Private Equity Chatter Drives Bullish Activity In HOT Call Options
by Option Review - November 2nd, 2011 1:10 pm
Today’s tickers: HOT, QCOM, XRT & GRMN
HOT - Starwood Hotels & Resorts Worldwide Inc. – Call options on the owner and operator of brand-name, upscale, full service hotels, including W®, Westin® and Le Meridien®, are changing hands at a rapid clip this morning. Shares in the hotel and leisure company rallied sharply on Wednesday, rising as much as 7.7% to an intraday high of $52.05 in the first half of the session. HOT calls may be active on renewed private equity takeover chatter, according to flyonthewall.com. Indeed, it does seem many players populating Starwood options today are positioning for the price of the underlying to rally substantially by year end. Trading traffic is heaviest at the Nov. $55 strike, where more than 10,400 calls changed hands against open interest of 1,974 contracts. It looks like most of these call options were purchased for an average premium of $0.60 per contract. Bulls long the calls profit at expiration if shares in Starwood Hotels rally another 6.8% over today’s high of $52.05 to surpass the average breakeven price of $55.60. Call volume is heavy in the December contract, as well. Traders appear to have purchased more than 1,300 calls at the Dec. $55 strike for an average premium of $1.39 each, and picked up another 760 call options up at the Dec. $57.5 strike at an average premium of $0.73 a-pop. Higher-strike call buyers may profit at December expiration in the event that HOT’s shares jump 11.9% to exceed the average breakeven point on the upside at $58.23. Investors have exchanged more than 27,000 option contracts on the stock as of 11:30 am in New York.
QCOM - Qualcomm, Inc. – Large prints in Qualcomm call and put options appear to be the work of an investor putting the strangle-hold on the stock heading into the company’s fourth-quarter earnings report after the close of trading today. The short strangle benefits the trader most if the stock trades within a range of $50.00 and $52.50 at expiration in a couple of weeks. Shares in QCOM rose 2.8% to $51.55 in the first half of the session. It looks like the strangle-strategist sold 10,000 calls at the Nov. $52.5 strike for a premium of $1.70 each, and sold 10,000 puts at the lower Nov. $50 strike at a premium of $1.50 apiece. Premium pocketed on the position amounts to $3.20 per contract. The investor may keep the…
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DiggThrilling Thursday – Comedy or Tragedy?
by Phil - January 6th, 2011 7:29 am
Russell 8-0-0, Russell 8-0-0! Wherefore art thou Russell8-0-0? Deny thy dollar and refuse to fall, or, if thou spike not, be but consolidating at resistance and I’ll happily Capitulate….
If it’s good enough for fair Juliet, it’s going to have to be good enough for us as the Russell finally makes it over our 800 target – the last barrier that was keeping us on the bearish side. Above these lines – it’s time to stop worrying and love the rally as we romanticize the deadly combination of QE2 the Obama tax cuts as: "A pair of star-crossed lovers take their life, whose misadventured piteous overthrows doth with their death bury their parents’ strife."
Of course Willie Shakespeare has nothing on Jimmy Cramer, who’s pearls of wisdom are also sure to be repeated centuries from now. Last night the Bard of Wall Street sang a veritable sonnet in praise of the stock market and foretold a tale of woe for anyone dumb enough to take profits into this rally:
We got the correction this morning, Dow fell 35 points… Today’s action was proof positive that you need to stop worrying and learn to love corrections… What scares me, and what should scare you, is that if you sell your stocks here, you won’t be able to get back in. You should be worried about stocks getting away from you, because I think we can be on the verge of something big – something very positive. FORGET the fact that stocks have run up a lot in the last 6 months. For more than 10 years, this market has done nothing, THAT is the most important frame of reference…
What’s changed? We are finally starting to see big breakouts from a slew of breakouts from several large cap companies including: CAT, UTX, FCX, SWK, CBE, ETN, CSX, UNP and so many other big industrials. Ladies and gentlemen, we have waited over a decade for this move and what do people want to do now that it has arrived? They want to sell! That’s right, they want to sell. That’s right. They want to dump the stocks (sell button sound effect) because they are up way too much short-term or because they think the moves are illusory or driven by short squeezes that will
…
Meet Quadroid
by ilene - November 18th, 2010 2:48 pm
Meet Quadroid
Courtesy of Joshua M Brown, The Reformed Broker
Just as the Microsoft Windows/Intel Pentium combo (Wintel) came to rule the PC business, smartphones are starting to standardize around their own Big Two. According to a recent study, that standard is the new Qualcomm chip/ Google Android operating system one-two punch. The cool kids are calling it Quadroid.
