by Option Review - December 10th, 2012 1:52 pm
Options brief will resume December 12, 2012.
by phil - January 17th, 2012 7:54 am
Isn't this exciting!
The pre-markets are up 1% after a long weekend. That hasn't happened since – two weeks ago! Of course last Tuesday, we were jammed up as well and the Tuesday after Christmas, we were jammed up as well but THIS TIME – we're REALLY feeling it, right?
The funniest thing is the way they have dozens of idiots saying all sorts of ridiculous things on CNBC and not one of them mentions even the vaguest hint of deja vu in what has been the most consistent pattern of late 2011, early 2012.
On this Dollar chart from Scott Pluschau, you can see the dives that are occasionally taken to goose the markets and we have another one this morning with the Dollar down 1%, making the 1% pop in the futures slightly less impressive when taken in context.
This time may be different because, according to Friday's Legacy Commitments of Traders Report released by the CTFC, Commercial Traders are now net short on the Dollar to the tune of 59,023 to just 6,061 longs – about a 10:1 ratio that is EXTREME to say the least. Non-Reportable, Non-Commercial Traders (ie. Speculators), on the other hand, are almost 10:1 the other way with 9,765 long contracts and just 1,390 shorts. Reportable Non-Commercial Traders (Hedge Funds) fill out the rest of the longs with 52,644 long contracts against just 8,057 shorts.
To some extent, hedge funds are also speculators and usually you would assume their bets are covered but that's kind of hard to see with a 7:1 long/short ratio. Keep in mind that Commercial Traders are institutions with business reasons to hedge – they are not going to be flip-flopping their positions so they will NOT be buying Dollars just because they get cheaper. So, if it all hits the fan and the Funds shift to short – we could get quite a tidal-wave of Dollar selling.
That's an odd sort of positions for the speculating class to be taking (super-long on the Dollar) considering the possibility of a highly dilutive quantitative event (QE3) in the very near future. This is why we can't be gung-ho bearish – tempting though it may be and this is why every little rumor of Europe being "fixed" sends the Dollar flying down – there are no buyers – only nervous long Dollar holders.
by Option Review - November 28th, 2011 12:45 pm
Today’s tickers: SINA, BLK, KKD & SCHW
SINA - Sina Corp. – Shares in SINA Corp. quickly surrendered gains enjoyed at the open of U.S. markets, plunging as much as 11.2% to $56.05 before recovering somewhat to stand 4.5% lower on the day at a fresh 52-week low of $60.30, as of 11:30 AM in New York trade. The steep drop in SINA’s shares reportedly followed what some say is the misreading of an article in the Chinese-language version of the Wall Street Journal that mentioned the company in close proximity to research firm Muddy Waters. Shares are well off their lowest point of the session, but have not fully recovered from the selloff. Investors were quick to initiate bearish stances on the stock using put options after the stock turned-tail in early trade. Heavy trading traffic in the weekly put options indicates some traders are taking short-term bearish positions on the Chinese internet company in case shares in the name continue to come under fire over the next several sessions to expiration. Deep out-of-the-money puts are attracting substantial volume, with more than 3,900 puts changing hands at the Dec. ’02 $50 strike against open interest of just 14 contracts. It looks like investor purchased the majority of the puts at this strike for an average premium of $0.85 a-pop. Put volume exceeds 3,500 contracts up at the Dec. ’02 $55 and $57.5 strikes, as well. Options expiring on December 16 are quite active this morning, although not all transactions appear to be the work of bearish players. One investor sold a block of 3,881 puts at the Dec. $40 strike to pocket premium of $0.50 per contract. The trader walks away with the full amount of premium as long as shares in SINA Corp. top $40.00 at December expiration. SINA’s shares are down roughly 60.0% off their April 19, 2011, 52-week high of $147.12. Put buyers may profit if shares in the name continue to slide in the next few weeks.
