Posts Tagged
‘IBM’
by Phil - February 19th, 2010 7:17 am
I didn’t get to do a wrap-up last week so we have a lot of trades to go over and, with expiration looming and the Fed tightening, I thought it would be good to just get the list out on Friday so we can adjust our rolls to March where neccessary (in bold under appropriate positions).
In our Feb 7th Wrap-Up, I was gung-ho bullish saying "It’s Only a 55-Point Drop You Wimps!" and we had been BUYBUYBUYing at the bottom all week, especially Wed-Fri as the market spiked through our projected support at Dow 10,000 but not enough to change our minds as we bottom-fished on AAPL (2 trades), ABX, ACOR, AKAM, AMED, BRK/B (2), C, CCJ (3), CSCO, DELL, FXI, GE, GOOG, IBM, LLY, LOW, NLY, TBT (5 times!), TM (3), TNA, USO (yep, we wen long oil) and UYG. To say we were weigting bullish by that Monday was an understatement as we has finished the weekend in a bullish stance and were relying on our disaster hedges to protect us.
Those disaster hedges are an interesting set to look at, especially now that we’ve recovered 400 points:
- DXD July $27/33 bull call spread at $2.50, now $2 - down 20%
- We can roll the $27 calls to the $25 calls for $5 to widen the spread and drop our b/e from $29.50 to $28.50
- EDZ July $3/8 bull call spread at $2.10, now $1.60 - down 23%
- EDZ Apr $10 calls sold for .70, now .15 - up 78% (pair trade)
- SDS 2011 $36/40 bull call spread at $1.30, now $1 - down 18%
- We can roll the $36 calls to the $33 calls for $1.10
- TBT Jan $35/45 bull call spread at $6.30, now $7.40 - up 17%
- TBT March $50s sold for .65, now $1.22 - down 87% (pair trade)
This is what is great about disaster hedges. The potential upside on these spreads, if the market headed south was up about 100% on the 4 trades so a commitment of 5% of your portfolio to each one (20%) would give you back 40% of your portfolio in cash if the markets tanked. Already, after 2 weeks, we have the markets heading in the opposite direction and what is the cost? Not even 20% of the 20% you may have allocated, a 4% insurance premium while the 80% of the portfolio that is bullish caught a huge rally up and this insurance is still good through July!
I pointed out how much chart people love…
Tags: AAPL, ABX, ACOR, AKAM, AMED, AXP, AYE, BRK.B, C, CCJ, CSCO, DELL, DIA, DXD, EDZ, FCX, FXI, GE, GLW, GOOG, GSK, IBM, ITMN, IYR, LLY, LOW, MRK, NLY, NYX, PM, SDS, SPWRA, SRS, TBT, TM, TNA, USO, UYG, WFR
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by Phil - February 10th, 2010 8:21 am
Was that it?
A 10% correction (David Fry chart on right) and we’re done? If so, this is still a fairly bullish market, and it should be, as our sell-off last year was, beyond a doubt, way overdone. Often people forget the fundamentals of investing and the biggest fundamental of them all is: "Where else are you going to put your money?" There many fine companies out there with P/E ratios that are below 15. That means if you give them a dollar, they will return 6.6% in earnings. IBM has a PE of 12, which is an 8.3% return on my money and, according to projections, that will improve to 11 next year, generating 9 cents for each dollar I give them.
Call me an optimist but I think IBM is a fairly safe place to keep my money. Perhaps as safe as 4% TBills, or 7% Greek bonds or 3% Yen Notes or, Heaven forbid, a bank! In fact, not many banks are paying 1.8% on your deposits but IBM does through dividends. IBM was my example trade in the Weeekend Wrap-Up so I won’t get into strategies here but that is what our whole Buy List is about - picking up great long-term values and hedging them to even more effective entries.