CNNMoney’s David Goldman takes us inside the numbers:
But now, for the first time ever in the wireless ecosystem, a standard platform is emerging: At least a dozen handset makers have brought to market more than 90 different smartphones that run Android, and more than three quarters of those handsets have Qualcomm chips embedded in them, according to a new study by consultancy PRTM.
The Qualcomm-Android standard, or "Quadroid" as PRTM calls it, is becoming a parallel to the Windows-Intel, or "Wintel," standard that developed in the 1990s.
Qualcomm held their Analyst Day meeting yesterday and the The Street apparently loved what they heard. Goldman Sachs reiterated their Conviction Buy and raised their target to 58 this morning. Credit Suisse upped their target to 60 and gave it a buy rec as well.
As far as Google, Android is not the engine driving the stock right now but it is obviously of immense importance to the company strategically.
It’s too early to tell if this Qualcomm/Google duopoly is really going to own the space but so far their partnership appears to be the front-runner. If you’re trading technology stocks, wireless plays, chips, operating systems etc, you may want to get up on this story.
Source:
Android and Qualcomm are the New Wintel (CNNMoney)
Qualcomm Upgrades/Downgrades (TheStreet)
Advanced Pattern Recognition: Omega III Weekly Wrap-Up
by Phil - June 19th, 2010 6:46 am
What a fine and predictable week it was!
How can you not have fun when the market does exactly what you expect it to do every day? Why it’s almost as if we stole Goldman Sach’s evil playbook (and the Russell once again is at 666) so we too can make profits EVERY SINGLE TRADING DAY – just like they do! This is a real testament to my famous saying:
We don’t care IF the game is rigged, as long as we know HOW it is rigged so we can place our bets accordingly.
Remember it was last summer that Goldman’s secret trading program was stolen. At the time, Goldman Sachs asserted that: "There is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." I believe this was a misquote and what GS meant to say was that there was a danger someone ELSE could use it to manipulate the markets in unfair ways. Was it just a coincidence that the indictment of computer thief Sergey Aleynikov on Feb 11th coincided with the beginning of this year’s massive rally or was that the day GS regained sole control of their pet program?
Does this sound conspiratorial? Well perhaps then you haven’t read Tim Lavin’s "Monsters in the Markets," where he points out: "Algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete… At least a few high-frequency traders have learned to make a killing by detecting the more simplistic algo strategies deployed by basic pension funds and mutual funds, buying the next stock the funds plan to buy, and then selling it to them at a higher price. This may not be illegal, but it’s almost certainly unfair to the funds’ investors. “It is increasingly clear that there are quite a number of high-frequency bandits in the high- frequency-trading community who pump up volume statistics, front-run investor orders, increase transaction costs, and hurt real liquidity,” according to former NASDAQ vice-chairman David Weild."
We certainly know better than to trust our money to fund managers! Last Friday ("Pattern Recognition 101"), we determined that the TradeBots were following the rally pattern we now call Omega III and that meant we expected the day to finish…
Bears Descend on Genoptix as Shares Nosedive
by Option Review - June 16th, 2010 4:10 pm
Today’s tickers: GXDX, MRVL, QCOM, SMH, ORCL, FUQI & SMTS
GXDX – Genoptix, Inc. – Shares of the specialized laboratory service provider engaged in delivering personalized and comprehensive diagnostic services to community-based hematologists and oncologists plunged 25.79%, crashing straight through its now defunct 52-week low of $21.75, to reach a new low of $16.98 with just over 10 minutes remaining before the closing bell. The firm’s shares plummeted after the California-based company said it expects second-quarter net income of $0.30 per share, which disappointed analysts expecting an average of $0.40 a share. One bearish options investor took advantage of Genoptix’ hemorrhaging shares by initiating a credit call spread in the August contract. The trader appears to have sold 2,000 calls at the August $17.5 strike for a premium of $1.80 each, spread against the purchase of the same number of calls at the higher August $22.5 strike for a premium of $0.50 apiece. The investor pockets a net credit of $1.30 per contract, and keeps the full amount as long as shares of the underlying stock do not rally above $17.50 ahead of expiration day. The parameters of the transaction dictate maximum potential profits of $1.30 per contract, however, potential losses faced by the responsible party sum to a maximum of $3.70 per contract if GXDX shares rebound sharply and exceed $22.50 by August expiration. Losses start to accumulate for the investor if shares rally 10.6% from the current price of $16.98 to breach the effective breakeven price of $18.80 by expiration day in August.