BLK - BlackRock, Inc. – The investment management company’s shares took off this morning, rallying as much as 6.0% to an intraday high of $160.34. The sharp rebound erases the prior week’s pullback, although the stock continues to trade at a roughly 25% discount to its March 3, 2011, 52-week high of $209.77. One investor responsible for big prints in Jan. 2012 contract put options is prepared in the event that BlackRock’s…
by phil - November 22nd, 2011 7:43 am
Long live the Debt! In case you are voting in the next election – here are 12 people to get rid of. Much as I may blame one party over another for this failure, they all deserve what's coming to them for A) Pretending they were going to accomplish something and B) For not now getting up and making very strong statements denouncing the corruption in politics that make it impossible for Congress to do the Nation's business anymore.
In case you happen to be a Fox News viewer, I will try to keep this VERY simple because, as it turns out, we now have definitive studies that prove Fox News MAKES YOU STUPID. Of course, it is possible that only stupid people watch Fox News but I know many people who think they are smart and watch Fox News so I have to blame Fox News here as do researchers at Farleigh Dickenson University who found "The results show us that there is something about watching Fox News that leads people to do worse on these questions than those who don’t watch any news at all." As I can tell you from raising my own children to be good citizens:
The biggest aid to answering correctly is The Daily Show with Jon Stewart, which leads to a 6-point decrease in identifying the protesters as Republicans, and a 12-point increase in the likelihood of giving the correct answer. "Jon Stewart has not spent a lot of time on some of these issues," said Cassino. "But the results show that when he does talk about something, his viewers pick up a lot more information than they would from other news sources."
Watching Fox News, by the way, led to an 18-point disadvantage (out of 53% of all respondents) in being able to answer questions like "Were Egyptians successful in overthrowing Hosni Mubarak" or "Has the Syrian uprising been successful" but that was a Fox viewer's area of expertise compared to having a clue of what is going on in American politics other than "Obama sucks." Tied with Daily show viewers for best informed were NPR supporters but, sadly, only…
by phil - October 19th, 2011 8:08 am
GRANDPA JOE: But this roof is made of glass. It’ll shatter into a thousand pieces. We’ll be cut to ribbons!
WILLY WONKA: Probably.
Is today going to be the day? After pressing against our breakout levels for a week, today do we should finally have the gas to get over the top or will our Must Hold levels keep acting like a solid barrier? Oddly enough, I was asking the same question on August 30th, when I asked if we were "Breaking Higher or Dressing Windows?" My comment from that morning works for today as well:
No way to slow down. That line from Tull’s "Locamotive Breath" keeps playing in my head as I look at these rumor-driven markets and contemplate that we MUST keep going higher – or we will fall. On the whole, that’s not generally a winning long-term investing premise BUT – it does so happen to be the entire principal on which space travel is based so let’s not discount it entirely.
Willy Wonka understood stock market physics, there had to be enough power to get through that overhead resistance or it was going to be a very painful test of the top (like the one we had in August). Since our July dip, we’ve come back for another try at our Must Hold lines 4 times but the volume has been substantially lower than it was in July, leading us to believe it is only TradeBots, and not Oompa Loompas, who are buying this market.
by Option Review - October 14th, 2011 1:58 pm
Today’s tickers: JNPR, WFT, SCHW & XLF
JNPR - Juniper Networks, Inc. – Shares in the provider of high-performance network infrastructure rallied as much as 5.2% at the start of the session to a one-month high of $21.50. The stock gained nearly 30.0% off its October 4 low of $16.67, but even so continues to trade at a more than 50.0% discount to its March 8 year-to-date high of $45.01. Juniper’s morning rally has lost some steam this afternoon, with the stock trading higher by 1.6% at $20.75 as of 12:25 pm EDT.
