DWA – Dreamworks Animation SKG, Inc. – Animated feature film producer Dreamworks Animation popped up on our ‘hot by options volume’ market scanner on Tuesday morning due to heavier than usual trading in November expiry calls.
Trading in the Nov $30 calls suggests at least one strategist may be positioning for the price of the underlying to hit fresh 52-week highs after the company’s third-quarter earnings report after the closing bell next Tuesday. Roughly 1,900 of the Nov $30 calls have changed hands so far today, which is more than three times previously existing open interest in the $30 calls of 489 contracts. Time and sales data indicates most of the calls were purchased during the first five minutes of the session at a premium of $1.00 each. Call buyers stand ready to profit at expiration next month in the event that Dreamworks Animation’s shares rally 6.6% to exceed the breakeven price of $31.00.
Shares in DWA are currently up 0.45% on the session at $29.07 as of 10:45 a.m. ET.
FDX – FedEx Corp – Shares in shipping solutions provider FedEx Corporation are up strongly on Tuesday, gaining 3.0% to $131.23 during morning trading after the stock was upgraded to ‘Overweight’ from ‘Neutral’ with a target share price increase to $153.00 from $134.00 at J.P. Morgan.
Trading traffic in weekly calls on FDX indicates some options players are positioning for the price of the underlying to extend gains during the next few sessions. The most-traded weekly calls are the Oct…
MCP – Molycorp, Inc. – Options volume is up sharply on Molycorp on Tuesday after the rare earth elements producer forecast negative third- and fourth-quarter cash flow, lower than expected sales, and said it will offer approximately $200 million of common stock to finance its capital needs. Shares in the name fell as much as 22% to $5.54, the lowest level since June.
Trading in MCP options is heavier than usual, with overall volume up above 90,000 contracts as of 2:30 p.m. ET versus the stock’s average daily volume of around 18,700 contracts. The most traded options on Molycorp thus far in the session are the Oct $5.5 strike puts, with around 21,000 lots exchanged against zero open interest. Time and sales data suggests most of the volume was purchased at an average premium of $0.19 each. Put buyers may profit at expiration next week if shares in MCP decline another 4.2% to breach the average breakeven point on the downside at $5.31.
FDX – FedEx Corp. – Shares in FedEx are up sharply on Tuesday after the company announced its Board of Directors authorized a new share repurchase program of up to 32 million of outstanding shares of common stock, adding to the 7.4 million shares remaining as part of the company’s existing buyback program. FDX shares increased as much as 6.1% to a new multi-year high of $122.45 during morning trading.
Trading in April 2014 expiry options on FedEx today indicates some traders are positioning for shares in the name to extend gains during the next six months. Upwards of 6,000 of the Apr ’14 $125 strike calls changed hands against open interest of 372 contracts by midday in New York trading, with much of the volume purchased for an average premium of $6.75 each. Traders long the $125 calls stand ready to profit at expiration next year in the event that FedEx shares rally another 7.5% to exceed the average breakeven price of $131.75.
FDX - FedEx Corp. – Shares in FedEx rose as much as 7.25% on Tuesday morning to $106.00, the highest level since March, fueled by speculation the company may be the target of activist investor and Pershing Square Capital Management L.P. CEO, Bill Ackman. Rumors sparked heavy trading in FDX options, with volume nearing 60,000 contracts by 11:55 a.m. ET versus average daily volume of around 6,700 contracts. Trading in FedEx calls is outpacing that of puts, pushing the call/put ratio to 3.35 at midday. Options traders that were quick to place short-term bullish bets on the stock straight out of the gate this morning are seeing big intraday gains in the value of their positions today. It looks like early-movers picked up roughly 1,300 weekly calls at the Jul 12 ’13 $103 strike for an average premium of $0.79 per contract during the first hour of trading. These contracts are now in the money and changing hands at a last-traded price of $3.35 each, a roughly four-fold increase since this morning, as of 12:15 p.m. in New York.
MCP - Molycorp, Inc. – Upside call options in play on rare metals mining company, Molycorp, Inc., this morning look for shares in the name to rebound in the near term. Shares in MCP are up 4.0% today at $6.04 as of 12:15 p.m. ET. The most actively traded contracts on Molycorp as measured by volume are the Aug $7.0 strike calls, with volume in excess of 12,500 contracts versus open interest of 2,699 lots. Time and sales data suggests most of the volume was purchased for an average premium of $0.24 apiece, thus positioning call buyers to profit in the event that MCP shares rally 20% over the current price of $6.04 to exceed the average breakeven point…
Oh, who are we kidding? I could not be happier saying I told you so and neither could our Members as our "Sell in March and Go Away" strategy seems to have hit the nail on the head – and it's only April 4th!
