Green Mountain Jitters Continue To Drive Heavy Trading In Options-Land
by Option Review - October 20th, 2011 3:14 pm
Today’s tickers: GMCR, TOT, BP, MSFT & OSK
GMCR - Green Mountain Coffee Roasters, Inc. – Shares in Green Mountain Coffee Roasters turned positive earlier in the session, but are now continuing to unravel on the heels of a roughly 25.0% decline in price since hedge fund manager David Einhorn of Greenlight Capital presented analysis of the coffee company at an investor conference on Monday. Over the past month, the stock has fallen as much as 45.0% to touch today’s intraday low of $63.26 since reaching the September 20, 52-week high of $115.98. Frenzied trading in GMCR options continues today, following similarly active sessions earlier in the week. Investors are exchanging calls and puts in relatively equal numbers, with puts outpacing calls slightly in early-afternoon trade.
The front month garnered the most attention from options players placing short-term bets on the stock ahead of expiration at the end of the week. Investors hoping the stock has reached a bottom appear to have purchased in- and out-of-the-money calls, and sold puts. Meanwhile, concerned parties wary the stock could extend losses snapped up puts. The bears bought around 1,100 puts at the Oct. $55 strike for an average premium of $1.09 each. These deep out-of-the-money put options may expire worthless at expiration if shares in GMCR fail to drop sharply by the end of the trading week. But, the puts could provide quick profits for some traders if premium on the contracts rises with either volatility or further declines in the price of the underlying. The most active put on Green Mountain is the Oct. $65 strike, where nearly 6,000 puts changed hands against open interest of 1,539 positions. Trading patterns in the puts reveal mixed opinion.
Investors itching for a quick rebound in GMCR purchased October contract calls. More than 7,000 calls have traded at each of the Oct. $70 and $75 strikes. While both buyers and sellers drove volume in the contracts, there does appear to be somewhat of a bullish bias thus far today. Traders long the calls may profit at expiration should the week wrap up with shares in Green Mountain back on track. Overall volume in GMCR options is just under 100,000 contracts as of 2:10 pm on the East Coast.
BP & TOT - BP PLC & Total SA – Big prints in call options on European oil behemoths, BP and Total, shed some light on one strategist’s view of which company’s…
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Digg$25,000 Virtual Portfolio – Month 7 – Profiting from Chaos!
by Phil - August 8th, 2011 6:23 am
Wheeeeeeee, this is fun!
There’s nothing like an active virtual portfolio to get you through a rough market. The last update to our very aggressive virtual porfolio was on the July 28th, when I said to Members "On the whole, we’re pretty short so we’ll be either adding longs or cashing in shorts tomorrow to get a little more even into the weekend but still bearish if there’s no debt deal." There was, of course, no debt deal that week and the next morning I said in our Member Alert:
Volume is not very high – this is a retail panic so far. If you have short positions, strongly consider put tight stops on them (this includes the $25KP and Income Virtual Portfolio) as they put plenty of cash in your pocket and we can always find another layer of shorts if the RUT can’t hold 775.
Needless to say, the RUT failed (10% ago!) and we stayed generally bearish. At the time we "only" had $57,760 of virtual cash (after starting with just $25,000!) with $960 worth of unrealized losses in our remaining, mostly bearish positions. How do you think that worked out? That’s right, possibly our biggest gains of the year! In the last two weeks, we closed the following positions as the markets collapsed around us:
- 10 USO 8/5 $36 calls at $1.35, out at $2.35 – up $1,000
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Moronic Monday – Still No Deal?
by Phil - July 25th, 2011 8:29 am
This is amazing, isn’t it?
Our "leaders" still can’t work out a debt deal with just 7 days left until the Government shuts down (and we’re already at the end of our bonus time as Treasury has been juggling the books for three months just to allow us this much). I wrote extensively about this over the weekend so we can move on – just as we moved on in Chat yesterday evening when my 6:09 pm Alert to Members was to go long on the Dow Futures (/YM) over the 12,500 line (now 12,543, up $215 per contract), Russell (/TF) at 830 (now 831.80, up $180 per contract) and, of course, shorting oil (/CL) below 99.50 (now $98.97, up $530 per contact) so the winner of the morning is oil! Congrats to all the players with a lovely start to our week!