Not every stock is as rock solid as IBM but (going back to the Wrap-Up) who did we buy when the chips were down last week? C, CCJ, TBT, GOOG, XLF, AAPL, AMED, CSCO, TM, LOW, AKAM, LLY, NLY, GE, TNA, USO, ABX, DELL, FXI, UYG, BRK/B. Not exactly a radical collection of picks is it? Yesterday, with the market up 2.5% from our shopping spree - we bought NOTHING. Part of the "buy low - sell high" philosophy is waiting for the market to be either high or low. Two weeks ago, on Jan 29th, I charted 10,058 on the Dow as a critical support line and, from our Buy List Update this weekend, I put up the following chart for Members:
And where did we finish yesterday on the Dow? 10,058. See, this charting thing is easy - that’s why I don’t usually bother, it’s dullsville! Let’s now turn our attention to our other major levels of 10,165 and 10,300 which, keep in mind, is nothing more than our predicted "weak bounce" off the drop from 10,700. As I said in the above chart, we can expect to be "tight and bouncy," which is what we’re seeing this week as…
Tags: AAPL, ABX, AKAM, AMED, BRK.B, C, CCJ, CSCO, DELL, FXI, GE, GOOG, IBM, LLY, LOW, NLY, TBT, TM, TNA, USO, UYG, XLF
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by Phil - February 7th, 2010 12:19 pm
That’s right, I said WIMPS!
I have never heard so much whining and crying and complaining about a market drop as I have the past few weeks. Last week, I pointed out that we had only fallen 105 points from the prior week (10,172 to 10,067) and this week we fell ALL THE WAY to 10,012 to finish the week and you would think the world was ending (again) from the way the MSM has been acting.
By Friday the panic was palpable as we gave up Monday and Tuesday’s bogus gains to test new lows for the year - testing, in fact, the lowest levels the market has hit since last November and I pointed out in Friday’s post that it reminded me of when BSC and LEH went under and everyone panicked and sold Financials off to the point where Warren Buffet was willing to give GS $5Bn AFTER they bounced 50% - THAT’s how undervalued the financials were in November of 2008.
What do we do while people are panicking? We BUY! We don’t BUYBUYBUY like Cramer’s Pavlovian Peons but we sure do BUY and take some nice entry positions with sensible hedges. I was finally motivated to finish updating our Buy List on Friday and 18 of our 38 positions were highlighted (immediately actionable) on Friday. Sure they may go lower, but we’re buying them with 20% buffers built into the positions and then we can double down if they drop 40% (back to Nov 2008 lows) and then we’ll have our entries down 10% from the lowest levels of the past decade or so that we can hold until the next decade - what’s there to panic over?
If I wanted to buy IBM in January but thought it was a little pricey at $134, why would I not be HAPPY to have the opportunity to make an enty at $122, back at where they were pre FABULOUS October earnings? I can buy IBM for $122 and take advantage of the panic-induced VIX at 26 to sell July $125 calls for $6.60 and the July $120 puts for $6.65 for a net entry of $108.75 with a call away at $125 for a $16.25 profit (15%) in 5 months. If IBM should fall below $120, we will have a second round of the stock put to us as $120 for an average entry of $114.38, another 6.2% lower than it is now. If we were more worried, we…
Tags: AAPL, ABX, ACOR, AMED, BRK.B, C, CCJ, CSCO, DELL, DIA, DXD, EDZ, FCX, FXI, GE, GLL, GOOG, IBM, IYR, LLY, LOW, NLY, QID, QQQQ, SDS, SRS, TBT, TM, TNA, USO, UWM, UYG, VIX, XLF
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by Andrew Wilkinson - January 25th, 2010 4:39 pm
Today’s tickers: IBM, XLF, TXN, XLF, CTXS, EBAY, HAL & FITB
IBM – International Business Machines Corp. – A long-term bullish transaction on IBM suggests one investor is positioning for a significant boost in share price at the computer services firm by expiration in January 2011. IBM’s shares are trading 0.75% higher this afternoon to $126.47. The optimistic trader purchased a ratio call spread on the stock, buying 5,000 calls at the January 2011 $135 strike for an average premium of $6.24 apiece, and selling 10,000 calls at the higher January 2011 $150 strike for a premium of $2.33 each. The net cost of the ratio spread amounts to just $1.58 per contract. Thus, the trader accrues profits if IBM’s shares rally 8% over the current price to surpass the breakeven point at $136.58 by expiration next year. Maximum available profits of $13.42 per contract amass only if shares surge 18.60% to $150.00. IBM’s shares must increase to a new 52-week high in order for the investor to break even on the transaction. The current 52-week high on the stock is $134.25, attained back on January 19, 2010.
