Thrilling Thursday – Comedy or Tragedy?
by Phil - January 6th, 2011 7:29 am
Russell 8-0-0, Russell 8-0-0! Wherefore art thou Russell8-0-0? Deny thy dollar and refuse to fall, or, if thou spike not, be but consolidating at resistance and I’ll happily Capitulate….
If it’s good enough for fair Juliet, it’s going to have to be good enough for us as the Russell finally makes it over our 800 target – the last barrier that was keeping us on the bearish side. Above these lines – it’s time to stop worrying and love the rally as we romanticize the deadly combination of QE2 the Obama tax cuts as: "A pair of star-crossed lovers take their life, whose misadventured piteous overthrows doth with their death bury their parents’ strife."
Of course Willie Shakespeare has nothing on Jimmy Cramer, who’s pearls of wisdom are also sure to be repeated centuries from now. Last night the Bard of Wall Street sang a veritable sonnet in praise of the stock market and foretold a tale of woe for anyone dumb enough to take profits into this rally:
We got the correction this morning, Dow fell 35 points… Today’s action was proof positive that you need to stop worrying and learn to love corrections… What scares me, and what should scare you, is that if you sell your stocks here, you won’t be able to get back in. You should be worried about stocks getting away from you, because I think we can be on the verge of something big – something very positive. FORGET the fact that stocks have run up a lot in the last 6 months. For more than 10 years, this market has done nothing, THAT is the most important frame of reference…
What’s changed? We are finally starting to see big breakouts from a slew of breakouts from several large cap companies including: CAT, UTX, FCX, SWK, CBE, ETN, CSX, UNP and so many other big industrials. Ladies and gentlemen, we have waited over a decade for this move and what do people want to do now that it has arrived? They want to sell! That’s right, they want to sell. That’s right. They want to dump the stocks (sell button sound effect) because they are up way too much short-term or because they think the moves are illusory or driven by short squeezes that will
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DiggBulls Covet Comcast Corp. Calls as Shares Hit New 52-Week High
by Option Review - December 14th, 2010 4:01 pm
Today’s tickers: CMCSA, CSX, WHR & TSN
CMCSA - Comcast Corp. – Bullish traders are piling into call options on Comcast Corp. today after the cable provider received an upgrade to ‘outperform’ from ‘market perform’ with a 12-month target share price of $26.00 at Sanford Bernstein. Shares in Comcast Corp. surged 5.05% to secure an intraday- and new 52-week high of $22.40. Optimism on the cable services company also follows a report in the Wall Street Journal this morning that describes Comcast’s efforts to test a new service that combines TV and the some features of the Internet through a set-top box. Near-term bulls purchased more than 5,910 now in-the-money calls at the December $22 strike for an average premium of $0.36 apiece. Investors holding these contracts are hoping to see Comcast’s shares soar above the average breakeven price of $22.36 through expiration on Friday. More than 7,200 calls changed hands at the December $22 strike versus puny previously existing open interest of just 1,052 contracts. Optimism spread to the January 2011 contract where investors purchased in- and out-of-the-money call options. Traders scooped up more than 2,800 calls up at the January 2011 $22.5 strike at an average premium of $0.46 apiece. Call buyers at this strike are poised to profit should shares in Comcast Corp. climb 2.5% over today’s high of $22.40 to exceed the average breakeven point on the calls at $22.96 ahead of January 2011 expiration. Comcast call and put options were active in the April 2011 contract, as well. It looks like one trader may have unraveled a 2,500-lot three-legged bullish spread this morning. The sharp rise in demand for options on the stock lifted Comcast’s overall reading of options implied volatility 8.8% to 25.26% by 12:55 pm.
CSX - CSX Corp. – The provider of rail-based transportation services popped up on our scanners in the first half of the trading session after a large number of put options changed hands in the January 2011 contract. CSX Corp.’s shares are down slightly…
SP 500 September Futures Daily Chart
by Chart School - July 13th, 2010 5:54 pm
SP 500 September Futures Daily Chart
Courtesy of JESSE’S CAFÉ AMÉRICAIN
Stocks were rallying today on optimism about earnings based on last night’s results from Alcoa and CSX.
After hours tonight Intel announced better than expected earnings and raised its forecasts. This caused the futures to gap open when they resumed trading. Here is what they look like now, after hours.
This has been a wicked rally off the lows. It *might* be getting towards a short term top, possibly tomorrow, but I would not want to get in front of it. Wait and see how the rally progresses.
Testy Tuesday – Already?
by Phil - July 13th, 2010 8:19 am
Wheeeee, this is fun!
