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
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DiggMarvell Technology Group Ltd. Call Options Fly Off The Shelves
by Option Review - June 11th, 2010 4:15 pm
Today’s tickers: MRVL, EFA, MSFT, PFE, BMY, BAC, GME, NFLX & PM
MRVL – Marvell Technology Group Ltd. – The semiconductor maker popped onto our ‘most active by options volume’ market scanner late in the session due to rampant call buying in the June and July contracts. Marvell’s shares are higher by 1.65% to $17.74 just before 3:30 pm (ET). Near-term optimistic individuals itching for continued appreciation in the price of the underlying stock purchased approximately 9,000 calls at the June $18 strike for an average premium of $0.33 apiece. Investors long the calls make money if Marvell’s shares rally at least 3.325% from the current price of $17.74 to exceed the average breakeven point to the upside at $18.33 by expiration day in one week. Buying interest spread to the July $18 strike where bullish players paid an average premium of $0.89 per contract to take ownership of some 5,100 call options. Traders holding these contracts accumulate profits as long as MRVL’s shares increase 6.5% to surpass the average breakeven price of $18.89 by July expiration.
EFA – iShares MSCI EAFE Index Fund – The implementation of a large-volume short strangle on the EFA, an exchange-traded fund designed to provide investment results that correspond to the price and yield performance of the MSCI EAFE Index – an index which includes stocks from Europe, Australasia and the Far East, indicates one options strategist expects shares of the underlying fund to remain range-bound through September expiration. Shares of the EFA are trading lower by 0.63% to stand at $48.53 with less than 45 minutes remaining before the closing bell. The investor responsible for the strangle sold 16,000 puts at the September $42 strike for an average premium of $1.54 apiece in combination with the sale of the same number of calls at the higher September $52 strike for an average premium of $1.15 each. Gross premium pocketed on the transaction amounts to $2.69 per contract. The strangle-seller keeps the full premium received as long as the fund’s share price trades within the boundaries of the strike prices described through expiration. The short stance assumed in both call and put options expose the responsible party to losses in the event that shares rally above the upper breakeven price of $54.69, or if shares trade beneath the lower breakeven point at $39.31 at expiration. We note that shares of the fund have not…
Prior Weekly Wrap-Up – February Expiration Day Special!
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 virtual portfolio to each one (20%) would give you back 40% of your virtual 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 virtual portfolio that is bullish caught a…
Goldman-Bulls Foresee Greener Pastures by July
by Option Review - January 26th, 2010 5:59 pm
Today’s tickers: GS, AMLN, LYV, KFT, PM, IYR, MAS, VMW, BKS & CAL
GS – Goldman Sachs Group, Inc. – Option traders assumed medium- and long-term bullish stances on the global investment banking and management firm today to position for a rebound in shares in the next six to twelve months. Shares edged 1.65% lower during the session to stand at $152.43 as of 2:45 pm (EDT). One optimistic individual sold 2,500 put options for a premium of $8.90 apiece at the July $140 strike in order to finance the purchase of 2,500 calls at the higher July $175 strike for about $6.10 each. The trader receives a net credit of $2.80 per contract on the risk reversal play, and keeps the full amount as long as Goldman’s shares trade above $140.00 through expiration in July. Additional profits amass if the stock price jumps 15% over the current price to surpass the $175.00-level by expiration. Longer-term optimism appeared in the January 2011 contract where another Goldman-bull purchased a call spread. The investor bought approximately 2,300 call options at the January 2011 $160 strike for an average premium of $17.38 apiece, and sold the same number of calls at the higher January 2011 $195 strike for about $6.50 each. The net cost of the spread amounts to $10.88 per contract. Maximum potential profits of $24.12 per contract accumulate if Goldman’s shares surge 28% from the current price to $195.00 by expiration next January.
AMLN – Amylin Pharmaceuticals, Inc. – Shares of biopharmaceutical company, Amylin Pharmaceuticals, are up more than 11% to a new 52-week high of $19.39 in afternoon trading. The stock opened the session even higher at $19.97 on “optimism that the company’s new version of diabetes treatment Byetta will be approved following U.S. regulators’ clearance of a similar drug”, according to an earlier report by Elizabth Lopatto at Bloomberg. Option traders initiated bullish plays on the stock to position for upward movement in AMLN shares, which is likely to occur if the Food & Drug Administration approves the once-weekly version of Byetta, known as Byetta LAR. One investor established a bullish risk reversal by selling 10,000 puts at the February $17.5 strike for a premium of $0.50 each, spread against the purchase of 10,000 calls at the higher February $20 strike for $0.80 apiece. The net cost of the reversal amounts to $0.30 per contract and positions the trader…
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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
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