MRVL – Marvell Technology Group Ltd. – Bullish and bearish options trading strategies were initiated on the semiconductor maker this afternoon with shares of the underlying stock up more than 1.6% at $19.25 as of 2:40 pm (ET). Optimists purchased call options in the June and July contracts to position for continued appreciation in Marvell’s share price. Investors picked up approximately 2,500 now in-the-money calls at the June $19 strike for an average premium of $0.34 apiece. Call buyers at this strike price are positioned to make money if MRVL shares rally above the average breakeven price of $19.34 by expiration on Friday. Buying interest spread to the higher July $20 strike where 1,100 call options were coveted at an average premium of $0.52 per contract. Investors long the calls profit only if shares of the underlying stock jump 6.6% to surpass the average breakeven…
Wonderful Weekly Wrap-Up
by Phil - June 12th, 2010 8:28 am
I love it when a plan comes together!
Last week, I felt like I was going to have to call Animal Control to help me fight off the bears. As I mentioned in last week’s Wrap-Up, all 14 misses (out of 55 trade ideas for the week) we had were bullish plays that we were grabbing on the way down. On Friday we went bullish on USO, SSO, DIA, TBT (well, we’re always bullish on TBT), AET, ABX, Copper Futures and even poor BP. Those followed up on bullish plays we had taken on Thursday on TSRA, USO, MEE, FCX, EEM, ERX and XOM. We went into the weekend still bearish but we were excited about flipping back to bullish. My closing comment in the Wrap-Up was: " I’m hoping for a blow-off spike down on Monday with heavy volume, hopefully followed by a recovery over the next few days" and, gosh darn it, wouldn’t you know that’s EXACTLY what we got.
I don’t MAKE the markets do these things, I simply tell you what is going to happen and how you can make money on it… Needless to say, we had a LOT of fun this week at PSW! Last weekend, however, was such a bearish frenzy in the MSM that it was making our Members nervous and THAT I do not tolerate so I wrote : "The Worst-Case Scenario: Getting Real With Global GDP!" to illustrate why I felt our bottoms would hold and I began a Top 20 Buy List on Sunday and boy did we get some fabulous entries this week!
Monday Market Movement – Will We Survive?
As I said on Monday Morning: "I already stuck my neck out calling a bottom so now we’re just waiting patiently." We were disappointed to have not gotten a stronger statement from the G20 over the weekend but it was just the Finance Ministers, so we weren’t expecting too much until the big boys meet at the end of the month. While we were in a buying mood, I cautioned against getting too bullish until we took back our anticipated "weak bounce" levels, which were the orange lines on Monday’s Multi-Chart:
I pointed out (on another Multi-Chart) that Europe was already gathering strength so we were pretty confident things would go our way but, as I said in the 9:50 Alert to Members, SOX 340 and TRANQ 2,000 had be taken back before we could feel confident. My outlook for the day was:…
Qualcomm Bull Itching for a Sharp Rally in Shares by July Expiration
by Option Review - April 15th, 2010 4:48 pm
Today’s tickers: QCOM, KBE, XRT, GE, BAC, F, UPS, UAUA & NTRI
QCOM – Qualcomm, Inc. – The manufacturer of digital wireless telecommunications products and services received a vote of confidence by one optimistic options investor who purchased a debit call spread in the July contract today. Qualcomm’s shares rallied 0.55% in late afternoon trading to stand at $42.84 as of 2:45 pm (ET). The trader initiated the call spread by purchasing 4,000 lots at the July $46 strike for a premium of $1.00 each, marked against the sale of 4,000 calls at the higher July $49 strike for $0.37 apiece. Net premium paid for the bullish play amounts to $0.63 per contract, thus positioning the investor to amass maximum potential profits of $2.37 per contract should Qualcomm’s shares rally 14.4% over the current value of the stock to $49.00 by expiration day in July. The parameters of the transaction suggest the responsible party hopes Qualcomm’s share price shifts toward the stock’s current 52-week high of $49.80, attained back on January 8, 2010, in the next several months to expiration.
KBE – SPDR KBW Bank ETF – Shares of the SPDR KBW Bank fund, which replicates the performance of the KBW Bank Index, slipped 0.75% during the course of the trading day to stand at $28.18 with 35 minutes remaining in the session. Earlier today, one investor pocketed a net credit by selling a large chunk of call options spread against the purchase of put contracts. The trader sold 28,260 calls at the May $29 strike for a premium of $0.58 each, and purchased the same number of puts at the lower May $27 strike for $0.40 apiece. A net credit of $0.18 per contract pads the investor’s wallet as long as shares of the underlying fund trade below $29.00 through expiration day in May. Additional profits are available should shares slip beneath $27.00 in the next several weeks. The transaction may be linked to an underlying share position. If this is the case, the put options serve as downside protection should the fund’s share price erode, but the short position in calls could result in the investor having the underlying shares called away from him at expiration should the call contracts land in-the-money at that time.