The company releases third-quarter earnings after the final bell on Tuesday, and one doubting Thomas is betting the report will do little to rocket-launch the shares to the upside. It looks like the investor sold a block of 13,000 calls at the Oct. $24 strike to pocket premium of $0.13 per contract. The trader keeps the full amount of premium as long as JNPR’s shares fail to rally above $24.00 at expiration next week. The transaction was not tied to stock, but the investor could already hold a large long position in the underlying. If no stock is held, potential losses the investor may ultimately be forced to swallow are unlimited. But, shares in JNPR would need to surge 16.3% over the current price of $20.75 in order for the trader to start losing money above the effective breakeven share price of $24.13 at October expiration. Shares in Juniper Networks have languished beneath $24.00 since July 28.
WFT - Weatherford International Ltd. – The energy sector is up big and is presently outpacing rallies…
by phil - July 13th, 2010 8:19 am
Wheeeee, this is fun!
It's only been a week since I called for "Turnaround Tuesday" and asked the question "Will CNBC Apologize to America" for their ridiculous, sickening parade of negativity that chased their poor viewers out of the market (now 600 points ago) by completely misrepresenting the economic outlook in order to protect the TERRIBLE advice given by Jim Cramer, the Fast Money Crew, their sponsors etc. etc. – it was all one national frenzy of media negativity designed to shove retail investors entirely out of the market while the cognoscenti went shopping.
It's not just CNBC, of course, it's a problem with the whole MSM but I ranted about corporate (top 0.01%) control of the media last week so let's move on as we wave bye-bye to all the beautiful sheeple who were kind enough to sell us their stocks at the bottom, despite my warnings. Our 500% upside plays are now well on their way to making 500% for us and our "9 Fabulous Dow Plays Plus a Chip Shot" are also looking good already. Even the trade ideas I mentioned right in last Tuesday's post are well on track as I said last week:
On Friday, I had said to Members right at 9:38, in the Morning Alert: "If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. Out of short-term short trades if you haven’t already. Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short."
The latter was a reference to our 500% upside plays. We also went with EEM July $38 calls at .99, and a QLD $50/53 bull call spread for $1.30 (selling puts as well for more profits) as well as long plays on RIMM, AA, HOV, VLO and TASR. My optimism was based on the considered TA analysis I shared with Members at 2:39:
After completing last month’s "Omega III" market pattern on the Trade Bots, it’s now time to spring the bear trap and run the "Apha II" into options expiration
by phil - January 5th, 2010 8:27 am
Wow – what a lot of work to get back to last Tuesday's high!
As usual, the vast majority of gains came in pre-market trading and the rest came in light-volume, early morning trading while the rest of the day was dominated by every buyer finding a willing seller for 75% of the day's volume. We saw what happened on Thursday when someone big wants to sell and there are no buyers so we'll see how long the bull's luck (manufactured or otherwise) will hold out as we begin to get economic data along with some early earnings reports.
The Ag sector popped 2% yesterday ahead of tonight's earings from MOS with MON checking in tomorrow morning so we'll see how wise those last-minute bets were in short order. SONC also has earnings tonight and we like those guys long-term. SONC makes a decent buy/write candidate as you can buy the stock for $10.29 and sell June $10 puts and calls for $2.25 for a net entry of $8.04 with a very nice 24% profit if called away at $10 and an average entry of $9.02 (a 12% discount) if more stock is put to you below $10 in June.
FDO and WOR also report tomorrow morning. FDO will be interesting but a weak dollar probably hurt them last quarter. Tomorrow night we hear from BBBY, BLUD, OHB and Sonic competitor RT, who seem a bit pricey at $7.50. Thursday we get our first real builder, LEN along with STZ and TXI. After the bell on Thursday we hear from APOL, CRI and SCHN with GBX and PSMT on Friday. AA officially kicks of earnings season next Monday with GAP, INFY, KBH, BGG, SCHW, SHFL, INTC and JPM highlighting the reporters.
