares in BBY, up better than 200% since this time last year, are trading 2.0% higher on the day at $41.36 as of midday in New York trading.
Fresh interest in upside call options expiring at the end of this week are active today, with the Dec 06 ’13 $42 strike options attracting the most volume. Around 1,900 of the $42 weekly calls have traded thus far in the session against open interest of 161 contracts. One strategist appears to have purchased around half of the volume at a premium of $0.56 each just before 11:00 a.m. EST this morning. The calls make money at expiration if shares in BBY rally another 2.9% over the current price of $41.36 to exceed the breakeven point at $42.56. Traders are also homing in on the Dec 06 ’13 $43.5 and $44 strike calls, with around 430 and 750 contracts exchanged thus far in the session, respectively.
GM – General Motors Co – Shares in GM are on the rise today, up 1.0% at $39.15 as of 11:20 a.m. EST, after earlier rallying 1.7% to touch a new 52-week high of $39.39. Trading in the regular December options on the automaker this morning suggest one strategist is positioning for shares in the name to extend gains during the next few weeks.
It looks like one trader initiated a one-by-two ratio call spread on the stock, a strategy that looks for limited gains in the price of the underlying through December expiration. The trader appears to have purchased 920 calls at the Dec $39 strike at a premium of $1.10 each and sold twice as many of the Dec $41 strike calls at an average premium of $0.345 apiece. The net cost of the ratio spread amounts to $0.41 per contract and positions the strategist to profit in the event that GM’s shares exceed the breakeven price of $39.41. Maximum potential profits of $1.59 per contract are available on the spread if shares in the automaker rise 4.1% to settle at $41.00 at expiration later this month. Shares in GM are up more than 50% since this time last year.
BBY – Best Buy, Inc. – Shares in Best Buy have slipped into negative territory in the final hour of trading on Monday, with the stock down 0.20% at $43.62 as of 3:20 p.m. EST, ahead of the electronics retailer’s third-quarter earnings report prior to the opening bell tomorrow.
Nov 22 ’13 expiry options are active ahead of the quarterly earnings release, with interest rising in both call and put options. One strategist appears to be taking the view that shares in the name will rally to fresh 52-week highs this week, buying a 1,000-lot Nov 22 ’13 $44/$48 call spread at a net premium of $1.23 per contract. The spread makes money if shares in Best Buy rally 3.7% over the current price to exceed the breakeven point at $45.23. Maximum potential profits of $2.77 per contract are available on the bull call spread in the event that BBY shares surge 10% to $48.00 by expiration this week. BBY shares are up roughly 200% since this time last year.
Overall options volume on Best Buy is approaching 35,000 contracts in the final 30 minutes of trading, which is roughly 165% of the stock’s average daily volume of around 20,700 contracts. Puts are trading more heavily than calls, with the put/call ratio up above 1.2 as of the time of this writing.
TWTR – Twitter, Inc. – Shares in Twitter are on the decline today, slipping 2.8% to $42.73 during the first half of the session after the stock was rated new ‘Sell’ with a 12-month target share price of $34.00 at Wunderlich Securities. Options on Twitter, which began trading on Friday, are active today, with volume nearing…
BBY - Best Buy Co., Inc. – Options on Best Buy are active this morning ahead of the consumer electronics retailer’s second-quarter earnings report prior to the opening bell on Tuesday morning. Shares in BBY are rising ahead of earnings, up 1.75% at $30.90 as of 11:40 a.m. ET. Weekly call and put options are the most actively traded contracts by volume as of the time of this writing, with more puts changing hands than calls and the put/call ratio hovering around 2.75. Much of the trades initiated this morning appear to be near-term bullish on BBY, with put sellers stepping in as well as upside call buyers. It looks like more than 2,000 of the Aug 23 ’13 $28.5 strike puts were sold in the early going for a premium of $0.55 apiece, while roughly 2,000 of the Aug 23 ’13 $29 puts were sold at a premium of $0.70 each. Put sellers keep the premium received on the trades as long as shares in Best Buy settle above the $28.5 and $29 striking prices at expiration this week. The positions start to lose money, however, in the event that BBY shares decline nearly 10% from the current price to trade below effective breakeven points at $27.95 and $28.30, respectively, at expiration. Finally, options traders exchanged more than 2,400 of the Aug 23 ’13 $31 strike calls versus open interest of 152 contracts. Time and sales data suggests much of the volume was purchased for an average premium of $1.20 apiece, thus positioning buyers of the calls to profit should shares in Best Buy rally 4.2% over the current price of $30.90 to exceed an average breakeven point and new 52-week high of $32.20.