XRT – SPDR S&P Retail ETF – A massive bearish transaction on the XRT, an exchange-traded fund which seeks to replicate the performance…
Qualcomm Tries to Woo Investors with Massive Buyback and Dividend Hike
by ilene - March 3rd, 2010 11:15 am
Qualcomm Tries to Woo Investors with Massive Buyback and Dividend Hike
Courtesy of Ockham Research
San Diego-based technology giant Qualcomm (QCOM) has been in a steady downtrend since the beginning of 2010 falling nearly 30% from the high point in January. Much of the decline was in response to a weaker than expected revenue outlook and expected margin pressure for the year ahead, even though the company reiterated their earnings guidance shares fell more than 14% on that day. Today, the stock continued its now 7 day consecutive slide, with the technology sector leading the market higher, QCOM fell by another 3%. This is not the sort of performance one would expect from a company that is deeply tied to one of the market’s hot sectors, with a market leading position in producing computer chips for mobile devices.
Desperate for some good news, management has taken action to combat the declines; they announced a 12% increase to quarterly dividends as well as authorization of a $3 billion share repurchase. The new quarterly dividend of $.19 will be effective on payments after March 28th, and the $.76 annual payout implies a 2.1% yield. Also in the press release, the company’s trumpeted that it has returned $12.6 billion to shareholders dating back to 2003, which is certainly commendable. However, the share repurchase comes with no expiration, so they get the benefit of the good press with no implied time-table to spend the cash should better uses for capital arise.
These shareholder-friendly moves have sent shares higher in after hours trading, but will this be the silver bullet that will turn QCOM stock around? Analysts and investors have been scared off by falling average unit selling prices on some of their products, but we think those concerns at this point have been nearly priced in. While there still may be some further downside, we think the value has become attractive following the pressure the shares have been under.
As of the beginning of this week, we rated QCOM as Fairly Valued, but was very close to the threshold to upgrade it. Any further decline in price or improvement in fundamentals may be enough to push it to Undervalued, and the dividend increase will clearly be a positive fundamental factor. In addition, QCOM’s historical price-to-sales has ranged from 6.8x to 11.6x, but the current metric is only 5.8x. This company has lowered…
Qualcomm Strangle Suggests Range-Bound Shares Until October Expiration
by Option Review - February 24th, 2010 4:40 pm
Today’s tickers: QCOM, ETFC, CAL, SLB, AUY, EEM, ADSK, NFLX & JNPR
QCOM – Qualcomm, Inc. – Options activity on the digital wireless communications products and services firm indicates shares of the underlying stock could remain range-bound through October expiration. Qualcomm’s shares are down more than 2% to $37.72 with approximately one hour remaining in the trading session. Analysts at Credit Suisse maintain a ‘neutral’ rating on the stock, but slashed its target share price for QCOM to $40.00 from $45.00 and lowered its earnings guidance for 2010 and 2011. According to one options investor, Qualcomm’s shares are likely to trade within a certain range for the next eight months. The trader acted on the range-bound prediction by selling a strangle. The investor sold 10,000 puts at the October $35 strike for a premium of $2.30 each and shed 10,000 calls at the higher October $44 strike for a premium of $1.30 apiece. Gross premium pocketed by the strangler amounts to $3.60 per contract. The trader keeps the full amount of premium only if Qualcomm’s shares trade above $35.00 and below $44.00 through expiration. The premium received acts as a limited buffer against losses should shares swing above or below the strike prices described above. However, losses accumulate for the investor if shares rally above the upper breakeven price of $47.60, or if the stock falls below the lower breakeven point at $31.40 ahead of expiration day in October. Qualcomm’s share price exceeded the upper breakeven point as recently as January 21, 2010, when the stock traded as high as $49.00. Finally, shares have not traded lower than $31.40 – the lower breakeven price on the strangle – since December 5, 2008, when the stock dipped down to $29.33.
ETFC – E*Trade Financial Corp. – Shares of the financial services firm are down 0.65% to $1.54 in late afternoon trading, but options activity on the stock was initiated by bullish investors positioning for a rebound in share price. One optimistic individual established a ratio call spread in the October contract. The trader bought 5,000 call options at the October $2.0 strike for a premium of $0.18 each and sold 10,000 calls at the higher October $3.0 strike for about $0.04 apiece. The investor paid a net premium of $0.10 per contract for the transaction, but stands ready to accrue maximum potential profits of $0.90 per contract if E*Trade’s share price…
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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
(