It’s only been a week since I called for "Turnaround Tuesday" and asked the question "Will CNBC Apologize to America" for their ridiculous, sickening parade of negativity that chased their poor viewers out of the market (now 600 points ago) by completely misrepresenting the economic outlook in order to protect the TERRIBLE advice given by Jim Cramer, the Fast Money Crew, their sponsors etc. etc. – it was all one national frenzy of media negativity designed to shove retail investors entirely out of the market while the cognoscenti went shopping.
It’s not just CNBC, of course, it’s a problem with the whole MSM but I ranted about corporate (top 0.01%) control of the media last week so let’s move on as we wave bye-bye to all the beautiful sheeple who were kind enough to sell us their stocks at the bottom, despite my warnings. Our 500% upside plays are now well on their way to making 500% for us and our "9 Fabulous Dow Plays Plus a Chip Shot" are also looking good already. Even the trade ideas I mentioned right in last Tuesday’s post are well on track as I said last week:
On Friday, I had said to Members right at 9:38, in the Morning Alert: "If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. Out of short-term short trades if you haven’t already. Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short."
The latter was a reference to our 500% upside plays. We also went with EEM July $38 calls at .99, and a QLD $50/53 bull call spread for $1.30 (selling puts as well for more profits) as well as long plays on RIMM, AA, HOV, VLO and TASR. My optimism was based on the considered TA analysis I shared with Members at 2:39:
After completing last month’s "Omega III" market pattern on the Trade Bots, it’s now time to spring the bear trap and run the "Apha II" into options expiration on July 16th. Maybe there will be as little logic to the rise as there was to the fall – who really cares – it’s just our jobs to try to
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Strangle Strategist Targets MSG Ahead of LeBron James’ Decision
by Option Review - July 7th, 2010 4:11 pm
Today’s tickers: MSG, MOS, LUV, ILMN, GHDX, FCN, KBH, LCC & CSX
MSG – Madison Square Garden, Inc. – Speculation as to which team will acquire the larger-than-life LeBron James continues to mount ahead of the basketball superstar’s Thursday night announcement on ESPN. One options investor put uncertainty in the marketplace to good use by purchasing a strangle on Madison Square Garden, Inc., the fully-integrated sport, entertainment and media business, which, among other things, owns and operates sports franchises including the New York Knicks. MSG’s shares are currently up 1.5% to $20.58 as of 2:50 pm (ET), but earlier surged 5.4% to an intraday high of $21.36. MSG edged onto our ‘hot by options volume’ market scanner after the trader purchased a long strangle in the July contract. The investor appears to be positioning for a dramatic shift in the price of the underlying shares ahead of July expiration. The options strategist purchased a 2,000-lot strangle, buying 2,000 calls at the July $22.5 strike for a premium of $0.60 apiece, and buying 2,000 puts at the lower July $20 strike for a premium of $0.50 each. The net cost of the transaction amount to $1.10 per contract and prepares the strangle-player to benefit nicely as long as MSG’s shares take off running in either direction. Profits are available to the investor if shares rally straight through the current 52-week high on the stock of $22.95 to trade above the effective upper breakeven price of $23.60. If LeBron James were to join the NY Knicks it has been said the value of the MSG franchise will increase significantly. The strangler will certainly benefit if the Knickerbockers turn out to be James’ new teammates because MSG shares are likely to soar. Conversely, the options strategist is poised to profit to the downside should shares trade below the lower breakeven price of $18.90 ahead of expiration day. Perhaps the investor is expecting shares of the underlying stock to suffer if LeBron ends up with a different team. Either way, the investor responsible for the strangle strategy is positioned to benefit from a wayward shift in the price of the underlying stock. But, the trader will lose the full premium paid, $1.10 per contract in this case, if shares trade within the confines of the strike prices described at expiration. Finally, the investor may profit if implied volatility on MSG, which is currently up…
Buy-Write Strategist Sinks Teeth into Apple Call Options
by Option Review - July 6th, 2010 5:19 pm
Today’s tickers: AAPL, AUXL, CSX, CTRP, SNDK, CPB & SLV
AAPL – Apple, Inc. – Options investors fluttered about the iPhone maker today populating the stock with various trading strategies and exchanged more than 234,000 contracts on the stock by 3:40 pm (ET). Apple’s shares are up 0.40% to stand at $247.95 with the final bell set to ring in approximately 15 minutes, but earlier in the session the stock rallied as much as 2.37% to touch an intraday high of $252.80. One strategist expecting the price of the underlying stock to increase sharply ahead of July 16 expiration day initiated a buy-write transaction today. It looks like the investor sold roughly 1,300 calls at the July $280 strike for an average premium of $6.00 apiece and simultaneously purchased Apple shares at an average price of $251.90 each. The premium received for writing the call options effectively reduces the average price paid to purchase shares of the underlying stock to $245.90 apiece. Thus, the covered call strategy positions the investor to walk away with maximum gains of 13.87% should Apple’s shares trade above $280.00 at expiration. Shares of the iPad manufacturer have not exceeded $279.01 in the past 52-weeks. But, the bullish player certainly reduced the cost of getting long Apple shares and is positioned to benefit nicely from upward momentum in the price of the underlying stock whether or not shares are called from him at expiration day in July.
