Full Throttle Friday – Dollar Dive Does Bears In
by Phil - December 2nd, 2011 8:28 am
Oh what fun this is!
Now the ECB is lending the IMF about $200Bn, which the IMF can lever up to lend Eurozone countries another $500Bn and that’s before the Fed and the BOJ and all the other partners in World Crime get together and pump even more money in. Nothing gives the old Futures a shot in the arm like MORE FREE MONEY and, interestingly enough, the ECB handing out cash Boosts the Euro, now over the $1.35 line.
This is, of course, FANTASTIC for our Monday trade ideas, which were:
FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one. (Now net $4.95 – up 725%)
FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread. (Now $1.45, up net 1,350%)
JPM Jan $25 puts can be sold for $1.20 (Now .65 – up 45%)
AA 2013 $7.50 puts can be sold for $1.28 (Now $1.05 – up 18%)
VLO June $17 puts can be sold for $2.05 (Now $1.40, up 32%)
- Gasoline (/RB) futures at $2.55 (Now $2.62 – up $2,940 per contract)
Now I know that these are the kind of results you get every week so, whatever you do – don’t subscribe to our Newsletter! Why would you want these ideas EMailed to you every morning before the market opens? If they make you money, then you have to pay taxes and paying taxes is evil, right? Premium Membership is sold out but you wouldn’t want to get trade ideas live during market hours anyway. Less than $2 per day, however, gets you our Annual PSW Report Membership and you are able to read our full posts every morning, as soon as they are published.
Speaking of Premium Memberships, congrats to all who followed us last week as it was a doozy! You can tell from our titles (and our Stock World Weekly Newsletter does a great recap of the action each week and is included with that Report Membership) how we turned bullish over the week:
Keep in mind, these are titles that go out in the "In Progress" posts that…
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DiggThrill Is Gone Thursday – Already?
by Phil - December 1st, 2011 8:11 am
Yesterday was very exciting, but now what?
David Fry summed up yesterday’s action perfectly, saying "Wednesday’s massive rally was prompted by sudden global central bank intervention adding (printing money) liquidity (reducing the lending rate overseas to zero basically) to shore up sovereign debt in the eurozone. They basically set up a swap facility to do the job in the future. Is it a cure or a bailout? No, this is a handout. And it doesn’t solve the problems the eurozone is facing."
"But, it must be said that the European leaders must have hit a dead end in talks and a potential financial panic must have seemed likely. Mind you, Mr. Bernanke is perfectly comfortable with reflation and money printing. He’s been at it for a long time. It will take years for the Freedom of Information Act to discover how much money and to whom the U.S. has given free money. Americans and others will see price increases in all products and services as a result of a weaker dollar negatively affecting purchasing power. Beyond Moral Hazard issues this is the cost you’ll see and perhaps even wonder why."
It’s the classic "stick save" that was clearly (to us) telegraphed by the very low-volume blow-off bottom last week and now, in retrospect, it is also clear that the market manipulators and their media hounds were pulling out all the stops to get retail investors to SELLSELLSELL.
As I mentioned yesterday, I’ve been railing against the market manipulation and the media nonsense that had been going on each month and today we learn that Wall Street execs did, in fact, meet privately with top Fed officials in September, according to Fed documents, and they "recommended" Central Banks make a joint effort to address the Eurozone debt crisis. Don’t forget that our Fed works for the Banksters, not vice versa! In addition to knowing well in advance this move was coming, their suggestions included boosting the global economy by buying securities, a move that may yet happen as many investors believe yesterday’s swap announcement was a prelude to additional coordinated action.
You see, it’s not enough for Lloyd Blanfein (allegedly and for example, of course, a fine man like Lloyd would never do this) to know that the Fed is going to make a massive move like yesterday – there’s much more money to be made if…
Just Another Cyber Monday (Manic Edition)
by Phil - November 28th, 2011 8:21 am
INSANITY!
That’s what we have today (and what we’ve been having all month) as the markets celebrate the fact that neither the US consumer or the Euro is dead – yet. Holiday sales are apparently up 16.4% from last year with 10% of those sales being IPhones and Ipads so we can thank the actually dead Steve Jobs for saving the markets from a total meltdown this month as we were on track for the worst November EVER until today.
