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
SAP - SAP AG – Put options on SAP are active on Friday, with shares in the software company down more than 4.0% in the early going at $72.42. SAP’s shares are declining in sympathy with Accenture, the world’s second-largest technology-consulting company, after that company posted lower-than-expected third-quarter revenue after the closing bell on Thursday. Traders positioning for shares in SAP to potentially extend declines during the next few weeks picked up roughly 2,000 puts at the Jul $72.5 strike for an average premium of $1.97 each. The bearish strategy makes money at expiration in the event that SAP’s shares slide 2.6% from today’s low of $72.42 to breach the average breakeven point on the downside at $70.53. Shares in the name, down nearly 12% since the start of 2013, last traded below $70.53 back in November of 2012. SAP is scheduled to report second-quarter earnings ahead of the open on July 18th.
CTRP - Ctrip.com International, Ltd. – Upside call options on Ctrip.com are active this morning, with shares in the online provider of travel services in China rising 2.0% to $33.38 during morning trading. The most heavily traded contracts as measured by volume thus far in the session are the Aug $34 strike calls, with roughly 2,500 lots in play versus open interest of 12 contracts. Time and sales data suggests most of the calls were purchased within a few minutes of the opening bell at an average premium of $2.03 apiece. Call buyers stand ready to profit at expiration in August should shares in CTRP rally another 10% over the current price of $32.87 to exceed the average breakeven point at $36.03. Ctrip.com’s shares are up better than than 90% since this time last year.
JBLU - JetBlue Airways Corp – Takeover chatter sparked heavier than usual trading traffic in out-of-the-money call options on air carrier, JetBlue, Inc., this morning. Shares in the…
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…
CAT - Caterpillar, Inc. – Shares in Caterpillar are down for the third straight day, trading 2.1% lower on Thursday afternoon at $106.68 as of 12:50 p.m. in New York following the release of weaker manufacturing data from Germany and China. Activity in the newly issued weekly options on the machinery maker suggests some traders anticipate the downside move in the shares will continue in the near term. Bearish positions were initiated at the Mar. ’30 $100 strike, where more than 1,000 puts were purchased for an average premium of $0.35 apiece. Traders long the $100 puts profit at expiration next week in the event that CAT’s shares decline another 6.6% to breach the average breakeven price of $99.65. Shares in Caterpillar last traded below $99.65 in mid-January.
KKD - Krispy Kreme Doughnut, Inc. – Options on Krispy Kreme are more active than usual today, with shares in the doughnut retailer down 6.6% at $7.25 this afternoon. More than three times as many call options are changing hands on KKD as put options, but most of the volume appears to be bearish. Front month $7.5 strike calls traded around 1,200 times so far today against open interest of 415 positions. It looks like most of the call options were sold this morning for $0.25 to $0.30 per contract. Perhaps call sellers are throwing in the towel on the possibility for a near-term rebound in shares of the doughnut maker. Alternatively, some of the volume today may be the work of traders cutting their losses on bullish positions initiated yesterday afternoon. Open interest in the April $7.5 strike calls suggests buyers shelled out $0.65 per contract for a couple hundred contracts on Wednesday. These positions more than halved in value overnight.…
DD - EI du Pont de Nemours & Co. – Shares in the U.S. chemical maker dropped on Friday after the company lowered full-year earnings guidance by $0.10 a share to a range of $3.87 to $3.95 a share. The stock is off its lowest point of the session to stand 4.75% lower on the day at $44.31 just before 12:00 PM ET. Activity in DuPont put options expiring in January 2012 indicate some traders are positioning for the price of the underlying to extend losses in the near term. It appears one strategist initiated a ratio put spread, buying 2,250 puts at the Jan. 2012 $41 strike for a premium of $0.94 each, and selling 4,500 puts at the lower Jan. 2012 $38 strike at a premium of $0.48 apiece. The spread yields a net credit of $0.02 per contract and positions the trader add to profits in the event that shares drop 7.5% from the current price of $44.31 to breach the effective breakeven point on the downside at $41.00 by expiration. Maximum potential profits of $3.02 per contract are available to the investor should DuPont’s shares plunge 14.2% to settle at $38.00 at expiration day in January. The chemical company is scheduled to report fourth-quarter earnings ahead of the opening bell on January 25, after the Jan. 2012 expiry puts will have expired.
