Trading in upside call options on PetSmart (Ticker: PETM) today suggests some options players may be positioning for shares in the pet supplies retailer to rally following the company’s fourth-quarter earnings report on Wednesday ahead of the open. PETM opened the session lower amid a down day for U.S. stocks, but are currently in positive territory, up 0.30% on the day at $67.27. Options volume is nearly four times the stock’s average daily level, with overall volume hovering near 4,000 contracts as of the time of this writing.
The most traded options by volume on PetSmart are the Mar $70 strike calls after some 3,600 of the contracts appear to have been purchased most at a premium of $0.90 each. Buyers of the $70 calls stand ready to profit at expiration this month in the event that shares in PETM rally another 5.0% over the current price of $67.27 to exceed the breakeven point at $70.90. Shares in PetSmart last traded above $70.90 back on January 3rd.
PETM - PetSmart, Inc. – Shares in the specialty retailer of products and services for pets and their owners fell sharplythis morning on a downgrade to ‘reduce’ from ‘neutral’ at Nomura, with the stock currently trading 7.4% lower on the session at $64.81 as of 11:25 a.m. ET. A sizable bearish options strategy initiated on PetSmart in the early going suggests one trader is bracing for shares to extend declines during the next couple of months. It looks like the strategist purchased a 2,000-lot March $60/$65 put spread for a net premium of $1.55 per contract. The bearish position starts making money if shares in PETM decline 2.1% from the current price of $64.81 to breach the effective breakeven point at $63.45. Maximum potential profits of $3.45 per contract are available on the spread in the event that shares drop more than 7.4% to settle below $60.00 at April expiration. Two weeks ago we noted a similar bear put spread initiated on PETM; the similar-sized position was an April $60/$65 put spread purchased at a net premium of $1.80 per contract. Both positions result in maximum possible profits if shares in PetSmart drop to $60.00 by expiration in March and April.
FURX - Furiex Pharmaceuticals, Inc. – Shares in Furiex Pharmaceuticals are soaring today, up 52% to stand at $32.33 just before midday in New York, after the company confirmed that its partner, Japanese firm Takeda Pharmaceutical Co., received approval from the U.S. FDA for three new type 2 diabetes therapies designed to treat the disease in adults in combination with diet and exercise. Furiex options, which typically see daily volume of around 33 contracts on average, are far more active than usual on news of the approval, with volume topping 1,685 contracts during the first half of the session. Put options are more active than calls, with roughly two puts in play for each single call option. The stock this morning rallied 55% to an all-time high of $32.97, but had already started making moves to the upside at…
STZ - Constellation Brands, Inc. – A large stock and options combination play on wine, beer and spirits producer, Constellation Brands, Inc., appears to be a synthetic put on the name that benefits from bearish movement in the price of the underlying in the near term.Shares in STZ, up roughly 80% since mid-June 2012, are currently down 1.1% on Monday afternoon to stand at $35.24 as of 12:05 p.m. in New York trading. The hefty transaction in STZ options today pushed overall options volume to a level well above the stock’s average daily options volume of around 13,100 contracts. The largest transaction in STZ options appears to be the purchase of a 20,000-lot Feb. $37.5/$42.5 call spread for an average net premium outlay of $0.75 per contract, tied to the sale of STZ shares at $34.80 on a 25.5 delta.The synthetic put position is a bearish strategy that prepares the trader to profit from declines in the price of Constellation Brands’ shares through February expiration.
PETM - PetSmart, Inc. – Shares in the specialty retailer of products and services for pets and their owners are in negative territory on the first trading session of the week, down 1.0% at $67.50 as of 11:30 a.m. ET on Monday. A sizable bearish options strategy initiated on PetSmart today suggests one trader is bracing for shares to potentially extend declines during the next few months. It looks like the strategist purchased a 2,000-lot April $60/$65 put spread for a net premium of $1.80 per contract. The bearish position starts making money if shares in PETM decline 6.4% from the current price of $67.50 to breach the effective breakeven point at $63.20. Maximum potential profits of $3.20 per contract are available on the trade in the event that shares drop more than 11% to settle below $60.00 at April expiration. PetSmart’s shares last traded below $60.00 in May 2012.