The DOOM meter was certainly set to 100 and, in fact, 100 is about how low the McClellan Oscillator went on Friday – to a state of oversold not matched since August 8th, when the Dow bottomed out at 10,600 so holding 11,200 in this protracted sell-off was a victory, of sorts, for the bulls and certainly a victory for those of you following our Big Chart – which made us perhaps the ONLY newsletter that was bullish on Friday, when I laid out my bullish case and right in the main post – for free – suggested long ideas on:
- Oil Futures (/CL): Was $95, now $100 – up $5,000 per contract
- Gasoline Futures (/RB): Was $2.50, now $2.54 – up $1,680 per contract
And, in Member Chat – our Morning Alert had the following trade ideas:
- FAS Dec $48/55 bull call spread at $3, selling the $40 puts for $2.40 for net .60 on the $7 spread. 5 in the WCP on that one.
- FXE Dec $132/135 bull call spread at $1.20, selling the $129 puts for $1.10 for net .10 on the $3 spread.
- JPM Jan $25 puts can be sold for $1.20
- AA 2013 $7.50 puts can be sold for $1.28.
- VLO June $17 puts can be sold for $2.05
We also speculated on an aggressive AMZN long play with the Dec $200 calls at $2.50 but, overall, we take this 2% bounce after a 10% drop with a grain of salt. As I said to Members in the alert: Just like we watched with amusement while things fell earlier this week, we should take a move up just as lightly until we cross back over our Must Hold Lines – to some extent, we have selling fatigue driving this move – keep in mind my bullish discussion on hyperinflation is more…
Contrarian Options Strategies Crop Up In Some Financials Ahead Of Holiday
by Option Review - November 23rd, 2011 1:16 pm
Today’s tickers: JPM, BCS, ARCC & YGE
Commentary to resume Monday, November 28th
JPM - JPMorgan Chase & Co. – JPMorgan blends in with the sea of red today, its shares trading lower by 3.2% to stand at $28.48, as of 11:55 AM in New York. But, fresh prints in weekly options covering the banking institution reveal some strategists are initiating low-probability bullish positions on the stock should shares rebound after the holiday. Call options expiring on Friday saw an influx of buyers paying as little as a penny per contract to prepare for a near-term rebound. Trading traffic in the front-week calls is heaviest at the Nov. ’25 $29 strike where more than 7,600 contracts changed hands against previously existing open interest of 340 positions. It looks like most of these calls were purchased for an average premium of $0.30 apiece. Investors long the calls may profit at expiration this week in the event that JPM’s shares rally 2.9% to exceed the average breakeven point at $29.30. Traders also purchased another 1,000 calls at each of the Nov. $30 and $31 strikes for average premiums of $0.06 and $0.01 each, respectively. Meanwhile, like-minded optimism appears to have spread out to contracts that expire one week from this Friday. Investors itching for a rebound picked up around 1,500 in-the-money calls at the Dec. ’02 $28 strike for an average premium of $1.28 a-pop. Call buyers make money if shares in JPMorgan Chase & Co. top the average breakeven price of $29.28 at expiration on December 2. Options implied volatility on the stock rose 13.8% to 53.5% in early-afternoon trade.
BCS - Barclays PLC – A burst of call activity on Barclays pushed the stock onto our ‘most active by options volume’ market scanner just before midday in New York. The seemingly bullish call buying on Barclays contrasts with the 3.0% move lower in the price of its shares to $9.32 this afternoon. More than 30,000 call options changed hands at the Dec. $12 strike against open interest of 3,863 contracts. It appears one investor purchased most of the calls, outright, at a premium of $0.15 apiece. The trader stands ready to profit at expiration in the event that the stock jumps 30.4% to surpass the effective breakeven price of $12.15. Shares in Barclays had topped $12.15 as recently as November 4.
ARCC - Ares Capital Corp. – Put activity on Ares Capital Corp. this morning suggests…
TGIF – Saved by the Bell or on a Highway to Hell?
by Phil - November 18th, 2011 8:10 am
Wheeeeeeeee, what a ride this week!
