A second consecutive down day for shares in airline stocks spurred heavy trading traffic in options across the largest market-cap names, including United Continental Holdings, Inc. (Ticker: UAL), Delta Air Lines, Inc. (Ticker: DAL), American Airlines Inc. (Ticker: AAL), and JetBlue Airways Corporation (Ticker: JBLU). Shares in these air carriers are down roughly 6.0%, 5.0%, 5.5% and 4.0%, respectively, as of the time of this writing amid higher oil prices and in the wake of Lufthansa’s cut to its 2014 profit guidance on Wednesday.
Options on American Airlines and Delta Air Lines are seeing the most volume overall with more than 55,000 contracts traded on each, while JetBlue is experiencing the highest volume relative to its average daily options volume. Volume in JBLU options is nearing 40,000 contracts just before midday in New York, which is approximately four times its average daily reading of around 9,200 contracts.
Meanwhile, smaller air carrier, Hawaiian Holdings, Inc. (Ticker: HA), Hawaii’s biggest and longest-serving airline, with a market cap of around $816 million (vs. roughly $33 billion market-cap for Delta Air Lines and $29 billion for American Airlines), also attracted heavier than usual options activity. Upwards of 4,100 contracts have changed hands on Hawaiian Holdings as of 11:30 am ET, which compares to average daily volume for the stock of around 640 contracts. Shares in HA are down 3.5% on the session at $14.65 as of the time of this writing. Hawaiian shares on Monday of this week traded up to a record high of $16.49.
As the chart below shows, shares in the air carriers mentioned have lost some altitude lately, but the stocks are still up, in some cases significantly, for the most recent six month period.
Chart – Six-month chart of AAL, DAL, UAL, JBLU & HA
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…
The Refik Saydam National Public Health Agency has released 29 HA [hemagglutinin] sequences from Ankara, Turkey. Several were partial sequences, but 26 covered the receptor binding domain and 8 had D225E,… while one had D225N,…
My comment: D225 is the most common or wild-type receptor binding protein - the hemagglutinin (HA) protein – which enables the virus to bind to tissues in the respiratory tract of infected people.
A change in the amino acid in position 225 of the receptor binding domain (RBD) is symbolized by using the letter representing the new amino acid, e.g. "G" for glycine in "D225G." The marker D225G signifies that a glycine (G) is present in the 225 position, replacing the amino acid usually in this position, aspartic acid, or D (hence the wild-type marker is "D225"). Glutamic acid, E, and asparagine, N, are two other amino acids that have been found in this position in non-wild-type swine flu viruses.
The change in the receptor binding protein from D to G alters the protein’s preference for binding to human tissues. Viruses with the D225G marker bind in the lung tissue, rather than binding in the upper respiratory tract (nasal area and throat), the more typical target. This appears to result in more severe disesase which may trigger a "cytokine storm" reaction in the lungs. Whether substitution with "E" or "N" causes similar changes is not known. Theoretically, if the immune response is generated against the wild-type protein D225, viruses with D225G, D225E or D225N markers might avoid the immune system’s response.
[Back to Dr. Niman] The outcomes of these patients were not given but media reports have described a rapid in increase in H1N1 fatalities in Turkey. A large number of HA sequences with D225E has been published from Spain, and recently released GISAID sequences from Sweden and the UK also have D225E, including three fatal cases from Sweden. The prior reports of D225G and D225N associations with fatal cases has raised concerns that changes at position 225 could alter tissue tropism or aid in immune escape, leading to more severe and fatal cases.
DRYS DryShips, Inc. – The drybulk carrier’s share price rally of more than 25% to $6.94 breathes new life into DryShips’ sails today amid an upgrade to ‘outperform’ from ‘market perform’ by an analyst at Oppenheimer & Co. this morning. The company has also managed to raise $500 million via equity offering that it plans to use to decrease its massive debt. Option investors saluted the bullish news by purchasing calls in the May contract. At the May 7.5 strike price 7,300 calls were picked up for an average premium of 59 cents apiece. Shares need only rise by an additional 7% in order for the May 7.5 strike calls to land in-the-money by expiration next month. More optimistic traders selected the May 9.0 strike and bought 3,000 calls for about 28 cents per contract. Another positive sign for the cargo-carrier was the sale of 1,400 puts at the May 6.0 strike price for 74 cents each as some investors hope that shares remain above the breakeven on the trade at $5.26 by expiration. While much of the activity we observed was bullish in the May contract, we did notice that some downside protection was sought at the May 7.5 strike price as about 2,100 in-the-money puts were picked up at an average premium of 1.55 each.