XLF – Financial Select Sector SPDR – Option traders continue to initiate bearish strategies on the financial ETF today despite the 0.90% rebound in shares of the underlying to $14.31. Earlier we reported a June $14/$10 ratio put spread, which established downside protection beneath a breakeven share price of $13.30. This afternoon we observed a similar transaction take place. Another pessimistic investor purchased an even larger ratio put spread in the June contract. It looks like this individual bought 27,500 puts at the now in-the-money June $15 strike for an average premium of $1.52 apiece, spread against the sale of 55,000 puts at the lower June $12 strike for about $0.39 each. The net cost of the ratio transaction amounts to $0.74 per contract, and provides downside protection beneath a breakeven share price of $14.26.
TXN – Texas Instruments, Inc. – Chipmaker, Texas Instruments, is scheduled to report fourth-quarter results after the closing bell this afternoon, and although analysts expect the firm to post profits of $0.49 per share on a 19% increase in sales, option traders initiated near-term protective plays. Shares of the semiconductor company are up 1.80% to $23.52 ahead of earnings. One investor established a bearish risk reversal by selling 5,000 calls at the February $24 strike for a premium of $0.50 apiece, spread against…
Tags: CTXS, EBAY, FITB, HAL, IBM, TXN, XLF
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by Phil - January 19th, 2010 8:08 am
"There is no pain you are receding
A distant ship’s smoke on the horizon.
You are only coming through in waves.
Your lips move but I can’t hear what you’re saying.
When I was a child
I caught a fleeting glimpse
Out of the corner of my eye.
I turned to look but it was gone
I cannot put my finger on it now
The child is grown,
The dream is gone.
but I have become comfortably numb." - Pink Floyd
I have a theory that the markets (and the American people in general) aren’t irrational, they are simply shell-shocked after suffering a very traumatic group financial experience…
To be shell-shocked is to be "mentally confused, upset, or exhausted as a result of excessive stress" and the most common symptoms are: Fatigue, slower reaction times, indecision, disconnection from one’s surroundings, and inability to prioritize - That certainly sounds like our Congress doesn’t it? Combat stress disorder was first diagnosed in WWI, when 10% of the troops were killed and 56% wounded - far worse than had been experienced in previous wars. Our current financial crisis has similarly affected more people than any previous crisis with almost everyone knowing someone who is bankrupt or lost their jobs or homes and almost no one escaped the carnage of the downturn without some financial damage.
Combat fatigue may go a long way to explaining the severe drop-off in volume that has plagued the markets since March, with participation now down to 25% of where we were last January and that leaves us open to the blatant sort of market manipulation that Karl Denninger caught last week as well as the usual nonsense we get daily from HFT programs that drive the market with such precision that we are able to tell how the day is going to go by simply checking our hourly volume targets. Here’s a clip from CNBC where a floor trader discusses market manipulation as a fact of trading (2 mins in).
As Nicholas Santiago points out on In The Money Stocks, "January is usually a very high volume month, yet it has started off the New Year even lighter than the last two months of 2009. Light volume markets are very difficult to short. Hence the old saying, ‘never short a dull market’." Not only is the market volume light, but over 60% of the trading volume is concentrated on 5 stocks: AIG, C, BAC, FNM and FRE!