Since we went bearish on Tuesday afternoon, the Dow has dropped 450 points. That pushed our White Christmas Portfolio over the top (as we flipped bearish, of course) with a virtual balance of $26,075 including $2,565 of unrealized gains on our still-open (and still bearish) positions. That’s up $11,075 (73.7%) from our $15,000 start on October 24th and we’ll be getting back to cash and going for another $10,000 (our original goal) before Christmas.
How did we do it? We teach keeping trades short and simple in a choppy market as we stick to our trading range. Trades in the WCP were very much like the trade ideas I published Wednesday morning, from our Tuesday Member Chat at 3:21. As we had a little BS rally Wednesday afternoon, many of the trades were still makeable that day. In fact, in Seeking Allpha, where the post didn’t even go up until later that morning, Jamesbwood was able to take advantage of the XOM $77.50 puts at .14 (less than our original entry) and took a double off the table at .28 – a 100% day trade!
All of those trades ideas are great examples of the kind of trades we look for in our White Christmas Portfolio (our current, virtual, short-term portfolio) – ones we can get quickly in and out of with nice gains. We were quite satisfied with our oil shorts and cashed those out yesterday and, had President Obama followed my advice and sold those 140M barrels for $100 (could have gotten $102), he could have bought them back yesterday at $98.50 for a quick $210M profit – enough to pay for at least an hour’s worth of the deficit! Percentage-wise, he would have been better off subscribing and taking those trade ideas from our Member Chat. Those Wednesday morning trade ideas were:
- GOOG $625/620 bear put spread at $3.10 is a nice downside play – figure risking $1 to make $1.90.
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GOOG is at $600 and this spread will likely expire at $5 today – up 61.3%
- MMM $82.50 puts are $1, also a good trade for a crash tomorrow.
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MMM finished the day at $80.43 and the $82.50 puts were $2.35 – up 135%
- WYNN $130/125 bear put
…
Put Players See More Pain Ahead For Computer Sciences Corp.
by Option Review - November 10th, 2011 1:59 pm
Today’s tickers: CSC, SGY, JPM & UNH
CSC - Computer Sciences Corp. – Bearish traders snapped up put options on the provider of information technology services straight out of the gate this morning, a sign the already hard-hit stock may have further to fall before the current calendar year concludes. Shares in Computer Sciences Corp. opened sharply lower, one day after the company reduced its fiscal 2012 profit estimate and reported a second-quarter net loss of $2.88 billion. Excluding some items the company earned $0.94 a share in the quarter, more than the $0.68 a share anticipated by analysts, on average. CSC’s shares closed Wednesday’s session down 15.0%, and extended losses on Thursday, falling 8.0% this morning to an intraday low of $25.67. The stock was cut to ‘Underweight’ from ‘Neutral’ at JPMorgan today. Investors positioning for the stock to continue to decline picked up deep out-of-the-money November and December expiry puts that look for the price of the underlying to suffer additional double-digit declines in the near future. Bears populating the front month picked up more than 700 puts at the Nov. $25 strike for an average premium of $0.58 each, and purchased some 400 put options at the lower Nov. $22.5 strike at an average premium of $0.15 a-pop. Options volume on the stock is heaviest, however, in the December expiry. One trader appears to have purchased a block of 5,000 put options at the Dec. $20 strike for a premium of $0.30 each. The put player may profit at expiration next month in the event that CSC shares plunge 23.25% off today’s low of $25.67 to breach the effective breakeven price of $19.70. Finally, Dec. $22.5 strike puts were popular this morning, as well, with some 1,300 of the options having been purchased for an average premium of $0.59 apiece. Computer Sciences Corp. shares are down a staggering 55.0% off the February 8, 2010, 52-week high of $56.51. Options implied volatility on CSC is up better than 40.0% to stand at 69.2% as of 11:50 AM in New York.