We have plenty of data this week including Factory Orders and Pending Home Sales at 10 am along with December Auto Sales throughout the day (did you get a new car for Christmas?). Tomorrow is jobs day, with the ADP Report and Challenger Job Cuts ahead of the bell followed by ISM Services (yesterday's ISM was a nice beat) and, of course, Crude Inventories at 10:30 which are unlikely to sustain $82 oil (USO Jan $40 puts for .80 are a good way to play this). We talked about the other stuff yesterday so I won't repeat it – suffice to say…
by Option Review - September 15th, 2009 4:11 pm
Today’s tickers: JOYG, VRSN, GE, DAL, TER, SCHW & KR
JOYG - The mining equipment manufacturer has enjoyed a more than 2.5% increase in shares during today’s session to stand at $44.40. Investors hoping for continued bullish momentum for the stock busied themselves with buying up call options in the September contract. It looks like nearly 8,000 call options were coveted for an average premium of 85 cents apiece at the now in-the-money September 44 strike. Investors holding the calls have the right to take delivery of the stock at $44.00, but they will not realize profits unless shares of JOYG climb through the breakeven point at $44.85 by expiration on Friday. – Joy Global, Inc. –
VRSN - Internet infrastructure services provider, VeriSign, jumped onto our ‘most active by options volume’ market scanner today after 25,000 call options were traded by one investor targeting the December contract. Shares of VRSN are currently trading flat on the day at $22.46. The chunk of 25,000 calls were traded at the out-of-the-money December 25 strike for an average premium of 87 cents per contract. It appears that the calls were tied to shares of the underlying stock. It could be the case that the investor is taking a bullish stance on VRSN by initiating a covered call. If this is the case, the trader purchased shares of the underlying and simultaneously shed call options. This strategy would partially offset the cost of getting long the stock by the amount of premium received and establish an effective exit strategy. The covered call reduces the price paid per share to about $21.59 and positions the trader to attain maximum potential gains of 3.41 – or 16% – in the event that the stock rallies higher than $25.00 by expiration. Shares would be called from him by expiration day if the calls were to land in-the-money. Another possible motivation for the call transaction is that the investor is decidedly bearish on VeriSign. If this is the case, the trader sold the stock short because he believes the stock will fall, and then bought calls as an effective stop-loss strategy. If the stock should rally by expiration rather than decline, the trader can purchase the shares for $25.00 each to cover his short position and cap potential losses. – VeriSign, Inc. –
GE - As its shares rally, option traders are increasingly attracted to bullish call options on…
by Option Review - July 6th, 2009 4:07 pm
Today’s tickers: WFT, XLE, MS, AET, IYR, SCHW, UNG, & AMTD
WFT – The slight 1.5% decline in shares to $18.02 today has not deterred some option traders from making bullish plays on the oil and equipment services firm. The August 17.5 strike price had 9,200 puts sold short for an average premium of 1.50 apiece. The investor(s) who sold the puts will retain the full premium as long as shares remain higher than $17.50 by expiration next month. Traders appear to expect shares of WFT to remain high enough such that the puts remain out-of-the-money by expiration. However, such individuals must be prepared to have shares of the underlying put to them at an effective price of $16.00 in the event that the puts land in-the-money and are exercised. Additional bullishness on the stock appeared in the November contract where it looks as though one trader initiated a covered call strategy. The sale of 1,600 calls at the November 23 strike price yielded a premium of 95 cents each. Perhaps the investor purchased shares at an effective price of $17.07 and simultaneously sold the call options to establish a potential exit strategy. If the November 23 calls land in-the-money by expiration the investor will have the shares called away from him. At that point he will have attained profits of about 35% on the accretion in market value of WFT. – Weatherford International Limited
XLE – A bullish reversal in the energy ETF caught our eye amid a more than 2% decline in the price of the fund to $45.20 today. It appears that one investor chose to sell 1,700 puts at the December 42 strike price for a rich premium of 3.25 apiece. The put options were then spread against the purchase of 1,700 calls at the December 53 strike price for 1.52 each. The net credit enjoyed on the reversal strategy amounts to 1.73. The trader can augment his gains if the price of the XLE rises approximately 17% through the exercise price of $53.00 by expiration at the conclusion of 2009. Otherwise, he will retain the full credit received today as long as the puts options at the December 42 strike price remain out-of-the-money by expiration. – Energy Select Sector SPDR