We have often noted that high-volume (relatively) days almost always tend to be down days and PSW Members can tell you how the…
Tags: ADTRN, AMTD, BAC, C, COH, CREE, CSX, EAT, EBAY, EDU, FAST, FFIV, FHN, FRX, FULT, HBHC, HCBK, IBM, IIVI, KMP, LOGI, MMR, MS, MTB, NTRS, OHB, PETS, PGR, PH, PNFP, RJF, SBUX, SLM, STT, STX, USB, WFC, WIT, XLNX
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by ilene - January 8th, 2010 8:00 pm
Courtesy of The Shocked Investor
As an IEEE member, this is an issue I receive eagerly annually. The IEEE has issued its list of technology winners and losers for 2010:
(please click to enlarge)
Here are summaries of the winner and losers.
Winners:
1. Google Chrome
The Chrome suite looks an awful lot like a dagger aimed straight at Microsoft’s heart. Who needs 500-gigabyte hard drives and a 6-megabyte L2 cache when lots of input ports and a fast wireless connection will do? That’s the rhetorical question that has lately prompted the meteoric rise of the netbook, a bare-bones laptop that gets most of its muscle from online services. Google, in Mountain View, Calif., is the first software company to truly capitalize on the promise of these machines: to allow casual users to live entirely in the cloud, without realizing they’re there.
Chrome OS has no built-in applications—no iCal, no Outlook, no TextEdit, no Word. You just turn on your netbook and you’re on the Web, in what we now call the cloud, where all your stuff lives: all your photos on Flickr, a long trail of your daily foibles and frustrations on Twitter, your purchasing history on PayPal, your prolix unpublished novel on LiveJournal, your music collection on Rhapsody, and the stuff that might be a little embarrassing if your coworkers came across it on Facebook. In fact, cloud computing is what makes Google’s strategy possible.
2. Russian Railways and IBM
The backbone of the Russian Federation is its railways. With 85,500 kilometers of track and 664,600 railcars transporting people and goods across 11 time zones, Russian Railways is practically a force of nature.
Russian Railways has struck a technical partnership with IBM. With IBM’s help, the railway is at last overhauling the hardware, software, and communications architecture that underpin its operations. The overhaul will centralize the management of data into new computing hubs, restructure the collection of information on the railroad’s field operations, and integrate new automation software to help the railway strategize how to deploy its assets. When the redesign is completed in 2014, the company will do business in a fundamentally new way.
3. Pixel Qi’s Everywhere Display
The picture quality is fine, if nothing special. But then you push a small white button at the side of the display, and it does something I’ve never seen before: The backlight disappears, and the image turns black and white, remaining visible thanks to the…
Tags: Airport security, Amazon Kindle, biofuel crops, Cellulosic Ethanol, D-Wave Quantum mechanics, GM Volt, Google Chrome, Grassoline, IBM, IEEE, Intrinsity's More Cerebral Cortex, liquid Helium-cooled computer, NanoGaN's Crystal Method, NanoUV's Bright Light, Pixel Qi's Everywhere Display, Russian Railways, Samsung, technology
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by ilene - October 17th, 2009 7:27 pm
More on the Raj Rajaratnam insider trading drama…
By AP / LARRY NEUMEISTER, courtesy of TIME
One of America’s wealthiest men was among six hedge fund managers and corporate executives arrested Friday in a hedge fund insider trading case that prosecutors say reaped more than $20 million in illegal profits and should be a wake-up call for Wall Street.
Raj Rajaratnam, a partner in Galleon Management and a portfolio manager for Galleon Group, a hedge fund with up to $7 billion in assets under management, was accused of conspiring with others to trade based on insider information about several publicly traded companies, including Google Inc.
