Call Options Fly Off the Shelves at Yahoo!
by Option Review - February 3rd, 2011 5:21 pm
Today’s tickers: YHOO, TSN, BJ & CEPH
YHOO - Yahoo, Inc. – Large prints in Yahoo! call options today indicate some strategists see shares in the name rising in the next couple of months. Shares in the online media company rallied as much as 1.8% today to trade around $16.87 by 12:00pm in New York. A massive call spread appears to have been purchased in the April contract. The investor responsible for the transaction purchased 46,500 calls at the April $18 strike for a premium of $0.50 each, and sold the same number of calls at the higher April $20 strike at a premium of $0.20 a-pop. Net premium paid to initiate the spread amounts to $0.30 per contract. Thus, the investor responsible for the spread is poised to profit should shares in Yahoo! rally 8.5% over today’s high of $16.87 to surpass the effective breakeven price of $18.30 ahead of April expiration. Maximum potential profits of $1.70 per contract are available to the investor if shares in YHOO jump 18.6% to trade above $20.00 before the options expire in April. Earlier in the session, another bullish player initiated a similar spread, buying around 5,000 calls at the March $17 strike for an average premium of $0.54 each, and selling the same number of calls at the higher March $19 strike at an average premium of $0.19 apiece. The net cost of the transaction amounts to $0.35 per contract and positions the trader to make money in the event that Yahoo’s shares rise above $17.35 by March expiration. The sharp rise in demand for options on Yahoo! sent the overall reading of options implied volatility on the stock up 10.6% to 33.41% in early afternoon trade.
TSN - Tyson Foods, Inc. – Bullish options traders are picking up calls on the producer of chicken, beef, pork and prepared food products this morning ahead of the firm’s first-quarter earnings report, scheduled for release before the market opens on Friday. Shares in Tyson Foods increased as much as…
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DiggNo-Thrills Thursday – Where’s the Kaboom?
by Phil - June 3rd, 2010 8:28 am
Where’s the kaboom? There’s supposed to be an Earth-shattering kaboom.
Well, it’s Thursday and the World hasn’t ended yet, contrary to the dire predictions we were getting last week and I guess that means you’d better buy some stocks! We’ve been buying up a storm since falling below the bottom of our range with 50 long-term entries on our Buy List and another dozen longs in the first two days of this week including speculative longs (haven’t taken those for a while) on BP and RIG. We even took two very bullish earnings plays on STP and JOYG – both of which were just way too low to ignore.
JOYG was a complex spread from our 12:50 Alert to Members with a max profit at $55 but STP was a very simple, VERY bullish play where we bought the $9 calls for $1 and sold the $9 puts for .47, for a net .53 entry and no limit to our upside over $9. Even if your margin requirement is 50% on the puts, you can pick up a single contract spread like this for $497 in buying power and your risk is being assigned the stock at net $9.53 but a move over $10 nets you a 10% gain in one day. As long as you don’t mind owning the stock on a move down, these are fun earnings plays to make…
We didn’t expect to be getting bullish (and we are still well-hedged for the next fat-fingered fall) but at 12:27 on Tuesday, I posted the following chart for Members where I drew a line in the sand for the downturn:
Yesterday I noted in the Morning Post that we were completing that move down into the open so all we really did was follow-through with our plan to flip bullish for at least a bounce. As we drifted along into the afternoon on a low volume move up, I re-examined the chart and decided it was a fine afternoon for a stick save and I drew this updated chart with the attached comment:
10,080 is the 0% line for the Dow and if I were Mr. Stick, I’d use that as my go point and jam the Dow up 100 from there, back to about 1,100 (on the S&P) so that’s the game(d) plan for the afternoon if we are getting back to the usual bullish shenanigans. Which would
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Apple Shares Reach New 52-Week High Ahead of iPad Release
by Option Review - March 29th, 2010 4:06 pm
Today’s tickers: AAPL, GDXJ, CEPH, LO, MHK, VRTX & MJN
AAPL – Apple, Inc. – Shares of the iPhone and iPod maker rallied to a new 52-week high of 233.87 in morning trading with just five days remaining before the firm’s newest product, the iPad, hits retail stores across the U.S. Bullish options trading patterns on the stock today indicate optimistic sentiment on Apple ahead of the iPad’s release on Saturday morning. One investor enacted a bullish put credit spread in the May contract in order to benefit from continued strength in the price of Apple’s shares through expiration. It looks like approximately 10,000 puts were shed at the May $210 strike for an average premium of $3.46 per contract, marked against the purchase of about the same number of puts at the lower May $200 strike for $1.95 each. The investor responsible for the spread pockets a net credit of $1.51 per contract, which he keeps in full as long as Apple’s shares trade above $210.00 through May expiration. Maximum potential losses faced by the trader amount to $8.49 per contract should shares of the underlying stock plummet 14.5% to $200.00 ahead of expiration day in May.
