DIS - Walt Disney Co. – Shares in Disney are off 0.50% on the session at $65.50 amid declines in U.S. stocks, but trading traffic in weekly call options this morning suggests some traders are looking for the price of the underlying to reverse course in the near term. The Jul 26 ’13 $67.5 strike call options on Disney are active for a second consecutive session, with around 600 contracts traded as of 11:20 a.m. in New York. It looks like most of the calls were purchased in the early going for an average premium of $0.14 apiece. The bullish position may be profitable at expiration next week should shares in Disney rally more than 3.0% over the current price of $65.50 to exceed the average breakeven point at $67.64. Yesterday afternoon, roughly 400 of the $67.5 strike calls were purchased for a premium of $0.23 each. The weekly calls expire prior to Disney’s third-quarter earnings report on August 6th.
JAKK - Jakks Pacific, Inc. – Put activity on toy producer, Jakks Pacific, Inc., today indicates some traders are positioning for shares in the name to continue to drop. The stock yesterday plunged 40% after the company reported a surprise second-quarter loss, forecast a loss for the full year and suspended its quarterly dividend. Shares declined another 2.6% this morning to stand at $6.81 as of 11:35 a.m. ET. Traders expecting the stock may have further to fall in the near term picked up Aug $5.0 strike calls, buying roughly 470 lots for a premium of $0.20 each during the first 10 minutes of the trading day. Buyers of the $5.0 strike calls stand ready to profit at expiration next month should shares in Jakks Pacific tumble 30% from the current price of $6.81 to breach the effective…
DIS - Walt Disney Co. – Front month call options changing hands on Disney today suggest some traders are positioning for shares in the name to break well above recent all-time highs in the near future. The stock, up some 50% since this time last year, increased 0.45% near the open this morning to touch a record high of $65.09 after Iron Man 3, produced by Marvel Studios, a division of the Walt Disney Co., earned more than $175 million in its opening weekend in North America. Traders betting the stock pushes to fresh highs snapped up roughly 2,800 calls at the May $67.5 strike for an average premium of $0.48 apiece during the first half of the session. Call buyers make money at expiration if shares in Disney surge 4.4% over today’s high of $65.09 to top the average breakeven point at $67.98. Walt Disney Co. reports second-quarter earnings after the closing bell tomorrow.
VMED - Virgin Media, Inc. – Big prints in Virgin Media put options on Monday morning indicates at least one trader is bracing for shares in the name to potentially pull back off recent record highs. Shares in Virgin earlier today rallied 0.40% to touch a fresh all-time high of $50.31. The stock has more than doubled since this time last year and is up roughly 1600% since touching down at a 2008 financial-crisis low of $2.96. The May $50 strike put contracts traded approximately 5,000 times by midday in New York versus open interest of just 15 contracts. It looks like most of the volume was purchased at a premium of $0.55 each, thus positioning buyers to profit in the event that VMED’s shares slip 1.7% from today’s high of $50.31 to breach the effective breakeven point on the downside at $49.45 by expiration next week.
MS - Morgan Stanley – Shares in Morgan Stanley are on the rise…
DIS - Walt Disney Co. – Trading traffic in weekly call options on Disney suggests traders are positioning for shares in the name to extend gains, with the stock up as much as 2.2% at a new all-time high of $63.25 today on the heels of an upgrade to ‘Buy’ from ‘Neutral’ with a target price of $72.00 at UBS. Shares in Disney are up nearly 50% since this time last year. Traders betting the stock pushes to fresh highs this week appear to be buying the May 03 ’13 $65 strike weekly calls. Roughly 400 contracts have changed hands versus open interest of 13 contracts as of 12:30 p.m. ET, and it looks like the bulk of the volume was purchased in the early going for an average premium of $0.07 per contract. Weekly call buyers make money at expiration this week if shares in Disney increase another 2.9% over today’s high of $63.25 to top the average breakeven point at $65.07. Walt Disney Co. reports second-quarter earnings after the closing bell next Tuesday.