U.S. Attorney Preet Bharara, putting total profits in the scheme at $20.6 million, told a news conference it was the largest hedge fund case ever prosecuted and marked the first use of court-authorized wiretaps to capture conversations by suspects in an insider trading case…
Robert Khuzami, director of enforcement at the Securities and Exchange Commission, said the charges show Rajaratnam’s "secret of success was not genius trading strategies."
"He is not the master of the universe. He is a master of the Rolodex," Khuzami said.
Rajaratnam, 52, was ranked No. 559 by Forbes magazine this year among the world’s wealthiest billionaires, with a $1.3 billion net worth…
The others charged in the case were identified as Danielle Chiesi, 43, of New York City, and Mark Kurland, 60, also of New York City.
According to court papers, Chiesi worked for New Castle, the equity hedge fund group of Bear Stearns Asset Management Inc. that had assets worth about $1 billion under management. Kurland is a top executive at New Castle.
A criminal complaint filed in the case shows that an unidentified person involved in the insider trading scheme began cooperating and authorities obtained wiretaps of conversations between the defendants.
In one conversation about a pending deal that was described in a criminal complaint, Chiesi is quoted as saying: "I’m dead if this leaks. I really am. … and my career is over. I’ll be like Martha (expletive) Stewart."…
Prosecutors charged those arrested Friday with conspiracy and securities fraud…
A separate criminal complaint in the case said Chiesi and Moffat conspired to engage in insider trading in the securities of International Business Machines Corp.
According to a criminal complaint in the case, Chiesi and Rajaratnam were heard on a government wiretap of a Sept. 26, 2008 phone conversation discussing whether Chiesi’s friend Moffat should move from…
Tags: Chiesi, conspiracy, IBM, insider trading, Moffat, Rajaratnam, securities fraud
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by Phil - July 18th, 2009 8:28 am
We have a new section at Phil’s Stock World, it’s called Chart School.
We will be featuring Technical Charters and Analysis from some of the top people on the web. If you are interested in contributing or know someone you think would be a good contributor, contact Ilene@ our .com address (I don’t want her getting spam by putting her email in a post!) and let her know who you think would make a good addition to our roster. We’re looking not just for nice charts, but also for people who are skilled in explaining them. A good chart person needs to be a little bit of an artist, which is why I’m not one - my drawing skills make my daughters laugh, and not in a good way!
Like all good art, charts are subject to interpretation and different people will see different things, and come to different conclusions - from looking at exactly the same thing. That’s why I like to look at lots of different charts and try to check my bias at the door and let art speak for itself. Here’s a few that caught my eye this morning, starting with this interesting S&P chart by Ichimoku, who uses the SPX Price/TRIX daily divergence to catch a possible correction brewing just ahead of us (something I agree with for fundamental and technical reasons):
Interetsing stuff! Of course, I will caution members (as I had to when everyone was getting "Head and Shoulders" fever) that these are unprecedented market moves and "normal" charting techniques will often fail you here. We have record amounts of cash on the sidelines in proportion to the size of the market, which itself is trading on low volumes, which means it doesn’t take very much to override a bearish chart. It also would not take much of a panic to wash out the relatively small number of people who buy into the market every day.
As I mentioned in yesterday’s comments, just 20M out of 1.3Bn of IBM’s shares were exchanged yesterday at prices that averaged $112.50 per share yet that $2.25Bn worth of rangey trading upped IBM’s total market cap by $6.5Bn. Should the other 98.5% of the shareholders decide they’d like to get the $115 closing price for their shares, they may find the "value" isn’t quite what the chart says at the moment. This is nothing against IBM, they are worth about $115 - as long as…
Tags: CHINA, CNBC, GE, IBM, SPX, SPY
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by Andrew Wilkinson - July 17th, 2009 4:24 pm
Today’s tickers: SU, EEM, IBM, AXP, MOS, GE, YHOO & MMM
SU – The Canadian energy company appeared on our ‘most active by options volume’ market scanner today following a frenzy of bullish call buying activity in the August contract. Suncor’s shares climbed more than 4% during the trading day to $30.61, leading stocks in Canada higher on the rise in price of oil and the unexpected increase in June housing starts. Option-bulls purchased more than 17,000 calls at the August 31 strike price for an average premium of 1.56 apiece. Shares of SU must rally higher by about 6% in order for investors to begin to amass profits beyond the breakeven point of $32.56. Traders expecting an even sharper rise in the price of the underlying were seen picking up 5,300 calls at the higher August 32 strike for 1.00 per contract. These individuals are hoping shares breach $33.00 by expiration next month. – Suncor Energy Inc.
