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…
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…
A key index of global shipping prices is nearly 50% below its previous record low level.
We swore we wouldn’t devote any more Charts Of The Day to the Baltic Dry Index (BDI) after it broke its all-time low in November. Things are really getting out of hand now, though, so it deserves at least a mention. The previous record low in the BDI was 553, set back in 1986. Upon breaking that low in November, the BDI continued to crater. As of today, the Baltic Dry Index is listed at 303.00 – nearly a full 50% below its previous all-time low.
Want to deposit cash at JPMorgan Chase? Then prepare to be treated if not like a criminal, then certainly a suspect of a very serious crime. The charge: being in possession of that "barbarous relic" known as cash.
Soon, as cash becomes increasingly frowned upon, cash deposits will be slowly but surely phased out in their entirety forcing those few savers left in Obama's grand economic "recovery" experiment, to engage in commerce only in a way that allow...
The bad year for stocks is getting worse by the minute - and tech investors are feeling the brunt of the pain.
The 462 information technology stocks in the broadRussell 3000 index have shredded a total of $514 billion this year thanks to their average decline of 13.4%, according to a USA TODAY analysis of data from S&P Capital IQ.
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.
Small Gains as indecision held sway. The S&P finished inside the range of last Friday's breakout and held rising support, but the index did the minimum to pacify bulls.
The Nasdaq breakout has eased alongside former resistance turned support. Volume was lighter, and the spinning top finish marks indecision. While Thursday's action offered no side an advantage, a push towards 4,900 would appear to be the favoured path.
Reminder: OpTrader is available to chat with Members, comments are found below each post.
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.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
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.
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither PSW Investments, LLC d/b/a PhilStockWorld (PSW)
nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
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.
Site owned and operated by PSW Investments, LLC. Contact us at: 403 Central Avenue, Hawthorne, NJ 07506. Phone: (201) 743-8009. Email: email@example.com.