On the whole, we were just protecting our bearish bets as I remained very grumpy into the weekend on Friday. Those of you who followed our suggestions from Friday’s post were no doubt pleased because, at the time, we were short the Dow Futures at 12,720 and the Russell Futures at 842.60 with $1,100 and 1,260 moves from there to Sunday night’s flip-flop respectively.
We also picked the S&P (/ES) short at 1,346 (now 1,331) and the only one that isn’t working is the Nasdaq (/NQ) – back at the same 2,415 we had in Friday Morning’s Futures. Well, it’s not the only one – gold went over our $1,605 shorting target this morning, after giving us a quick gain on Friday. This is not good for our GLL August $22 calls (.40 on Friday) or our ZSL Sept $11/15 bull call spread at $2, offset with the sale of SLW Sept $44 puts for $1.20 for net .80 on the $4 spread but a nice re-entry opportunity today – if you are still a believer.
We’re more agnostic now. We were bearish into the weekend expecting pretty much what happened – NOTHING, and now we’re waiting to see what actually happens and how the markets react. The Shanghai Composite freaked out this morning and dropped 3% – only saved by the closing bell as the Government moved to shut down counterfeit Apple Stores and bullet trains went off the rails. The Hang Seng wasn’t as worried –…
Stock World Weekly: Deadlocked
by SWW - July 24th, 2011 12:02 am
Here’s the latest Stock World Weekly. Click on this link to read the full SWW: "Deadlocked" and sign in with your PSW user name and password. (Or sign up for a FREE trial to Stock World Weekly.)
Excerpts reviewing the week and looking ahead
U.S. Debt Ceiling Deadlock
One line of reasoning from the “no tax hikes” crowd is the inaccurate premise that the very wealthy, the top 0.1%, are job creators. If they’re the “job creators,” it might be in the public interest to protect them from excessive taxation – thereby allowing these top 0.1% to spend money on creating jobs. This is incorrect. The overwhelming majority of U.S. jobs are ‘created’ by ordinary Americans when they spend their paychecks. Consumer spending drives about 70% of our GDP. When average Americans are struggling with high unemployment, which recently popped back up to 9.2%, they are reluctant to spend money on anything beyond basic necessities. The broader U6 unemployment number – which includes the underemployed and “discouraged workers” – is 16.2%.
Meanwhile, U.S. companies are not stepping up hiring due to weakness in the economy – there is no demand. As Paul Ashworth of Capital Economics wrote, “Businesses aren’t confident enough, and the longer this goes on, the harder it is to convince them that they should be.” (Dearth of Demand Seen Behind Weak Hiring)…
Let Them Eat Cake
Russ Winter of Winter Watch at the Wall Street Examiner discussed the gap between what people think corporations pay in taxes, versus what they really spend. For example, Microsoft “lowers its effective tax rate a full 7% by taking foreign income to $19.2 billion from $15.4 billion, and lowering US income (and expenses) from $9.6 billion to $8.9 billion. Today MSFT is effectively a 68% foreign operation. In return it gets all the benefits of stimulus and minimizes the costs of supporting the US system…
“Mark Kreiger writes a spot on piece regarding the high end luxury bubble that includes this gem - ‘The social crisis facing the country as a result of the most egregious plundering in modern American history will spell the end of the ‘high end’ theme. Buying into this trend now is like getting long Marie Antoinette’s unsevered
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Make Billion$ With StockTwits (and Win a Free Quarter!)
by Phil - July 9th, 2011 4:34 pm
Billions!
That’s right, if you followed Philstockworld on Stocktwits this past month and followed our trade ideas, you could have made Billions of Dollars. Not bad but that’s only a tiny portion of what you get at PSW every day. Needless to say, we’ve had a good month but it’s no fun being right if nobody knows it so let’s review a month of Tweets and also make it worth your while to send others to Our StockTwits Link and follow us there.
For the month of July, every new follower will be entered in a random drawing and one will be selected to win a free 1-year subscription to the PSW Report – our twice-daily Email that gives you access to all of our non-Premium posts as well as Stock World Weekly. If you are already a paying PSW subscriber and win this drawing, we will give you a 3-month extension of your Current Membership Level instead added to your current subscription.
If you are a Member and your friends subscribe and tweet us your name – one of those named members will also be the winner of a 3-month extension of that member’s current level. The more friends you have, the better the chances to win!