AUXL – Auxilium Pharmaceuticals, Inc. – Shares of the specialty biopharmaceutical company fell as much as 6.85% during the trading session to attain a new 52-week low of $19.99. AUXL’s shares declined following a downgrade to ‘perform’ from ‘outperform’ at Oppenheimer this morning, and are currently down 4.3% to close the trading day at $20.54. The decline in Auxilium’s shares today inspired one options investor to purchase a plain-vanilla debit put spread on the stock. The trader purchased 2,000 now deep in-the-money puts at the July $22.5 strike for a premium of $2.85 apiece, spread against the sale of the same number of puts at the lower July $20 strike for a premium of $1.20 each. The net cost of the transaction amounts to $1.65 per contract, thus positioning the bearish player to accrue maximum potential profits of $0.85 per contract if shares of the underlying stock trade below $20.00 by July expiration day.
CSX – CSX Corp. –…
Wheeeeeeekly Wrap-Up
by Phil - April 17th, 2010 8:22 am
Wheeee! That was fun – let’s do it again!
There is nothing more fun than a nice, big dip in the roller coaster that you are prepared for and nothing more terrifying than a sudden, unexpected drop you were not prepared for (think air pockets on planes). I know my incessant harping on fundamentals gets annoying and makes me somewhat of a party pooper at market tops but think of my commentary as that "clack, clack, clack" sound you hear when a roller coaster is climbing to the top of the tracks – the sound lets you know there’s a big drop coming and the more clacks you hear – the bigger the dip is likely to be.
In fact, much like a roller-coaster, most of our well-prepared members were disappointed that we didn’t get a BIGGER dip on Friday but we’ve learned not to be greedy on the bear side and to quickly take those profits on our short-term plays while we let our long-term disaster hedges run wild, waiting patiently for the big score. By the way, it’s not that we’re perma-bears – far from it, when Cramer, Adami, Finerman, John AND Peter Najarian were telling you to crawl into a bunker and hide your head in the sand a year ago – I was the one yelling BUYBUYBUY while our hugely successful Buy List, which is the bulk of our virtual portfolios, has been all bullish since Feb 8th. Just because we think a rally is BS, doesn’t mean we don’t participate in it!
As a fundamentalist, I believe there is a market "truth" a real value that can be placed on stocks and indexes based on reality, not hype and, when the MSM hype stampedes the herd and takes the market (or an individual stock) too far one way or the other – we simply step in and take advantage of it. It’s not complicated but it takes a little bit more work than the average "Lightning Round" participant is used to so PSW is not for everybody – this is our JOB, not our hobby, but boy is it fun when we get it right!
Despite the sell-off this week, we still finished up over 11,000 on the Dow but poor 1,200 on the S&P couldn’t hold and Nas 2,500 was merely a brief flirtation. The NYSE fell all the way to 7,550, down 200 from Thursday’s…
Wednesday Rally – 80% Gain For S&P!
by Phil - April 14th, 2010 8:03 am
S&P 1,200?
It could happen this morning. We have good earnings from INTC and a beat by JPM so there’s no reason not to take out our last major technical as we party just like it’s 1999 with MASSIVE gains behind us and the MSM projecting MASSIVE gains for the rest of this year too. As I said yesterday, we’re not going to complain (much) – we’re just going to go with the flow. Yesterday I put up a DIA play that returns 566% in 37 days if the Dow simply holds 11,000. Today we’ll look at a similar play on S&P 1,200.
After all, like the crazy guy on TV says, if the government is giving free money away – shouldn’t we be getting ours too. Only I’m not telling you you need to buy a book or do anything special – just join my Membership site AFTER you make your 566% – that’s a pretty good deal! Of course, keep in mind these are the bull plays and we are generally hedging for a possible correction so obey the sign on the left and play wisely! Consider that you can make 5% a month by risking just 1% of your virtual portfolio on successful plays like this one – that’s 60% a year if all 12 months are positive, and the last 12 months have been so why not 12 more?