BCSI - Blue Coat Systems, Inc. – Investors that bought December expiry call options in the latter half of November saw the value of their positions sky-rocket overnight on news Blue Coat Systems, Inc. agreed to be purchased by an investor group for a reported $1.3 billion. Shares in the provider of Internet-security software jumped 44.5% to $25.27 in the first half of the trading session. Call open interest in the front…
HAL - Halliburton Co. – Shares in the Houston, Texas-based oilfield services provider dropped as much as 5.8% to $34.86 today on reports BP is accusing a unit of the Halliburton Co. of destroying evidence that could have shown the company is also at fault for the deadly explosion in the Gulf of Mexico last year. Options traders expecting the stock to remain under pressure this week placed short-term bearish bets on the stock. Weekly puts that expire at the end of the trading week attracted heavier-than-usual volume, with the Dec. ’09 $35 strike put trading more than 4,400 times against open interest of just 444 contracts. It looks like investor purchased the majority of the $35 strike weekly puts for an average premium of $0.53 each. In-the-money put buyers at this strike stand prepared to profit should the price of the underlying fall another 1.1% to breach the average breakeven point on the downside at $34.47 at expiration. Bears picked up put options at the lower Dec. ’09 $ 34 strike for an average premium of $0.31 each, as well. Approximately 2,700 puts have changed hands at the $34 strike as of 12:30 PM ET. Options implied volatility on Halliburton is up 5.7% at 50.55% in early-afternoon trade.
JBLU - JetBlue Airways Corp. – Investors initiating near-term bullish positions in JetBlue Airways this morning appear to have shown up relatively late to the party, however, late could be better than never as long as the price of the underlying stock continues to rise in the next couple of weeks. Shares in JetBlue Airways Corp. are up 1.7% today to stand at $4.78 as of 11:20 AM ET. The stock has rallied roughly 30.0% since AMR Corp. filed for bankruptcy on November 29. Some traders jumped into JBLU…
EQIX - Equinix, Inc. – In the final trading week of 2010 we reported seeing one options strategist purchase a sizable bullish call butterfly spread on Equinix. It has been nearly four months to the day since the investor paid a net premium of $3.10 per contract for the June $85/$100/$115 call ‘fly, and it looks like the trader is reeling in substantial profits today by unraveling the position. Shares in the provider of global data center services are currently up 3.8% to stand at $100.30 as of 11:20am in New York. The company reported first-quarter earnings of $0.53 a share on Wednesday, which beat average analyst expectations of $0.30 a share in net income for the quarter. The trader responsible for the bullish spread nearly hit the nail on the head. On December 29, 2010, shares in Equinox closed the session at $81.20. Since then, the stock has climbed roughly 23.5% to today’s price. While the upward move in the price of the underlying happened a bit more quickly than estimated, the trader’s predictions for the magnitude of the move were pretty much spot on. It appears the investor closed out the spread this morning, selling 15,000 calls at the now deep in-the-money June $85 strike for a hefty premium of $16.20 each, bought back the 30,000 short calls at the June $100 strike for a premium of $4.70 each, and sold 15,000 of the June $115 strike call options at a premium of $0.30 a-pop. The trader takes in net premium of $7.10 per contract by closing out the spread, and therefore realizes net profits of $4.00 per contract, or around $6 million in total, after accounting for the initial cost of buying the spread at $3.10 apiece. Had Equinix’s shares risen more slowly, hitting $100.00 at expiration in June, the investor could have realized maximum potential profits of $11.90 per contract. But, in the end the investor’s predictions for EQIX’s performance and the…
SVNT – Savient Pharmaceuticals, Inc. – A ratio call spread implemented on biopharmaceutical company, Savient Pharmaceuticals, this afternoon indicates shares may shift higher by expiration in January 2010. SVNT’s shares increased 1% during the session to stand at $12.80. The spread involved the purchase of 2,400 calls at the in-the-money January 12.5 strike for an average premium of 1.34 apiece, marked against the sale of 4,800 calls at the higher January 14 strike for 62 pennies each. The net cost of the trade amounts to just 10 cents per contract. The investor responsible for the bullish play stands ready to accrue maximum potential profits of 1.40 per contract if the stock jumps to $14.00 by expiration. The increase in demand for option contracts on the stock boosted Savient’s option implied volatility reading 15% during the trading day from an opening reading of 75.22% to an intraday high of 86.56%.