We had April SQQQ and DXD hedges that failed, of course, but those were paid for by the short sale of AAPL 2014 $300 puts for $15, which are already $10.75, so up 28% already on those pays for a lot of protection.
Another offset we had looked at was the short sale of FDX April $80 puts at $1.10, which expired worthless (up 100%). We also looked at longer-term put sales on SKX, with the Oct $12 puts fetching $1.55 per contract, now $1.25 (up 19%), and the T 2014 $25 puts at $2.15, now $1.75 (up 18%).
Along the same vein, the XOM 2014 $65 puts at $5, now $4.05 (up 19%) were sold to pay for the SU 2014 $25/37 bull call spread for $6 for net $1 on the spread. The bull call spread is still $6 but that's net $1.95 now – up 95% on the combo. Our other bullish play on oil was the USO June $40/46 bull call spread at $2, selling he SCO Oct $26 puts for $3 for a net $1 credit. The USO spread has fallen to $1.40 but the short SCO puts dropped to $1.65 a net gain of .75 – up a quick 75% on a fairly neutral oil play, which was BRILLIANT as it covered many, many of our aggressive oil shorts over the month that went VERY well.
The S&P is finally over our 1,359 level but, so far, has not stayed over that line for a full session and we need two sessions over the line to confirm it. However, I did promise not to be bearish if we're over 1,360 and I think I got it all out of my system in the last few posts, as well as last night and this morning's Member Chat, where I outlined my case for for the oil glut and the collapse of the EU, which will lead to the collapse of Asia and the US – but not today.
Today there is a ton of money sloshing around in the system and we are clearly in a massive technical rally, which may (or may not) end at any moment. We discussed our February trade ideas from our morning posts on Monday's morning so I won't rehash them here but I do want to take a look at ways to leverage some trades to take full advantage of this non-stop rally as we have VERY CLEAR stop lines (our 10% lines) where we'll have a clear signal to get out or cover if ANY of the major indexes fail.
As with our early February trade ideas, we can add one more bullish trade each day that we're over the line and cash out the older trades that go well in the money and, of course, accumulate some Disaster Hedges (20-30% of your unrealized profits into protective hedges is a good rule of thumb as well as the cheapest form of protection – STOPS!).
My favorite disaster hedges are playing for a correction in the Dow or the Nasdaq which, if you are a Dow Theorist, would seem very likely based on the chart on the left but, so far, nothing matters to the bulls – who have their story and they are sticking to it – regardless of those pesky facts. Sorry, that's a bit bearish (bad habit). Anyway, my favorite disaster hedges are:
SQQQ April $13/17 bull call spread for .70. This trade has a 471% upside potential by itself if SQQQ (currently $13.14) gains 30% by April expiration (58 days). That's a lot but SQQQ is a 3x ultra-short to the Nasdaq so a 10% drop in the Nas, back to 2,650…
AMR - AMR Corp. – Shares in AMR Corp. went down in flames today, falling nearly 40.0% this afternoon to $1.83, before trading in the stock was halted for a second time…and then a third, fourth, and fifth time at current count. Implied volatility on the stock shot up 136.39% to 194.42% in early-afternoon trade on fears the U.S. may be heading into recession and concern AMR Corp. may need to eventually consider bankruptcy protection. Investors eyeing the breathtaking drop in shares of the airline operator snapped up in- and out-of-the-money put options across multiple expiries. The November $2.0 strike put attracted the greatest volume, with more than 12,000 contracts having changed hands against open interest of 574 positions. It looks like most of the puts were purchased for an average premium of $0.21 apiece. Investors long the puts profit in the event that shares in AMR Corp. trade beneath the average breakeven price of $1.79 at expiration next month. Same-strike puts expiring in October drew a crowd, as well. Traders purchased the majority of the more than 9,700 puts exchanged at the Oct. $2.0 strike for an average premium of $0.14 each. Put premiums may appreciate should implied volatility edge higher and shares in the parent company of American Airlines fall further as the story continues to play out.
SBUX - Starbucks Corp. – Fresh prints in Starbucks Corp. put options this morning indicate one investor may profit handsomely should shares in the maker of Frappuccinos and Tazo teas decline substantially in the next seven weeks to November expiration. The spread may be an outright bearish bet on the specialty coffee retailer or a protective play on the stock ahead of the company’s fourth-quarter earnings report after the final bell on November 3.…
FDX - FedEx Corp. – Bearish activity cropped up in FedEx Corp. call and put options within minutes of the opening bell this morning. Shares in the provider of transportation, e-commerce and business services are down 1.9% to stand at $75.59 as of 11:40 am ET, with less than one week to go before the Memphis, Tennessee-based company is scheduled to report first-quarter earnings. Yesterday, FedEx rival, UPS, reaffirmed its full year earnings guidance, but warned of difficult economic conditions and anemic growth. Traders positioning for shares in FedEx to extend losses, and possibly dip to new 52-week lows ahead of October expiration, initiated a few different bearish strategies in the first half of the session. Plain-vanilla put buying ensued at the Oct. $77.5 strike, where roughly 1,900 in-the-money puts were purchased for an average premium of $4.07 apiece. Investors long the puts profit at expiration next month if shares in FDX slide 2.85% from the current price of $75.59 to breach the effective breakeven point on the downside at $73.43.