NTE - Nam Tai Electronics, Inc. – Buyers of bearish options on electrical components and products provider, Nam Tai Electronics, Inc., last week prior to the company’s first-quarter earnings report ahead of the open this morning are seeing big gains in the value of those contracts, with shares in the name tumbling more than 30% today to the lowest level since August of 2012. Traders last week snapped up front month put options, buying around 1,500 lots at the May $10 strike for an average premium of $0.40 each and roughly 575 puts at the May $12.5 strike at an average premium of $1.48 apiece. The sharp selloff in shares of Nam Tai today now finds the $10 and $12.5 strike put contracts changing hands at $2.40 and $5.00 apiece, respectively, as of 12:15 p.m. in New York. Overall options volume in excess of 12,000 contracts in play on NTE today is substantial versus the stock’s average…
DIS - Walt Disney Co. – Put options on the world’s largest entertainment company are active on a morning that finds U.S. equities reversing earlier losses and moving into positive territory on favorable comments from Speaker of the House, John Boehner, regarding budget talks. Disney shares, in negative territory for much of the morning, are currently flat on the session at $48.60 as of 11:25 a.m. ET. Downside puts expiring January 2013 are the most active contracts on Disney today, with the $44 strike put changing hands upwards of 5,400 times in the first hour of the session. It looks like most of the volume was purchased for an average premium of $0.42 apiece. Put buyers may profit at expiration next year should shares in DIS decline more than 10% from the current price of $48.60 to breach the average breakeven price of $43.58. Put open interest of 8,335 contracts at the Jan. 2013 $44 strike is sufficient to cover today’s volume of roughly 5,400 contracts. The bulk of the previously existing positions comprising open interest were purchased on November 9th. Shares in Disney have traded above $44.00 since the end of May.
TFM - Fresh Market, Inc. – The operator of 115 food retail stores in 20 states throughout the U.S. popped up on our scanners this morning with options volume up sharply and the price of the underlying down substantially following the company’s third-quarter earnings report and a downgrade to ‘Sell’ from ‘Neutral’ with a 12-month share price target of $45.00 at Northcoast Research. Shares in Fresh Market are currently down more than 14% at $51.75 as of 12:15 p.m. in New York. Front month put buying on Fresh Market suggests some traders anticipate possible further declines in the near term. The Dec. $50 strike puts attracted the most volume in the first half of the session, with more than 1,000 lots in play versus open interest of 144 contracts.…
That's all the markets have been doing lately. As you can see from our Big Chart – it's been a pretty orderly sell-off according to our 5% rule with roughly a 4-5% drop during October with some consolidation, followed by a much steeper 4-5% drop after the election.
We're back to the point where we expect resistance at an 8% total drop as well as some bounce action where once again we'll be measuring for strong or weak bounces to determine whether or not we can get a turn again (our indicators kept us bearish last time). Regarding the current action, I said to our Members yesterday in Chat:
I think there is a lot of selling as people take capital gains while they can. I think that it's very possible that it's going to be very difficult to get a proper rally into the end of the year because there are plenty of people waiting for a rally to take their gains, whether through timing or position. The problem with this state of not knowing is it becomes prudent for people to hedge for the worst and, if someone had a 20% gain for the year and now it's 15% and they can take it off now and keep 12.75% (after 15% tax) vs possibly hitting another 5% drop and running down to 8.5% this year or possibly 7% (at 30%) if they wait until next year and there's no recovery (and the more the cliff looms the less likely recovery seems) then it almost doesn't make sense not to take the 12.75% and run. So that's very possibly the selling pressure we see and it may continue to be relentless into the end of the year unless there is some sort of resolution or delay to the cliff.
While we don't think the Fiscal Cliff will end up being a big deal – that doesn't stop others from panicking. This week we've been scooping up positions they have been running away from but, if we're going to have another leg down – we'll be needing those disaster hedges (see Wednesday's post) to keep us out of trouble. It doesn't take much to profit from a downturn, fortunately, when we use good hedges. On Wednesday I suggested the TZA April $17/24 bull call spread for $1.40, selling the $14…
DIS - Walt Disney Co. – Just six weeks ago, shares in the operator of the happiest place on earth were hitting fresh all-time highs, peaking at $53.40 in the final week of September, on the heels of an impressive 40% rally since the start of 2012. More recently, however, the stock has been edging down off the September high, sliding roughly 6% ahead of Disney’s fourth-quarter earnings report released after the close on Thursday. Shares in Walt Disney Co. gave up another 5.75% today to trade at $47.17 just before midday on the East Coast after the company posted earnings in line with expectations and sales that missed analyst estimates. The final weeks of 2012 may see shares in Disney continue to pull back by the looks of activity in far out-of-the-money put options expiring in December. Some traders snapped up bearish contracts on DIS that may be profitable if shares slip to their lowest levels since May, purchasing around 1,000 puts at the Dec. $44 strike for an average premium of $0.58 apiece. Like-minded bears picked up roughly 400 puts at the lower Dec. $43 strike for an average of $0.40 apiece, and shelled out $0.29 per contract, on average, to buy more than 425 puts at the Dec. $42 striking price. Traders long the Dec. $42 strike puts stand ready to profit at expiration next month should Disney shares drop 11.5% from the current level to settle below an average breakeven price of $41.71.