As I mentioned above, the S&P is up 80% from the March lows and is still 31% off the Oct, 2007 high of 1,576. As we switch off our brains and run with the bulls, we’re not going to worry about the low volume and those silly fundamentals – we’re just going to use 1,200 as a key support that lets us know when to get in and out of our bullish plays along with Dow 11,000, Nasdaq 2,500 (still waiting), NYSE 7,600 and Russell 700. This makes being bullish nice and brainless and a couple of high-percentage disaster hedges let us sleep at night without being worried about a Black Friday even wiping out our gains. The other key percentages are:
Dow 11,019, up 71% from 6,440 low. 80% is 11,592, still 30% off the Oct ’07 high of 14,279- S&P 1,197, up 80% from 666 low. 80% is 1,200, still 31% off the Oct 07 high of 1,576
- Nasdaq 2,465, up 95% from 1,265 low. 80% was
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Testy Tuesday – Have the Markets Become Comfortably Numb?
by Phil - January 19th, 2010 8:08 am
"There is no pain you are receding
A distant ship’s smoke on the horizon.
You are only coming through in waves.
Your lips move but I can’t hear what you’re saying.
When I was a child
I caught a fleeting glimpse
Out of the corner of my eye.
I turned to look but it was gone
I cannot put my finger on it now
The child is grown,
The dream is gone.
but I have become comfortably numb." – Pink Floyd
I have a theory that the markets (and the American people in general) aren’t irrational, they are simply shell-shocked after suffering a very traumatic group financial experience…
To be shell-shocked is to be "mentally confused, upset, or exhausted as a result of excessive stress" and the most common symptoms are: Fatigue, slower reaction times, indecision, disconnection from one’s surroundings, and inability to prioritize – That certainly sounds like our Congress doesn’t it? Combat stress disorder was first diagnosed in WWI, when 10% of the troops were killed and 56% wounded – far worse than had been experienced in previous wars. Our current financial crisis has similarly affected more people than any previous crisis with almost everyone knowing someone who is bankrupt or lost their jobs or homes and almost no one escaped the carnage of the downturn without some financial damage.
Combat fatigue may go a long way to explaining the severe drop-off in volume that has plagued the markets since March, with participation now down to 25% of where we were last January and that leaves us open to the blatant sort of market manipulation that Karl Denninger caught last week as well as the usual nonsense we get daily from HFT programs that drive the market with such precision that we are able to tell how the day is going to go by simply checking our hourly volume targets. Here’s a clip from CNBC where a floor trader discusses market manipulation as a fact of trading (2 mins in).
As Nicholas Santiago points out on In The Money Stocks, "January is usually a very high volume month, yet it has started off the New Year even lighter than the last two months of 2009. Light volume markets are very difficult to short. Hence the old saying, ‘never short a dull market’." Not only is the market volume…
Railroad Bulls Expect CSX Recovery on Track
by Option Review - October 5th, 2009 4:11 pm
Today’s tickers: CSX, VALE, ERTS, JNPR, BRCD & ORCL
CSX - The supplier of rail-based transportation services attracted option optimists to the November contract today amid a 2.5% rally in shares to $42.68. Bullishness was expressed through put selling as investors appear to expect CSX to continue to thrive through expiration in November. Approximately 7,300 puts were sold short at the November 40 strike for an average premium of 2.03 apiece. Traders selling these contracts retain the full credit as long as shares of CSX remain higher than $40.00 through expiration next month. Investors shorting the puts pocket the 2.03 credit in exchange for bearing the risk that shares decline beneath $40.00. If the puts land in-the-money by expiration, traders short the puts will have shares of the underlying stock put to them at price of $40.00 apiece. Therefore, losses begin to accumulate if shares fall 11% from the current price and breach the breakeven point to the downside at $37.97. – CSX Corp. –
VALE - Investors in the Brazilian metals and mining company enjoyed a more than 3% rally in shares to $23.63. The current share price represents a new 52-week high for the stock, which is one nickel greater than the previous 52-week high of $23.58, attained back on September 23, 2009. We observed bullish sentiment in the November contract where one investor established a risk reversal by shorting puts to finance the purchase of calls. The optimistic play involved the sale of 8,000 puts at the November 21 strike for a premium of 60 cents apiece, spread against the purchase of 8,000 calls at the higher November 25 strike for an average premium of 71 cents per contract. The net cost of assuming a long call position amounts to 11 pennies apiece. Shares of Vale must rise another 6% by expiration for the investor to begin to accumulate profits above the breakeven point at $25.11. – Vale SA –
ERTS - Shares at the game-maker are higher by 3% at $18.89 today making the options action a little curious. An investor appears to be writing nearby in-the-money puts in exchange for buying those at out-of-the-money strikes at later expiries. An investor sold 13,700 November puts at the 19 strike for a 1.50 premium, meaning he’d have shares put to him if they remain below the strike in seven weeks time. In the meantime he insures worried ERTS traders…
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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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