INTC - Intel Corporation – Shares in Intel are up the…
BBY - Best Buy, Inc. – Shares in Best Buy are soaring on Monday, up as much as 7.7% during morning trading to hit $29.44, the highest level since July of 2011, after the stock was resumed at ‘Outperform’ with an increased target price of $40.00 from $32.00 at Credit Suisse today. Trading traffic in weekly options on the consumer electronics retailer suggest some strategists are positioning for shares in the name to extend gains during the shortened U.S. trading week. The most actively traded weekly contracts by volume this morning are the Jul 05 ’13 $29 strike calls, with upwards of 1,300 lots in play versus open interest of 75 contracts. Bullish traders appear to have purchased most of the contracts for an average premium of $0.37 apiece and may profit at expiration should Best Buy’s shares exceed the average breakeven price of $29.37. Upside calls at the Jul 19 ’13 $30 strike are also active today, with around 630 lots purchased during morning trading at an average premium of $0.54 each. The contracts make money if shares in Best Buy rise another 3.7% to top $30.54 during the next few weeks to expiration. Shares in BBY are up more than 140% since the start of 2013.
GMCR - Green Mountain Coffee Roasters, Inc. – A sizable trade in January 2014 expiry put options on Green Mountain Coffee Roasters initiated within the first 40 minutes of the opening bell this morning suggests one trader may be bracing for a pullback in shares of the coffee producer, with the stock up more than 250% since this time last year. Shares in GMCR today are up 3.3% at $77.72 as of 12:25 p.m. in New York. It looks like one trader purchased 5,000 puts at the Jan 2014 $60 striking price for a premium of $5.35 per contract. The position starts making money in the event that shares in Green Mountain plunge 30% from the current price of $77.72 to breach the effective breakeven…
One of the candidates will lower taxes for the middle class and small businesses while slamming shut loopholes on the rich and Big Business, limiting their deductions and raising taxes if needed, he will provide national health-care and concentrate on jobs, punishing outsourcers and educating US workers to get them on the path to full employment. The other candidate is already President. Romney now claims there will be no 20% tax cut for the rich – I assume his rich backers assume he's lying to get elected (lying doesn't bother them) and President Obama was in no way prepared to debate the guy who showed up yesterday and he lost the debate in an embarrassing fashion.
From a market perspective, we were playing the weakness as nervousness ahead of the debates and accumulating long positions as planned yesterday. Oil blew past the $88.50 target I set in yesterday's morning post – all the way to $87.70 before finally bouncing back and hitting our target again overnight (now $88.64). That drop from $91.22 in the Futures was good for $3,500 per contract in the Futures but, of course, we were done being short, as planned at $88.50 and in fact made a couple of bullish trades – long on USO at $33 (as planned) and short on SCO at $44. We'll see how they work out today but up at the open is a good sign.
Our bullish stance on AAPL finally paid off as the stock went from $660 to $672 at the close – hopefully $680 is next. Gasoline only got to $2.75 (we were hoping for $2.70) but is back to $2.86 already in pre-market trading (/RB).
As you can see from Dave Fry's Russell chart, we're still in a bullish consolidation – just below our breakout level and today, so far, we don't have rising Dollar headwinds to hold…
Obviously, we're still bearish and the news we've been discussing this morning in Member Chat certainly hasn't changed my opinion on that. Back on August 7th(first Tuesday of last month), I said we were about $700Bn in stimulus short of what we need to support S&P 1,400 and we knew we would have to wait a month to see how much we got from Draghi and Bernanke but, so far, and with Ben already out of the way, we have zero.