XTO XTO Energy, Inc. – Shares of the oil and gas exploration company have rallied by more than 3% to $35.20. XTO edged onto our ‘most active by options volume’ market scanner after one investor took profits by closing a short put position. It appears that this individual originally established a short position on March 11, 2009, by selling 19,500 puts at the August 22.5 strike price for a premium of 1.86 apiece. Today, he purchased the lot of 19,500 puts at the same strike for an average price of 75 cents apiece. The difference between the two put premiums yields this investor 1.11 today for closing the position. It looks as though he plans to once again profit from a similar trade as he sold 15,000 puts at the August 26 strike price for an average premium of 1.35 apiece.
LGF Lions Gate Entertainment Corporation – The diversified independent producer and distributor of motion pictures jumped to the top of our ‘hot by options volume’ market scanner after one investor…
The market may be scratching its head over the outcome of this Sunday's Greek referendum, soaring on the faintest trace of good news such as the report of Tsirpas' capitulation this morning then reluctantly selling off as the euphoria is rejected, but for the bookies the outcome is now clear: earlier today Ireland's Paddy Power announced it has "paid out five figures" in winnings to gamblers who bet that Greece will back a July 5 austerity referendum that may seal the nation’s future as part of the euro region.
NPC R.P. Andrews fire, 628 D Street N.W, Washington, DC 1912
Just when you think things can’t get any crazier, they always do. The Guardian reports on unpublished Troika documents that show Greece is only too right in asking for debt relief. That for the Syriza government to sign what the Troika wants to force them to sign would see Tsipras et al plunge their country into a financial hell hole.
What’s potentially even weirder is that all German MPs have received the documents, because a vote on them was supposed to take place, but none have said a thing about them. Good thing one at least was awake enough to send them to the press.
So they have these docs, and then yesterday Merkel says no more talks until after the referendum, and total silence fol...
It has been a bad day for deals and deadlines all around: first Greece is about to enter July without a bailout program and in default to the IMF with the ECB about to yank its ELA support or at least cut ELA haircuts; also the US failed to reach a nuclear deal with Iran in a can-kicking negotiation that has become so farcical there is no point in even covering it; and now moments ago a third June 30 "deal" failed to reach an acceptable conclusion when Russia and Ukraine were unable to reach an agreement on gas prices at talks in Vienna on Tuesday. As a result, Ukraine is suspending its purchase of Russian gas.
This charts takes a 25-year look at the Pimco High Yield mutual fund. In 1999 & 2007 the fund was diverging against the S&P 500 and once it broke support the fund and broad markets turned weak together.
At this time PHDAX is now testing 4-year support and it has been diverging against S&P for almost a year!
Below looks at the two most popular junk bond ETF’s against the S&P 500
CLICK ON CHART TO ENLARGE
This chart reflects that JNK & HYG are diverging against th...
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BitGold, a platform for savings and payments in gold, is pleased to announce the launch of the BitGold platform for residents of the US and US territories. As of today, US residents can sign up on the BitGold platform and buy, sell, or redeem gold using BitGold’s Aurum payment and settlement technology. US residents will also have access to the BitGold mobile app and a prepaid card when these features launch over the coming weeks. Send and receive gold payment features are not initially available in the US.
Two weeks ago, bulls seemed ready to push stocks higher as long-standing support reliably kicked in. But with just one full week to go before the Independence Day holiday week arrives, we will see if bulls can muster some reinforcements and make another run at the May highs. Small caps and NASDAQ are already there, but it is questionable whether those segments can drag along the broader market. To be sure, there is plenty of potential fuel floating around in the form of a friendly Fed and abundant global liquidity seeking the safety and strength of US stocks and bonds. While the technical picture has glimmers of strength, summer bears lie in wait.
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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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