We’re doing this because we need to build up our social networking presence so I’ve been tweeting more in June. You can go to our StockTwits site and see all 45 Tweets posted since June 1st (there are many also before that) but I’m just going to review the ones that were less generic (we auto-tweet my posts) to give you an idea of what kind of value your friends can get out of this free service:
philstockworld Phil Davis
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$25,000 Virtual Portfolio – Week 21 – Goaaaaaaaaaaaaaal!!!
by Phil - July 2nd, 2011 6:39 am
We are over our $50,000 mark and right on schedule at the halfway mark! Not bad considering we began with our aggressive $10,000 virtual portfolio last year, which we ran up to $36,630 – put that $11,630 back in the virtual bank and began this year in February with a $25,000 Virtual Portfolio.
The last major update to our virtual portfolio was back on May 21st. We do send out Alert updates on a regular basis and discuss the trade ideas daily in Member Chat. Now we can start July off with a clean $50,000 Virtual Portfolio with the same goal – to double up in 6 months but sticking to the same small allocation hit and run trade ideas that we used (mostly) in the first half. I urge you to read the original post and the update if you haven’t already to get an idea of what we are trying to learn by following this "hyper-aggressive" virtual portfolio model.
As promised, it has certainly been a wild ride and our last Alert Update from June 23rd left us off with $95,072 worth of closed transaction and a virtual net balance of $45,972, with about $49,000 worth of unrealized losses in our still-open positions.
Getting that close to goal with a week to go put us in shut-down mode and we didn’t do too much trading last week but we did close the following transactions, which amounted to mainly closing out all of our losing trades for the year, charging them off against our $95,072 worth of winners that we already cashed out. Our goal was to get those losses under $45,000, so that we’d be left with $50,000 cash: …
Vacation-Proofing Your Virtual Portfolio
by Phil - June 25th, 2011 7:55 am
Option Sage Submits:
When driving a car and some object appears on the road ahead do you usually run right over it or do your best to avoid it?
Don’t we all take action in real-life based on the new information we receive that changes the old paradigm? Take the first two guys in this video: Who would you rather be, the first or the second guy? While the second gentleman reacts and looks ridiculous in so doing, he’s the guy that is more likely to survive when real disaster hits because he’s reacting to new information. In fact he doesn’t even know what’s making everyone else react, he just knows that when 99% are moving one way in panic, it’s best not to fight the crowd or he will be trampled. It’s no different in the market. Pride, ego and old theses have no place when new information directly contradicts an existing trade.
This week, we used DIA and QQQ puts and calls to "react" to quick changes in the market while we waited for better information before making more permanent changes in our positions. This gave us the benefit of the
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Green Mountain: Q2′s Dog and Pony Show Reveals More Accounting Fluff
by Insider Scoop - May 4th, 2011 3:45 pm
Swallowing pride is a lot harder than sipping a freshly brewed cup of Green Mountain Coffee – 20% hotter today. Here’s a post byJason Merriam on Seeking Alpha, who’s content to "gaze at the big ‘ol Green Mountain from a safe distance." - Ilene
While pride can be hard to swallow at times, panning a stock only to watch its share price skyrocket 20% above and beyond the previous 50% gain we didn’t think possible is downright humiliating. So, congratulations to all Green Mountain Coffee Roasters (GMCR) longs! May the java be with you.
Humble pie aside, investors were clearly impressed by the earnings beat and remainder of 2011 guidance offered by management Tuesday.
We have been bearish on this company for quite awhile and admittedly wrong about the stock since it was at $40 a share.
Yet, we have to hand it to GMCR management for their keen ability to captivate shareholders with such bright optimism while slipping in a secondary offering only minutes within releasing Q2 earnings.
[...]
Again, we have to tip our hat to GMCR management. Now, they have a rich $9 billion market cap, their timing of a secondary, remarkably uncanny. Granted, it’s only about 5% of total current outstanding, but it’s a very shrewd maneuver to build one’s currency (much thanks to bulls). It’s one of the slickest capitalization maneuvers we’ve seen in quite a while.
[...]
If management is so optimistic, why have they sold almost 290,000 shares in the past 12 months?
More here: Green Mountain: Q2′s Dog and Pony Show Reveals More Accounting Fluff – Seeking Alpha.