EEM – The emerging markets exchange-traded fund attracted one trader to initiate a bullish reversal amid a slight 1% rally in shares today to $33.61. The August 33 strike price had 20,000 puts sell for an average premium of 1.28 apiece spread against the purchase of 20,000 in-the-money calls at the same strike for 1.65 apiece. The net cost of the bullish play amounts to 37 cents to the investor responsible for the transaction. Selling the put options reduced the cost of buying the calls such that the trader has already amassed profits. Shares are currently 24 cents higher than the effective breakeven point of $33.37. Continued upward movement in the price of EEM will fatten this investor’s wallet through expiration. – iShares MSCI Emerging Markets Index
IBM – The world’s largest computer-services provider reported second-quarter earnings of 2.32 per share, putting average analyst estimates of 2.02 per share to shame. Shares of the firm have enjoyed a more than 3% rally today to $114.35, following the bullish earnings report. Option traders in the August contract have provided some guidance as to where the stock may be trading through expiration next month. The initiation of a sold strangle indicates this investor wants shares to remain at or about where they currently stand, yet has a decent amount of latitude into expiraiton. About 2,000 puts were sold for an average premium of 97 cents apiece at the August 105 strike price in conjunction with the simultaneous sale of 2,000 calls…
Tags: AXP, EEM, GE, IBM, MMM, MOS, SU, YHOO
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by Phil - March 8th, 2009 9:35 am
8,285 on February 9th to 6,485 at 3pm on March 6th.
That’s 1,800 points down in 19 market sessions, a 22% drop with a "stick save" at the end that took us back to 6,626 - almost exactly, to the point, 20% below where we started! These are not coincidences, we just discussed the 5% rule in detail during member chat the other day and, sadly, finishing right at the 20% line on a 4-week dip is not really encouraging. As I mentioned during the video-cast on Friday, we went into the weekend 55% bearish - a decision I had to make before I left for the day at 10:30.
We did not buy into the "rally" in the morning, other than our usual stab at FAS and SKF puts, neither of which went well on the day but, as I said during the live show, we aren’t really too worried until Wednesday when we’ll have to roll the SKF puts to April or possibly a hedged July/April spread (we’ll decided next week). As I said to members at 9:45: "This is why we need to take those bullish chances on the bad days, things get away from you fast once they get moving." We do not buy into sudden market moves at PSW, we were buying on Thursday, when everyone thought the world was ending and, had I been around Friday afternoon, we would have been buying there too!
A good example of how we offset our exuberance is my 9:17 comment to members as the futures began running up ahead of the open: "Watch 1.25% and 2.5% levels to decide when/if to stop out at least 1/2 of the covers. I would certainly roll up long puts into this rally (.50 or less per $1 higher strike)." So, what are we doing when the market is flying up nearly 200 points in the first 15 minutes - WE ARE IMPROVING OUR DOWNSIDE COVERAGE! We already have longs, those we can let run but we have an opportunity to move our long index puts up to higher strikes, which: 1) Gives us better leverage on the way down, 2) Improves our net delta to any puts we have sold as a hedge and 3) Puts us in a position to sell hedged puts at higher strikes without compromising our position advantage.
So the "game plan" of watching the 2.5% levels (which I laid out in the Friday…
Tags: C, DIA, IBM, SKF, SPY, XLF
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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
(