VRA - Vera Bradley, Inc. – Fresh interest in Vera Bradley call options this morning suggests some traders are positioning for shares in the maker of handbags and accessories to rally as the 2012 calendar year draws to a close. The stock today trades down 2.5% to stand at $26.20 as of 11:30 a.m. ET. The jump in call activity arrives four weeks ahead of Vera Bradley’s third-quarter earnings report after the closing bell on…
GM - General Motors Co. – Shares in the largest U.S. automaker are popping on Wednesday after the company reported third-quarter earnings that handily beat analyst expectations. The stock is up better than 8% just before midday in New York to stand at $25.15. Traders expecting shares in GM to extend gains heading into the weekend snapped up weekly calls that have two full trading sessions remaining to expiration. The most active weekly calls are the Nov. 02 ’12 $25 strike contracts, which have changed hands more than 2,800 times against open interest of 369 lots. It looks like most of the $25 calls were purchased earlier this morning for an average premium of $0.22 per contract, thus positioning buyers to profit should GM’s shares exceed the average breakeven price of $25.22 at expiration this week. Intraday gains in the price of the underlying have benefited early-bird call buyers, with premium on the $25 strike contracts now up more than 115% since this morning to arrive at $0.48 per contract. Meanwhile, options players who purchased upside calls at the end of last week are seeing substantial paper profits on their positions today. Bullish traders appear to have purchased around 1,000 calls at the Nov. 02 ’12 $23.5 strike for an average premium of $0.48 apiece last Friday. Today these deep in-the-money call options are changing hands at around $1.70 each as of 12:00 p.m. ET, a more than three-fold increase in value.
PBR - Petrobras Brasileiro SA – Bearish traders are bulking up on short-dated put options on Brazilian oil and gas company, Petrobras, this morning, with shares in the name down more than 5.2% at $21.21 on Wednesday. Buyers of put options with two full trading sessions to go before expiration appear to be positioning for shares in the world’s largest deep-water oil driller to extend declines. Traders positioned to potentially profit from further selling pressure in PBR…
DIS - Walt Disney Co. – Light front-month call buying in Disney this morning suggests some traders may be positioning for shares in the name to rally following the Company’s second-quarter earnings report on Tuesday of next week. Shares in the operator of the Happiest Place on Earth are down 2.0% at $42.92, joining in on the broad market decline on the heels of today’s jobs report. Traders picking up the May $43, $44 and $45 strike calls may see the value of their positions increase prior to expiration should Disney’s earnings beat expectations and send the price of the underlying higher. The most active DIS contracts at present are the Oct. $47 strike calls, with 5,000 lots changing hands in the first half of the session against open interest of 1,178 positions. It looks like most of the calls were sold for a premium of $1.17 each. The trader or traders responsible for the call sale keep the full amount of premium as long as shares in Disney fail to rally above $47.00 by October expiration. Strategists may be long the stock and selling covered calls, however, if these are naked short calls, sellers of the options face unbridled losses above a breakeven share price of $48.17.
NWL - Newell Rubbermaid, Inc. – A large block of call options sold on Newell Rubbermaid launched the consumer products maker onto our ‘hot by options volume’ market scanner this morning. The massive trade indicates the seller of the options expects the price of the underlying to remain below $20.00 through June expiration. Shares in NWL are currently down 1.5% on the day at $18.37 as of 11:55 pm in New York. It looks like the trader responsible for the transaction sold 30,000 calls…
Until the end of day, the volume was low and, as you can see from Dave Fry's SPY chart, the morning pump was mostly erased by the end of the day. In fact, on the Russell and Nasdaq – it was entirely erased. What a friggin' joke, yet no one will investigate it and few will even question it.
As we often say at PSW – We don't care IF the game is rigged, as long as we know HOW the game is rigged and get to place our bets accordingly. In my Morning Alert to Members at 10:05, my comment on the move up was:
Not too many markets are open so super low-volume means we can pretty much ignore whatever's happening. Some wild gyrations at the open already with AAPL popping $10 to goose the Nas and they are spiking us up and down at will on this low volume.
At 12:02 we made our planned adjustments to our 4 active virtual portfolios, taking advantage of the big, bad spike to move to cheap June bear positions and cash out our long plays and just get generally more aggressively bearish at what we thought was going to be the top for the day. The most aggressive move was made in our most aggressive, $25,000 Portfolio (pictured here from its 10am status BEFORE many changes were made), where we flipped our protective TNA hedge from bullish to very bearish – shifting the balance of the portfolio much more bearish with a single move:
TNA – $60s are now $4 so let's take that and run on 5 (1/2), as that's more than we paid for the spread and we'll ride the $63s half-covered with a stop on 5 at $3 (now $2.25). Also, a stop on the 5 remaining $60s at $3, at which point we would reset the stop on the $63s, of course.