At $10Bn per S&P point that puts our fair value all the way down to 1,330 but keep in mind that the $500Bn we did get only lasts for 6 months so more like 1,310 at this point without a proper commitment by the ECB or Fed this week. Even 1,310 would be up 50 from the June lows and it would represent a neat 2/3 retracement of the rally since then. Our $25,000 Portfolio has, if anything, gotten more bearish as we dragged along the top but another thing we've done each Tuesday has been to take aggressive bullish positions to cover ourselves IN CASE someone actually does put up the cash needed to goose the markets over our breakout levels (see Friday's post for current positions in the virtual Portfolio and our levels).
Seriously, this is 4 Tuesday's in row – is anyone seeing a pattern?
Of course this Tuesday we are 100 Dow points lower than we were last Tuesday and the BS pre-market pump job at 6am has already faded (7:30) although we're still working short bets on the Russell futures (/TF) and the Euro (EUR/USD) from 813 and $1.256 as I put up a note in early morning Member Chat as we spiked on – get this – the news that Draghi cancelled his appearance at Jackson Hole this weekend.
Why would it be good that Draghi is NOT going to the last Central Bankster conference of the year but the buzz is that he MUST be so close to a masterful solution to all of Europe's problems that he can't be bothered to gather with his brother bankers on the eve of his triumph. The announcement was timed to coincide (10 minutes before) bond auctions by Spain ($2Bn 3-month notes at 0.95%) and Italy ($3.75Bn of 2-year notes at 3.06%) and the Euro jumped 0.7% into the auction – lowering the effective rates and both auctions were a "success".
That pulled the EU markets off the floor (still down half a point at 8am) and got the US futures out of the red zone as we finally pushed the Dollar under that pesky 81.50 line, goosing the indexes and commodities. Unfortunately, it's just a sugar rush and we've already run out of steam but I'm sure someone will start another rumor around 9:15 to get us back to green into the open.
As I said last Tuesday, with the Dollar at 81.50 we're looking for adjusted levels of: Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and we held the Nasdaq yesterday but that was all so no reason to capitulate on our bearish stance just yet. Last Tuesday we also discussed 3 more trades (there we 3 the Tuesday before) to make 300% if the market did break higher and our first batch had several 100% winners so let's see how our 3 new trades did in a downtrend:
2 FAS Oct $107/117 bull call spreads at $2.05, selling 1 BBY 2014 $15 puts for $3.75 for net .35 is now net $1.52 – up 334%
AGQ Oct $38/45 bull call spread at $3.10, selling BTU 2014 $20 puts for $3.60 for
BBY - Best Buy, Inc. – A bull call spread initiated on the world’s largest electronic retailer this morning suggests one option strategist is positioning for shares in Best Buy to potentially post double-digit percentage gains by January 2013 expiration. Shares in the retailer are up 5.9% at $18.33 this morning on news Best Buy agreed to permit its founder, Richard Schulze, to perform due diligence on the company required to further the process of possibly taking over the retailer with a group of private equity firms. The sizable spread was constructed through the purchase of 6,750 calls at the Jan. ’13 $19 strike call and the sale of the same number of calls up at the Jan. ’13 $23 strike, all for a net premium outlay of around $1.28 per contract. The spread makes money if shares in BBY rally another 11% to surpass the average breakeven price of $20.28, with maximum possible profits of $2.72 per contract available should the stock soar 25.5% to $23.00 by expiration next year. Options on Best Buy are more active than usual today, with volume in excess of 56,200 contracts running at approximately 156% of the stock’s average daily volume of 35,942 contracts.