ARO - Aeropostale, Inc. – Shares in teen retailer, Aeropostale, Inc., are up 6.2% this morning at $13.87 in sympathy with Abercrombie & Fitch after that company raised its guidance for full-year earnings and reported better-than-expected third-quarter results before the opening bell on Wednesday. Aeropostale, which acquired online women’s apparel and shoe retailer GoJane.com yesterday, is scheduled to report third-quarter earnings after the close of trading on November 29th. ARO call options are buzzing with activity today, with some traders adjusting existing positions, while others take profits and establish bullish stances on the stock ahead of earnings in two weeks. One strategist responsible for the purchase of approximately 2,000 Nov. $14 strike calls for a premium of $0.10 apiece back on October 31st appears to be selling the calls today for three times that amount, or $0.30 in premium per option contract. Meanwhile, the purchase of more than 2,000 upside calls out at the Dec. $14 strike for a premium of $1.00 apiece looks for shares in ARO to extend gains in the near term. The trader or traders picking up the Dec. $14 strike calls may profit at expiration next month if shares in Aeropostale rally another 8% to surpass the average breakeven price of $15.00 at expiration. Call buying spread to the Dec. $15 and $16 strikes as well, with more than 500 contracts purchased at each strike earlier in the trading session. Interest in the Dec. $14, $15 and $16 strike calls today adds to positions established during the prior trading week.
WYNN - Wynn Resorts Ltd. – Trading traffic in call options on casino resort operator, Wynn Resorts Ltd., this morning suggests one strategist is positioning for shares in the name to rally substantially by year end. Shares in Wynn Resorts are down 1.2% this morning to stand at $105.67 as of 11:50 a.m. ET. The most active contracts on WYNN by volume so far today are the…
JPM - JPMorgan Chase & Co. – A New York Times report that said JPMorgan’s trading losses could reach $9 billion sent ripples across financial stocks on Thursday morning and pushed shares in the largest bank down as much as 4.1% to $35.26 in the first half of the session. Interest building in the newly issued weekly options contracts on JPM today suggests some strategists are positioning for the price of the underlying to make moves, either to the upside or downside, next week. Out-of-the-money put buying, particularly in the July 06 ’12 $32 and $34 strikes, looks for shares in the financial services provider to extend declines. Traders snapping up around 1,200 of the $34 put options for an average premium of $0.26 each profit at expiration next week should shares slip another 4.3% and settle below the breakeven price of $33.74. Low-probability bearish bets are on the rise at the July 06 ’12 $32 strike, with more than 500 puts purchased for a premium of $0.08 apiece. The value of these contracts could rise rapidly in the days ahead should JPM’s shares continue to come under selling pressure. On the flip side, traders buying far out-of-the-money weekly calls on the stock may see profits if the price of the underlying reverses course. Traders ready to benefit from a rebound in the stock price next week purchased around 850 of the $37 strike call for an average premium of $0.10 each and more than 220 of the $38 strike call for $0.05 apiece. Shares in JPM are hovering around their lows of the session as of midday in New York.
SLV - iShares Silver Trust ETF – Shares in the silver ETF have tanked since last summer, falling more than 40% from a 52-week high of $42.78 in August 2011, down to today’s current price and fresh 52-week low of $25.46. A burst of put buying on SLV…
RHT - Red Hat, Inc. – The software maker popped up on our scanners this morning after sizable trades were initiated in the front month calls. At first glance the activity could be mistaken for a pre-earnings bullish bet on shares in Red Hat ahead of the Company’s fourth-quarter release after the final bell on Wednesday. However, the transaction is likely bearish on RHT as the April expiry call activity appears to be tied to the sale of stock. Shares in Red Hat are up 1.7% at $52.74 in early-afternoon trade. The strategist responsible for the largest trade in RHT options appears to have purchased a 3,848-lot April $55/$57.5 call spread at a net premium of $0.75 per contract. The debit call spread was established seconds before a block of 50,000 shares in RHT sold at $52.70. The stock and options combo play positions the trader to profit on the short stock leg as long as Red Hat’s shares pullback sufficiently from the $52.70-level to offset the cost of buying the options. Meanwhile, the call spread hedges the position, protecting the trader from losses to the upside in the event that shares extend gains.