SGY - Stone Energy Corp. – The independent oil and natural gas company popped up on our ‘hot by options volume’ market scanner today due to heavier-than-usual activity in its calls. Shares in Stone Energy Corp. are up more than 5.1% this afternoon to stand at $26.25 as of 12:50 PM ET, and it looks like some traders are gearing up for…
Options Player Snaps Up Doomsday Protection On JPMorgan Chase & Co.
by Option Review - October 25th, 2011 1:56 pm
Today’s tickers: JPM, XLB & SWI
JPM - JPMorgan Chase & Co. – Shares in JPMorgan Chase & Co. are down 1.6% at $34.01 in early-afternoon trade, but the stock is just one among many slipping lower ahead of Wednesday’s meeting of euro-zone officials in Brussels. One strategist’s large stake initiated in Jan. 2012 contract put options on JPM this morning may be a hedge against steep declines in the price of the underlying into next year. It looks like one investor purchased 8,000 puts at the Jan. 2012 $24 strike for a premium of $0.62 each. The investor profits at expiration in the event that JPM’s shares drop 31.25% to breach the effective breakeven point at $23.38. The stock dipped to as low as $27.85 on October 4, and has since rebounded some 22.1% up to the current price of $34.01. The value of the deep out-of-the-money puts may rise sharply if JPMorgan’s shares head back down toward the lows of the month ahead of expiration. The stock hasn’t traded below $23.38 since March 2009.
XLB - Materials Select Sector SPDR ETF – The XLB popped up on our ‘most active by options volume’ market scanner this morning after one investor established a large bearish stance in the front month. Shares in the XLB, an exchange-traded fund that tracks the performance of the Materials Select Sector of the S&P 500 Index, fell 0.55% to $33.98 by 12:40 pm in New York. The fund’s three largest holdings, EI du Pont de Nemours, Monsanto and Freeport McMoRan, are all in the red this afternoon. It looks like the strategist responsible for more than half of total volume in XLB options today purchased the majority of the more than 56,000 puts exchanged at the Nov. $32 strike thus far in the session. It appears the investor snapped up some 53,000 puts at that strike for an average premium of $0.79 each. The put buyer may profit at expiration next month if shares in the fund slide 8.15% to trade beneath the effective breakeven price of $31.21. Shares in the XLB had traded down to a 52-week low of $27.77 as recently as October 4. Options implied volatility on the SPDR fund is up 5.6% at 35.8% in early-afternoon trade.
SWI - SolarWinds, Inc. – One call-seller targeting the software company today sees little chance the stock will make new record highs any time soon. Shares in SolarWinds are…
Monday Madness – G20 FinMins Set Two Week Deadline
by Phil - October 17th, 2011 8:01 am
Two weeks!
European leaders have two weeks to settle differences and flesh out a strategy to terminate their sovereign debt crisis as global finance chiefs warn failure to do so would endanger the world economy. “The risk of a recession would be increased dramatically were the Europeans to fail to accomplish goals that they’ve set for themselves,” Canadian Finance Minister Jim Flaherty said after the G-20 meeting on Saturday.
The Brussels meeting “has the potential to turn into a positive historic moment,” Joachim Fels, London-based chief economist at Morgan Stanley, wrote in a note to clients yesterday. “But it could also easily turn into a negative catalyst.”
Europe’s plan, which has still to be made public, includes writing down Greek bonds by as much as 50 percent, establishing a backstop for banks and magnifying the strength of the 440 billion-euro ($611 billion) temporary rescue fund known as the European Financial Stability Facility. “The plan has the right elements,” U.S. Treasury Secretary Timothy F. Geithner said in Paris. “They clearly have more work to do on the strategy and the details.”
The G-20 officials — who met to prepare for a Nov. 3-4 gathering of leaders in Cannes, France (and we’re fondly remembering London’s 2009 meeting with the graphic on the right) — said in a statement that the world economy faces “heightened tensions and significant downside risks.” European authorities must “decisively address the current challenges through a comprehensive plan.”
The policy makers held out the possibility of rewarding European action with more aid from the International Monetary Fund, while splitting over whether the Washington-based lender’s $390 billion war chest needs topping up. Europe’s latest strategy hinges on putting Greece, whose government forecasts its debt to reach 172 percent of gross domestic product in 2012, on a sustainable path. Austerity has plunged the country deeper into recession and provoked civil unrest that threatens political stability.