Needless to say, that trade worked out huge already as the $60s all stopped out at a $3.50 average ($3,500), which is $500 more than our max potential gain on the spread and the $63 calls already finished the day at $1.10 ($1,100) for a net of $2,400 (so far) off our $1,450 entry on 4/26 – so up 65% in less than a week on the trade we used to…
Wasn't it just 2 days ago that the EU was all set to pop the ESM to $1.25Tn and the IMF was going to add another Trillion and the Fed was talking about more QE in the $1.25Tn range, which plunged the Dollar to multi-week lows? Shouldn't adding 6% of the entire planet's GDP in additional stimulus give us more than a one-day pop in the markets?
As I pointed out in Monday's Morning Alert to Members – these are all just RUMORS and my conclusion in the Alert was:
Despite the bullish turn of events (which we anticipated last week) we're more inclined to cash out our bullish trades into the excitement and press our bear bets and TOMORROW, if we're still over our levels – THEN we will scramble to add some aggressive bullish trades to our virtual portfolios. Again, I cannot stress enough that CASH is my preferred position because this market is tough to call and you need to be very flexible and very nimble to trade it.
We proceeded as planned and, so far, we haven't had any reason to capitulate and get more bullish and that is both surprising and disappointing as this is the end of the first quarter of 2012 – if not now – when? As David Fry notes:
Monday’s rally was typical as we head toward the end of the quarter. Hedge fund performance fees are on the line and any way to boost these profits is job one. Top holdings for hedge funds include the usual suspects: AAPL, IBM, INTC, BAC, DIS, HD etc.
With little volume it’s easy for algos and hedge funds to prop stocks on little hard news. Tuesday we briefly saw more of this. Just as markets were weakening a story appeared using the Fed’s favorite oracle, the WSJ, as Fed governor Rosengren stated, “more stimulus is on the table”. Immediately HFT algos jumped and markets rose if only briefly.
It's very exciting for us as PLCN (see Thursday's notes) went all the way up to $736 on Monday and sold off on some pretty heavy trading yesterday. Slowly but surely, our negative premise is beginning to take shape as Piper Jaffray is finally catching up with us and noting "a sharp decline in unique visitors to Priceline's booking.com" from growth of 61 percent during the…
Long before the saying "BTFD" emerged on Wall Street as a result of some $13 trillion in central bank liquidity injections (now rapidly unwinding as a result of the failure off the Petrodollar and the so-called Quantitative Tightening) which made corrections impossible if not yet illegal, the phenomenon of buying sharply falling stocks had a different name on Wall Street: "catching a falling knife" (alternatively "dash for trash").
And yet, absent a functioning global central bank does it pay to catch falling knives? That is the topic of the latest analysis by SocGen's Andrew Laphtorne, whose conclusion is bound to disappoint thousands of 20-year-old hedge fund managers whose only "edge" is to buy whatever is most red ...
When you find yourself in a hole, the saying goes, stop digging. A simple lesson that arguably has bypassed a mining industry that’s wiped out more than $1.4 trillion of shareholder value by digging too many holes around the globe. The industry's 73 percent plunge from a 2011 peak is far beyond the oil industry's 49 percent loss ...
NOTE: readtheticker.com does allow users to load objects and text on charts, however some annotations are by a free third party image tool named Paint.net
.."There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks h...
In May of last year, the S&P hit a key level and stopped on a dime. We applied Fibonacci tools to the highs in 2007 and the lows in 2009, to the chart above. The 161% Fibonacci extension level came into play in the 2,150 zone last year and when hit at (1), the markets stopped on a dime.
If your tools or adviser has suggested to be long and strong since May of 2015, that advice has been costly.
Our take, “Free advice that is wrong, is expensive!!!”
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This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
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Throughout the past 30 days of wild volatility, here’s what I didn’t do.
Panic. Worry. Sell.
In fact, the best I did was add to a couple of positions yesterday. The world was already in an uncertain state for the past 3+ years. It’s just that with the market rising, we pushed the issue to the back of our mind and ignored it.
A number of systemic, structural forces are intersecting in 2016. One is the rise of non-state, non-central-bank-issued crypto-currencies.
We all know money is created and distributed by governments and central banks. The reason is simple: control the money and you control everything.
The invention of the blockchain and crypto-currencies such as Bitcoin have opened the door to non-state, non-central-bank currencies--money that is global and independent of any state or central bank, or indeed, any bank, as crypto-currencies are structurally peer-to-peer, meaning they don't require a bank to function: people can exchange crypto-currencies to pay for goods and services without a bank acting as a clearinghouse for all these transactions.
Last year, the S&P 500 large caps closed 2015 essentially flat on a total return basis, while the NASDAQ 100 showed a little better performance at +8.3% and the Russell 2000 small caps fell -5.9%. Overall, stocks disappointed even in the face of modest expectations, especially the small caps as market leadership was mostly limited to a handful of large and mega-cap darlings.
Notably, the full year chart for the S&P 500 looks very much like 2011. It got off to a good start, drifted sideways for...
Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.
Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).
Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself.
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 firstname.lastname@example.org 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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This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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