JBLU – JetBlue Airways Corp. – Investors initiated bullish stances on JetBlue this afternoon despite the 2% decline in value of the underlying shares during the trading session to $5.48. Fresh call positions were taken in the March and June contracts by traders preparing for a JBLU-rally. A chunk of 5,000 calls were purchased at the March 6.0 strike for a premium of 40 cents per contract. The investor responsible for the transaction breaks even if shares of the airline increase 17% over the current price to $6.40 by March’s expiration. Option traders purchased at least 1,700 calls at the June 6.0 strike for 65 cents premium apiece. Profits accumulate if and when JBLU’s shares rise 21.5% to surpass the breakeven point at $6.65. The increase in investor demand for option contracts on the stock lifted option implied volatility 13.57% to an intraday high of 55.55%.
ROST – Ross Stores, Inc. – The second-largest off-price retailer of brand-name apparel and home accessories in the U.S. appeared on our ‘hot by options volume’ market scanner in late-afternoon trading. One investor established a ratio put spread on the stock in the February 2010 contract. Shares are down 1% to $43.88 with approximately one hour remaining in the trading session. The option trader purchased 2,000 puts at the in-the-money February 45 strike for 2.60 apiece, and sold 4,000 puts at the lower February 42.5 strike for 1.40 each. The investor…
If Donald Trump is elected US president it will spell the end of the North Atlantic Treaty Organization. At least, that’s how a phalanx of US foreign policy pundits and establishment figures see it. Trump once again caused uproar recently with comments that were viewed as undermining a «cornerstone» of US foreign policy since the Second World War.
Ahead of accepting official nomination as the Republican party presidential candidate, the billionaire property magnate told th...
Anything can happen. At least, more things than you can imagine can happen.
Facebook, after trouncing yet another quarter’s earnings report, has now climbed to a market value greater than that of Berkshire Hathaway. It may be temporary, it may be forever. Regardless, at the current moment, a ten year old company with few physical assets and a small amount of employees is now worth more than an empire built by Warren Buffett over the course of 50 years.
How many people had the imagination to picture something like this as being within the realm of possibilities, let alone a likelihood?
The following are the M&A deals, rumors and chatter circulating on Wall Street for Wednesday July 27, 2016:
Sequenom Being Acquired by Lab Corp for $2.40/Share in Cash
Laboratory Corporation of America Holdings (NYSE: LH) and Sequenom, Inc. (NASDAQ: SQNM) announced Wednesday, that they have entered into a definitive agreement aunder which LabCorp would acquire all of the outstanding shares of Sequenom in a cash tender offer for $2.40 per share, for an equity value of $302 million.
Fed Wednesday turned out to be a ho-hum event for the US equity markets. The combination of parsing the FOMC statement, analyzing earnings and fretting about the growing glut kept our benchmark S&P 500 in a relative zombie state ... especially for a Fed Wednesday. The -0.12% closing loss extended the fractional up-down pattern of daily closes to ten sessions. And speaking of oil, WTIC fell 2.33% today and is now 18.65% below its interim high on June 8.
The yield on the 10-year closed at 1.55%, down five basis point from the previous session.
Here is a snapshot of past five sessions in the S&P 500.
Here is a daily chart of the index. We've highlighted the unusually narrow pattern over the past ten sessions, both in clo...
By Jacob Wolinsky. Originally published at ValueWalk.
It is a busy week for Elon Musk – Tesla Motors Inc (NASDAQ:TSLA) says it will need to raise more money for its new plans (shocker), the Gigafactory – by some metrics the largest manufacturer in the world is opening soon and Musk is making wild predictions about revenue on Model 3 sales (although little about earnings), and Tesla and Mobileye NV (NYSE:MBLY) parted ways yesterday in news which caused MBLY stock to tank before a bit of a recovery. With all the news it is hard to cover everything so below we will focus on the MBLY news and what it means for both companies. Many analysts note that Tesla is a small percentage of revenue for Mobileye so why focus on either? Because the news could be important and these co...
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After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
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.
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