My reaction to this in Member Chat this Morning was to call for shorting the jacked up Dow Futures (/YM) at 11,600, saying:
Speaking of the illusion of power – yet another G20 meeting ends with yet another plan to have a plan but this time, for some insane reason, they only gave themselves a week to fix everything. I’ll be writing about this this morning but the gist of it is the Finance Ministers have essentially sent their own
…
Thrill-Ride Thursday
by Phil - October 13th, 2011 8:24 am
Wheeeee, what a ride!
I hate to say I told you so but I did tell you so in yesterday’s morning post when I said: "Not to be cynical but, if you are going to have some Slovakian Government officials torpedo a vote that will tank the markets – isn’t it a good idea to run them up first and bring in a bunch of suckers to sell to? We remain a bit skeptical until we get back over our "Must Hold" levels and hold them for more than a day." As you can see from David Fry’s chart, a little cynicism is a good thing in these markets as the Slovakian vote was delayed again and the FT rumor popped the day’s bubble.
We discussed shorting oil at $86 (now $84) and gold at $1,695 (now $1,670) as good plays off the morning pump and, as usual, shorting TLT was a winner but now we’re near their theoretical support by the Fed so we’d rather see a run-up to $120 before we play them again. At 1pm, we have a 30-year note auction of just $13Bn but, as I pointed out to Members in Chat, this makes $52.5Bn of 30-year borrowing since August 15th – that’s not even two months!
Who can keep funding this kind of debt load? And it’s not just the US that’s borrowing at an ever-increasing pace – the EU is borrowing as much as we are and Japan is borrowing and Russia is borrowing and Brazil and India are borrowing – Africa would borrow if anyone would lend it to them and our NAFTA buddies, Canada and Mexico, who also borrow about $50Bn a year to fund their own deficits.
How is it possible, a logical person may ask, for almost every single country in the World to run a deficit at the same time? Either A) China has so much of a surplus that they are funding everyone else or B) Everyone is printing money 24/7 to pay bills they don’t have the income for and, if B is the case – where’s the inflation? Is it really possible that, on a planet with a $60Tn GDP and a $4Tn annual deficit (and yes, half of it is ours!) that prices go up less than the 6.66% (why does that number come up so often) printing of…
Just Another Manic Monday – Value Investing
by Phil - September 26th, 2011 8:27 am
Up, up and away!
As I mentioned in Friday’s morning’s post, we did a lot of bottom-fishing on Thursday as we began to develop Disaster fatigue with long plays on XLF at $11.50, shorting TLT at $123, shorting VXX at $49.50, TNA at $34.50, BRK.B at $65, AA at $10.20, VLO at $19, IMAX at $15.75, BA at $58.32, AGQ at $170, CHK at $27.50, DIS at $30.14 and ABX at $47.50. They were hedged, of course and, for the most part, you still had a nice chance to make those entries on Friday – but not so much this morning as the futures are up about 1.5% already (7:30).
Friday morning, in my Alert to Members, I reminded them that BCS looked like an excellent VALUE to me, no matter what the PRICE was ($8.75 after hitting $8.40 the day before) and this morning, that PRICE is up well over 10% in EU trading. Did the VALUE of BCS change materially over the weekend? Of course not, certainly not by the $4Bn their market cap gained – like the song, the VALUE remains the same – only the highly variable price of a share of BCS is undergoing ch-ch-changes…
I pointed out similar hedged, long-term plays could be made on GS ($94), MS ($13), BAC ($6) and C ($24). Of course we hedged them per our discussion in the morning post (TZA was our morning choice but we’re out over 650 on the RUT) but then we went long on EWG (Germany) again with the very aggressive Oct $16,18 bull call spread at $1.30, offset by the sale of the $17 puts for .90 for net .40 on the $2 spread. 10 of those in our virtual $25,000 Portfolio cost $400 and can return $2,000 in less than 30 days if EWG is over $18 and, guess what – they’re over $18 this morning!
Another bullish bet we placed was USO Nov $28/30 bull call spread at $1.30, selling the $27 puts for $1.10 for net .20 on the $2 spread with a 900% upside if USO simply doesn’t drop from where it is now. That’s what’s nice about options – you don’t need the market to go up to make money good money. On this trade idea, your worst-case scenario is owning USO at net $27.20, about 10% lower than it…
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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...
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