Testy Tuesday – AAPL Rebalancing in May May Keep the Nasdaq from 2,800 Today
by Phil - April 5th, 2011 8:18 am
The Nasdaq is finally rebalancing!
That is good news but not so much for Apple, Inc., whose current 20.49% weighting in the index will be cut to 12.33% on May 2nd. This explains a lot of the strange movement in the Nasdaq as apparently the cognescenti have already begun jockying their positions – trying to guess which of the 100 stocks in the Composite Index will curry some of AAPL’s lost favor.
Perhaps the the moves up in fellow 4-letter stocks like PCLN ($25Bn market cap), NFLX ($13Bn), OPEN ($2.5Bn), BIDU ($50Bn) and GMCR ($9.4Bn) don’t seem quite so crazy in light of the 40% reduction in AAPL ($314Bn) – take the money out of one bucket and you HAVE to fill up the others!
This does make me feel better as there may actually be a rational reason for NFLX having a p/e of 82 despite the fact that they have a completely indefensible service that already has competition from several on-line clones as well as big boys like AMZN, not to mention every cable and satellite company in America. Why does WFMI, a GROCERY STORE, trade at 41 times it’s projected 2011 earnings in the middle of the worst food inflation in US history? It’s not just because rich people are stupid and will overpay for anything because they hate to have people think they can’t afford stuff – it’s because their market cap is $11.4Bn and if you take 40% of AAPL’s $300Bn and distribute it around the Nasdaq – then WFMI get’s $1.2Bn of additional allocation.
That’s not exactly how it works but that’s the effect. A $1Bn Index fund who follows the Nasdaq has $205M of AAPL stock (20.49%) and, after the reweighing, they are to have $123M of AAPL stock. The other $82M does, in fact, get distributed to the other Nasdaq stocks according to the new weightings. Do you think that doesn’t distort the markets? Of course, that doesn’t "just" affect the Nasdaq – AAPL is a heavyweight in all the indexes.
The special rebalancing of the NASDAQ-100 Index will be enacted based on index securities and shares outstanding as of March 31 – now it is very clear why the MoMo stocks were jacked up like crazy into the end of Q1 – now the market manipulators have guaranteed bagholders for their stocks come May 2nd! On…
DHH Options Time
by Sabrient - March 18th, 2011 4:01 pm
Dark Horse Hedge is Rocking (2) & Options Time Again
By Scott at Sabrient and Ilene at Phil’s Stock World
My heater’s broke and I’m so tired
I need some fuel to build a fire (actually need something that cools heat down)
The girl next door (Tokyo), her lights are out, yeah
The landlord’s gone, I’m down and out
It’s cold gin (option) time again
You know it’ll always win – KISS
The tragic developments in Japan took center stage this past week and our hearts go out to everyone in Japan, and everyone who is touched by this catastrophic event.
Prior to the earthquake and tsunami, the VIRTUAL Dark Horse Hedge virtual portfolio was positioned with a 70% Long / 30% Short tilt. We are now considering moving to a 50% / 50% balance. We will most likely do that, assuming no material change in the world events, by adding to our short positions next week. In the meantime, we have two option positions which are expiring today and we wanted to add to the review we began last week. (Click here for our first four long positions reviewed a week ago.)
Options Expiration:
Radware Ltd (RDWR): On November 11, 2010 we added Radware (RDWR) to the virtual portfolio using Phil’s Buy/Write strategy. At that time RDWR was trading at $33.39 and we added half the shares we wanted (100) and sold the March $35 2011 call and March $35 2011 put to complete the buy/write. On December 7, 2010 when the stock traded up to $40, we rolled the call out to the Jan $35 2012 call, which we sold for $9. We kept the March $35 2011 put we had already sold for $5.10. The put (as 65-70% of options do) will expire worthless today yielding a $5.10 profit. At this time, we believe it is prudent to hold the shares, currently trading at $35.56, and the Jan $35 2012 call.
Xyratex (XRTX): On December 20, 2010 we added Xyratex (XRTX) using the buy/write strategy and acquiring half the shares we wanted exposure to and selling March $15 calls and puts for a net $3.60. XRTX is trading at $11.14 today on expiration day, so the call side will expire worthless ($1.80 profit) and the puts will be exercised – the
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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
(