GDXJ – Market Vectors Junior Gold Miners ETF – The GDXJ, which is an exchange-traded fund that seeks to replicate the price and yield performance of the Market Vectors Junior Gold Miners Index, realized a 1.25% appreciation in the value of its underlying share price to $25.82 today. The Market Vectors Junior Gold Miners Index tracks the overall performance of foreign and domestic publicly traded companies of small/medium-capitalization that primarily engage in gold and/or silver mining. Despite the move higher in shares today, one options trader initiated a bearish debit put spread in the May contract. It appears the investor purchased 10,000 in-the-money puts at the May $26 strike for a premium of $1.65 apiece and sold the same number of puts at the lower May $23 strike for $0.52 each. The net cost of the put spread amounts to $1.13 per contract. If the investor responsible for the trade holds no underlying share position, maximum potential profits of $1.87 per contract are available if shares slip to $23.00 by expiration day in May. However, the trader may be buying the spread to protect the value of an existing underlying share position, in which case protection kicks in beneath the breakeven share…
Wrong Way Weekly Wrap-Up
by Phil - September 19th, 2009 8:28 am
I am trying to get bullish, really I am.
As I said to Members on Thursday morning in chat, like Sam Jackson in Pulp Fiction: "I’m trying hard to be the (bullish) shepherd" but the data makes it hard – so very hard! Anyway, I’m not here to complain about the market forces moving against us but to review the carnage of our picks going all the way back to Sept 10th, when we decided the prior day’s beige book was not going to be enough to break out over 9,600 on the Dow. Now, with the Dow at 9,820 after testing 9,900 it’s a good idea to look back and see what we missed in this last 2.5% leg up.
On Thursday the 10th, we talked about patterns. One pattern I recommended following right in the morning post was the famous "stick save" investment. Simply buying high-delta DIA calls at about 2:30 each afternoon and selling into the pumped-up close. That was a winning play on the 10th, 11th (Fri), 14th and 16th but not the last two days, when we turned a lot more bearish – but we’ll get to that further down this review. 4 out of 5 days is pretty good for a patten and seeing it broken 3 of the past 5 days is also significant. I did promise that Thursday that we will look for more bullish opportunities once we have a clear break over our last two levels (NYSE 6,959 and S&P 1,056) and we did make those this week. If we hold it through Tuesday, it will be time and we’re going to line up some trades this weekend. True to my word on that Thursday, we chose a variety of bullish and bearish plays in Member Chat. I’m posting the plays along with suggested adjustments if needed as it’s a nice way to review our various strategies in progress – especially under "adverse" conditions.
Trade ideas of the day for Members were:
- DIA $95 puts that ended up being rolled and doubled down for a net 20% gain (too much bother to detail).
- SUN at $23.36, now $28.45 (up $5.09), short Oct $25 calls at $2.20, now 3.70 (down $1.50) and short the Jan $22.50 puts at $1.15, now .70 (up .45).
- Another buy/write at net $23.01/22.76, already up 17.5% so can be closed early here.
- FDO short Apr $25 puts at $2.10, now
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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
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