TSCO - Tractor Supply Co. – Shares in the largest U.S. retail farm and ranch store chain jumped 5.4% on Monday to hit a new 52-week high of $90.66. The Brentwood, Tennessee-based Company is scheduled to present at the Telsey Advisory Group’s 4th Annual Spring Consumer Conference on Wednesday morning. Options activity on Tractor Supply Co. this morning suggests some traders are positioning for the price of the underlying to extend gains in the near term. Around 795 calls changed hands at the May $95 strike against open interest of 51 contracts. It looks like most of these calls…
VIA B - Viacom, Inc. Class B – Options on the global entertainment content company are active ahead of the release of the firm’s third-quarter earnings report before the opening bell tomorrow. Investors are establishing both bullish and bearish positions on Viacom using near-term put and call options. Viacom’s shares are currently up 0.15% at $38.09 with just fewer than thirty minutes remaining in the trading session. Traders fearing the price of the underlying stock could fall following earnings initiated bear put spreads. Put players picked up approximately 3,000 in-the-money puts at the November $38 strike for an average premium of $0.77 each, and sold about the same number of puts at the lower November $36 strike for an average premium of $0.14 a-pop. Average net premium required to purchase the spread amounts to $0.63 per contract. Thus, investors are prepared to profit, or realize downside protection, in the event that shares in Viacom fall 1.9% from the current price of $38.09 to breach the average breakeven point at $37.37 by expiration day. Maximum potential profits of $1.37 per contract are available if VIA’s shares plunge 5.5% lower to trade below $36.00 by November expiration. Meanwhile, investors taking bullish stances ahead of earnings looked to the November $39 strike to purchase approximately 1,600 calls for an average premium of $0.32 per contract. Call buyers profit if Viacom’s shares rally 3.2% to surpass the average breakeven price of $39.32 by expiration day.
BJ - BJ’s Wholesale Club, Inc. – Reports that the warehouse club operator is considering hiring an advisor to review options including a potential sale to a leveraged-buyout firm in a deal that could net as much as $3 billion sent shares flying higher today and drew speculators to the…
Maybe there is a shining city on the hill with 1,000 points of light and if I simply close my eyes and believe in it, I will be transported there and everything will be wonderful and China will expand and Europe will expand and the US markets will rise and rise as the 18M unemployed people line up in the streets to cheer us as we all drive past them in our new cars as we head over to the gas station to pay $4 for gas, honking joyfully as we pass by each empty storefront and each abandoned home.
It was good to take quick bearish profits, as I warned in yesterday’s post because quick profits are all the bears get these days as it was indeed a "Whipsaw Wednesday," and Buffett’s warning went in one ear and out the other of investors so quickly that clearly there was no gray matter slowing it down along the way! I was very proud of our short plays on COF, HPQ, RTP, SRS, RTH and our DUG long but all had a half-life on their success so short you could have run an atomic clock with it. Fortunately, we had our bounce levels to guide us and our 3 of 5 rule to get out of bearish positions so the damage was more to our pride than our virtual portfolios.
Although I could see the turn in my 9:45 Alert to Members, I didn’t have the heart to make any bullish calls as it just seemed like such nonsense. By 10:12 we were even more concerned that something was up and I said: "Don’t get too excited bears. As I said in the post, profits need to come quickly off the table – this is not a market for riding 20% profits too far." Sadly, I then proceeded to make a short play on OIH at 10:26 that stopped out at 10:34 and an incredibly poorly timed idea to get the DIA $93 puts at 11:22, just minutes before the market went flying and stopped that one out too as we flew through our bounce zone of Dow 9,200, S&P 986, Nas 1,946, NYSE 6,400 and RUT 555. Now that they’ve held up so well, those levels now become our watch levels to the downside and it makes the previous support levels of Dow 9,100, S&P…
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.