Most of the volume in FedEx options was generated by one strategist, who initiated a three-legged bearish spread straight out of the gate this morning. It looks like the investor sold 2,500 calls at the Oct. $85 strike in order to purchase the 2,500-lot Oct. $67.5/$75 put spread. The transaction cost the trader a net premium of $0.90 per contract. The investor may be employing the three-way spread to take finance an outright bearish view on the stock, or could be using the trade to hedge a long position in the underlying shares. Profits are available to the trader should shares in FDX drop 2.0% to breach the effective breakeven price of $74.10 by expiration day. The investor may walk away…
FDX - FedEx Corp. – Sizable prints in call and put options on the provider of a range of shipping, transportation and business support services suggests one investor expects shares in FedEx Corp. to rebound substantially by October expiration. The stock today trades 0.50% lower on the session at $75.75 as of 12:00 pm on the East Coast. July and August were tough months to be long shares in Fedex, which fell nearly 28.0% from a 52-week high of $98.66 on July 7, down to a 52-week low of $71.33 on Tuesday. The three-legged options play could be a sign the investor expects monetary policy from the Fed to send shares higher, or perhaps for President Obama’s much-anticipated speech on jobs to inject some optimism into the market. Looking at a 2-year chart of FDX shares, it looks like the stock fell off a cliff in April 2010, bottoming out in July of last year, and ultimately spiking higher on the heels of Bernanke’s announcement of QE2. If the Fed ends up coming to the rescue, and markets believe the proposed actions will work, shares in FedEx could behave as they did around this time last year. The stock gained around 25.0% following the 2010 Economic Symposium in Jackson Hole, Wyoming, to top $98.00 a share in 2011. Speculation on possible Fed action aside, investors will surely be listening to Obama’s speech this evening to see if he says anything they don’t already expect to hear.
The trader appears to have sold around 5,000 puts at the October $67.5 strike, in order to purchase the October $77.5/$82.5 call spread 5,000 times, all for an average net premium of just $0.52 per contract. The transaction positions the trader to make money should FedEx’s…
That’s where we started the Year on January 3rd and we finished that day at 1,271, beginning a fine tradition of making almost all of our gains on the first day of the month, continuing a very disturbing (and very fake) year-long trend that I am calling "sell the next day (of the month) and go away." (chart by Bespoke).
Notice that this trend became very disturbing at the same time Uncle Ben announced his fabulous QE2 plan that showered money on his fellow Banksters according to a nice, predictable schedule that allowed them to lever up their investments to inflate stocks and commodities, trapping index fund investors (especially the working poor who make monthly contributions to IRA and 401K accounts in a nice, predictable and controllable fashion). It’s a simple plan, index fund managers get your pension money at the end of the month, they are required to buy baskets of stocks to balance their funds and that action can be manipulated by clever bankers who jack up the prices and then sell into the fake demand they created – effectively stealing tens of Billions each month out of the paychecks of working Americans. Just another one of those great crimes they commit where they steal a little bit of money from everyone, every day.
That’s right, those same tax cuts that are "off the table" in negotiations in Congress are, other than war spending, the sole cause of our nation’s deficit. This country does not have a spending problem, it has a collecting problem! As Mike Konczal, a research fellow at the Roosevelt Institute, noted: "It’s not like this has unleashed a wave of productivity, or better incentives, or increased work output. It’s mostly just rich people got a lot more money."
The cost of doing business is rising and GOOG happens to be one of those businesses that lacks pricing power as their rates are generally set through an auction process and their users have to VOLUNTEER to pay more money to advertise. Most advertisers on Google are on fixed budgets, like MSM advertisers and Google has done a great job of replicating that model. Why then, should it be surprising if a maturing Google begins to look more like a traditional media outlet than a dot com company with exploding growth?
Don’t get me wrong, we love Google long-term but we did short them as well as BIDU into Google earnings as we felt Google would disappoint enough to spook BIDU investors as well. We’re taking the short money and running and looking for some bullish plays now – the drop from $630 last month to $545 today is plenty of froth blown off the top for us to get long-term interested again. As you can see from the tag cloud of the Conference Call, growth is still there, especially in mobile display ads (Android a bit disappointing) and no major negatives. I’m not going to write a whole thing about GOOG though, there are thousands of people doing that and our Members know well enough where I stand. I’m more interested in examining the bigger picture.