KNXA - Kenexa Corp. – Shares in Kenexa Corp. are up nearly 42% this afternoon at $45.85 on news IBM agreed to buy the maker of human resources software for $1.3 billion in cash. It looks like the sharp move in the share price has some options traders sitting on substantial paper profits. Call open interest in Kenexa is largest at the Sep. $35 strike where 399 positions were initiated during the past few weeks. A 100-lot block was purchased at a premium of $1.00 back on August 9th and around 35 of the calls were picked up this past Friday at an average premium of $0.85 apiece. Call buyers paying up to $1.00 per contract for the…
Yep, that's what I said last Tuesday and the Tuesday before that because Tuesday is a day they push the Futures higher and ditch the Dollar and tell you that this time it's different because of the same rumors they had the Tuesday before only this week – the data is getting worse and worse, as we know is better, right?
Last Tuesday we set levels to capitulate and go fully bullish at Dow 13,464, S&P 1,428, Nasdaq 3,060, NYSE 8,160 and Russell 816 and, as of yesterday's close we had the Nasdaq and the Russell over their marks needing just one confirmation to make it 3 of 5 and begin to flip our short-term portfolios (the $25KPs) bullish. We are soooo close but, so far – no cigar.
While we waited, we looked at some upside hedges that would do well if the market continued higher. Just as we get downside protection when we're bullish – we use upside protection when we're bearish and I suggested taking 5% or 10% positions in aggressive upside plays to help balance a bearish portfolio against – well against exactly what happened in the past 7 days. Our trade ideas were:
2 FAS Oct $105/115 bull call spread at $2, selling 1 BBY 2014 $18 puts for $3.25 for net .75, now $1.15 – up 53%
2014 SHLD $32.50 puts sold for $7.50, now $6.40 – up 15%
6 EWJ Jan $9 calls at .53, selling 1 BBY 2014 $18 put at $3.25 for a net .07 credit, still net .07 credit – even
TNA Oct $55/61 bull call spread at $2.50, selling Oct $42 puts for $1.90 for net .60, now $1.80 – up 200%
The BBY puts jumped over 20% yesterday, from below $3 to $3.75 and that killed two of our trades (and worse today after earnings!), that were up significantly in Friday's update(which is why we take quick gains like that off the table). The good news is the EWJ play gives us a nice, new entry at the same net price so that one is still good and, of course, we are done with TNA after making 200% in a week and we'll find a fresh horse for that money.
Speaking of fresh horses – for our offsetting short puts today – let's take…
Equity markets around the globe plunged on Friday in response the Brexit vote outcome. Actually, prior to the Friday selloff, the week was looking rather positive for our eight-member watch list. Ironically, on a week-over-week basis, the UK's FTSE was the best performer, despite its -3.15% Friday loss. For the second consecutive week, Japan's Nikkei has the painful distinction of being the biggest loser, down 4.15%, which, sadly, is an improvement over its 6.03% rout the previous week.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We've also included the average for each week so that we can evaluate t...
Great Britain’s decision to extricate itself from the EU has consequences that are at once far-reaching and unknown. By Friday morning, no market was immune. Great Britain’s currency, the pound, had fallen to its lowest levels since 1985, and the FTSE (an index of the London stock exchange) and DAX (a German stock index) plummeted. In the U.S., markets opened in the red, gold (a co...
The most important thing long-term investors need to see today is the market’s response to crisis, courtesy of Dimensional Funds.
The chart above should put the Brexit in perspective. Nobody knows yet what the implications will be, but I’m pretty confident that this is no more significant than any of the six events above. Now of course there are never any guarantees, that’s what risk means. And if you need the money in the next five years, you should not...
By Jacob Wolinsky. Originally published at ValueWalk.
There has been a LOT of discussion about the Brexit vote and what the implications are (although none of us can predict the future), but one interesting point many seemed to miss is the impact on the world’s largest economy after the USA and EU – China. How does a Brexit impact the world’s largest country by population? No one knows for sure but it will likely have a big impact on China. Quartz is saying its bad while Bloomberg News says its good.
UK chancellor George Osborne, meanwhile, promised a “golden decade...
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...
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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.
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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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