Baron Rothschild, an 18th century British nobleman and member of the Rothschild banking family, is credited with the investment advice to “buy when there’s blood in the streets.” Well, with the Russell 2000 correcting about -14% and the S&P 500 -8% from their 2014 highs, you may not be witnessing drenched, bloody streets, but you could say there has been some “scrapes on the sidewalk.”
Although the Volatility Index (VIX – a.k.a., “Fear Gauge”) reached the highest level since 2011 last week (31.06), the S&P 500 index still hasn’t hit the proverbial “correction” level yet. Even with some blood being shed, the...
One of the items overlooked by the MSM regarding the dismal economic “recovery” of the last five years is the complete decimation of the self-employed.
There are currently 10 million people classified as self-employed in US. That’s 5% of the total workforce. Incidentally this is also a record low.
It is not coincidental the massive increase in reliance on Government handouts (46 million on food stamps, 47% of US households on some kind of Government assistance) has coincided with a significant drop in self-employment and independence.
It is also not coincidental that many entreprene...
Summary: Tomorrow the Social Security Administration will announce the 2015 COLA. A forecast based on data so far is 1.7%. But Q3 decline in energy prices strengthens the odds of a lower 1.6% adjustment.
Tomorrow the government will release the Social Security cost-of-living adjustment (COLA) for 2015. The adjustment will become effective with benefits payable for December but received by beneficiaries in January.
Although the first monthly Social Security payments were received in 1940, annual COLAs began being paid 35 years later in 1975. During 1975-82, COLAs were payable for June and received by beneficiaries in July. After 1982, COLAs were payable for December and received by beneficiaries in January.
Last week brought even more stock market weakness and volatility as the selloff became self-perpetuating, with nobody mid-day on Wednesday wanting to be the last guy left holding equities. Hedge funds and other weak holders exacerbated the situation. But the extreme volatility and panic selling finally led some bulls (along with many corporate insiders) to summon a little backbone and buy into weakness, and the market finished the week on a high note, with continued momentum likely into the first part of this week.
Despite concerns about global economic growth and a persistent lack of inflation, especially given all the global quantitative easing, fundamentals for U.S. stocks still look good, and I believe this overdue correction ultimately will shape up to be a great buying opportunity -- i.e., th...
Now that bitcoin has subsided from speculative bubble to functioning currency (see the price chart below), it’s safe for non-speculators to explore the whole “cryptocurrency” thing. So…is bitcoin or one of its growing list of competitors a useful addition to the average person’s array of bank accounts and credit cards — or is it a replacement for most of those things? And how does one make this transition?
With his usual excellent timing, London-based financial writer/actor/stand-up comic Dominic Frisby has just released Bitcoin: The Future of Money? in which he explains all this in terms most readers will have no tr...
Reminder: OpTrader is available to chat with Members, comments are found below each post.
This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).
We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options.
Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.
To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here
What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices? In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...
Shares in Apple (Ticker: AAPL) are near their highs of the session in the final hour of trading on Wednesday, adding to the muted gains seen earlier in the day, following the release of the September FOMC meeting minutes and after activist investor and Apple shareholder Carl Icahn tweeted, “Tmrw we’ll be sending an open letter to @tim_cook. Believe it will be interesting.” Icahn’s tweet hit the ether at 2:33 pm ET and was met with a spike in volume in Apple shares. The stock is currently up 2.0% on the day at $100.75 as of 3:15 pm ET.
Reminder: Pharmboy is available to chat with Members, comments are found below each post.
Well PSW Subscribers....I am still here, barely. From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.
First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices. Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment. Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer. For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...
Note: The material presented in this commentary is provided for
informational purposes only and is based upon information that is
considered to be reliable. However, neither MaddJack Enterprises, LLC
d/b/a PhilStockWorld (PSW) nor its affiliates
warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither PSW nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance, including the tracking of virtual trades and portfolios for educational purposes, is not necessarily indicative of future results. Neither Phil, Optrader, or anyone related to PSW is a registered financial adviser and they may hold positions in the stocks mentioned, which may change at any time without notice. Do not buy or sell based on anything that is written here, the risk of loss in trading is great.
This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only intended at the moment of their issue as conditions quickly change. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.