We expected Q1 earnings to be rough and we’ve already seen FDX, NKE, ORCL, RIMM, FAST, FCS and AA struggle so hopefully you don’t have to be hit on the head with another whole week of earnings before you get a little more cautious. Next week we hear from C, HAL, LLY, TXN, BK, GS, INTC, IBM, SYK, USB, VMW and YHOO on Monday and Tuesday and then we’re off to the races with hundreds of companies reporting each week for the rest of the month. Our job in the first few weeks of earnings season is to get a feel for the quarter and, so far, that feeling is rough.
It’s all about inflation, of course and don’t say we didn’t warn you about that one! We went more bearish up at those 100% lines we’ve been watching and now the question really is – how bad was it? Inflation is, after all, our long-term BULLISH premise. We don’t think corporations…
In case you missed Phil's appearance on BNN last week, be sure to watch this excellent video below!
Phil spoke with Kim Parlee on MoneyTalk on Aug. 26 about his call for a 10% correction, China's stock market collapse, commodities, and technical analysis, including the 5% rule and the difference between a bounce and a rally. Watch Phil on Business News Network's Money Talk.
Phil is a regular guest on MoneyTalk, Canada's premier personal finance show hosted by Kim Parlee.
Following last night's epic inventory build., according to API, DOE has reported a 4.7mm barrel build but US crude production pluinged 1.4% (lowest since March). However, ths oil complexc has been hit by two other 'issues' this morning as Obama captures the votes he needs to confirm the Iran nuclear deal (guaranteeing more oil supply) and China encumbers more Venezuelan oil ($5bn loan) allowing them to keep pumping at below-cost levels. The reaction for now is notable selling pressure...
The S&P 500 is now down around 7% on the year. Is the very long-term bull market still in play? Yes it is!!!
The chart below looks at the NYSE Composite on a monthly basis, dating back to 1965.
CLICK ON CHART TO ENLARGE
As you can see, since the mid 60’s, the NYSE composite has remained inside of rising channel (A). The last time the top of the channel was touched was in the late 1990’s and the last time the bottom of the channel was touched took place back in 2009.
Despite the quick down turn of late, this long-term rising channel remains in ta...
China’s stock markets continue to stumble, despite the massive stimulus that the government has unleashed to prop them up. The Shanghai benchmark index fell by 1.23 percent Tuesday, after closing down slightly Monday. The index has fallen by nearly 40 percent from its mid-June peak.
After the late recovery last week, sellers again made markets their home. Sizable losses were accompanied with higher volume distribution, although volume was down on earlier panic. Another pass at August lows looks likely.
The S&P is again heading to the 10% 200-day MA envelope. Relative performance is shifting away from Large Caps to more speculative indices, which is bullish in a rising market, but in a falling market suggests a lack of sanctuary.
The Nasdaq is also in the early stages of a retest of the August low. Technicals are weak, although stochastics crept above the bullish mid-line, but not enough to suggest ...
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The dark veil around China is creating a little too much uncertainty for investors, with the usual fear mongers piling on and sending the vast buy-the-dip crowd running for the sidelines until the smoke clears. Furthermore, Sabrient’s fundamentals-based SectorCast rankings have been flashing near-term defensive signals. The end result is a long overdue capitulation event that has left no market segment unscathed in its mass carnage. The historically long technical consolidation finally came to the point of having to break one way or the other, and it decided to break hard to the downside, actually testing the lows from last ...
With the VIX index jumping 120 percent on a weekly basis, the most in its history, and with the index measuring volatility or "fear" up near 47 percent on the day, one might think professional investors might be concerned. While the sell off did surprise some, certain hedge fund managers have started to dip their toes in the water to buy stocks they have on their accumulation list, while other algorithmic strategies are actually prospering in this volatile but generally consistently trending market.
Stock market sell off surprises some while others were prepared and are hedged prospering
Naysyers are warning that the recent plunge in Bitcoin prices - from almost $318 at its peak during the Greek crisis, to $221 yesterday - is due to growing power struggle over the future of the cryptocurrency that is dividing its lead developers. On Saturday, a rival version of the current software was released by two bitcoin big guns. As Reuters reports, Bitcoin XT would increase the block size to 8 megabytes enabling more transactions to be processed every second. Those who oppose Bitcoin XT say the bigger block size jeopardizes the vision of a decentralized payments system that bitcoin is built on with some believing ...
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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.
Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene
The replay is now available on BNN's website. For the three part series, click on the links below.
Part 1 is here (discussing the macro outlook for the markets)
Part 2 is here. (discussing our main trading strategies)
Part 3 is here. (reviewing our pick of th...
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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