Options On Cree, Inc. Light Up Ahead Of Earnings After The Close
by Option Review - January 17th, 2012 1:55 pm
Today’s tickers: CREE, AKS & SHLD
CREE - Cree, Inc. – U.S. stocks are in rally mode today as better-than-expected economic data out of China seemed to trump concerns following the myriad of downgrades of euro-zone states announced by Standard & Poor’s at the end of last week. Shares in Cree, Inc., which reports second-quarter earnings after the bell this afternoon, joined in on the broad market rally, rising 3.5% to $23.70 by 1:00 PM in New York. A sizable put spread established in the February expiry this morning may at first glance appear to be a bearish bet on the name. However, the purchase of stock tied to the options play suggests one strategist is cautiously optimism on the maker of LED lighting products ahead of earnings. It looks like the trader purchased approximately 123,293 shares of the underlying at $23.5279, and purchased a 5,900-lot Feb. $18/$22 put spread for a net premium of $0.99 per contract. The combination of long stock and debit put spread positions the trader to make money on the upside if shares in Cree continue to rally, while also providing downside protection in the event of a pullback through February expiration.
AKS - AK Steel Holding Corp. – Shares in the steel producer are up 2.0% at $9.29 this morning, one week before the Company is scheduled to reveal its performance in the fourth quarter. AK Steel was cut to ‘Hold’ from ‘Buy’ with a revised target share price of $10.00 from $13.00 at Deutsche Bank today. Put volume on the stock jumped after one strategist initiated a sizable one-by-two ratio spread in the March expiry. The trade may represent an outright bearish look at the stock by an investor expecting limited declines in the shares…
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DiggCrocs, Inc. Options Active As Shares Tank
by Option Review - October 18th, 2011 2:35 pm
Today’s tickers: CROX, SHLD, TLM & DPZ
CROX - Crocs, Inc. – Lower-than-expected third- and fourth-quarter sales guidance from the maker of plastic clogs trounced shares in Crocs, Inc. today, roughly two weeks before the company’s official third-quarter earnings release on November 3. Shares in CROX plunged 39.15% to as low as $16.21 this morning. Options on Crocs are changing hands at a fairly rapid clip, with trading in calls outpacing that in puts by more than 3-to-1. Trading in CROX calls appears somewhat mixed. It looks like some strategists are buying call options to get ahead of any potential rebound in the price of the underlying should selling pressure ease up ahead of October expiration. The most active option is the Oct. $18 strike call, where more than 3,200 contracts changed hands by 11:25 am EDT against zero open positions. Investors paid or received an average premium of $0.43 per contract depending on whether they were buying- or selling-to-open the position. Buyers of the contracts profit at expiration in the event that shares in CROX rally 11.0% over the current price of $16.60 to surpass the average breakeven point at $18.43. Meanwhile, sellers of the calls walk away with the full $0.43 credit received as long as the shoemaker’s shares fail to rally above $18.00 at expiration.
The sharp drop in the price of the underlying may be just what some bearish strategists were hoping to see. Open interest indicates there are 770 existing positions open in the Nov. $27 strike put. Examining changes in the open interest level at that strike suggests 500 of the puts were likely purchased by one trader at a premium of $2.20 each this past Friday. Shares in Crocs ended the previous week at $26.97. The subsequent nosedive in the price of the underlying now sees the price tag on those puts 380.0% higher at $10.60 as of 11:30 am in New York. Premium on the put options may continue to climb if shares in CROX extend losses through November expiration. Options implied volatility on the stock jumped 28.4% to 87.9% in the first half of the session.
SHLD - Sears Holdings Corp. – A sizable bearish put spread on Sears Holdings Corp. may signal caution by at least one investor ahead of the specialty retailer’s third-quarter earnings report in less than one month. Shares in Sears rallied 3.4% to $75.00 by 12:30 pm in New York,…
Just Another Manic Monday – Retail Edition
by Phil - November 16th, 2009 8:17 am
![[Growth and Deflation chart]](http://s.wsj.net/public/resources/images/NA-BC020B_JECON_NS_20091115220414.gif)
Good morning!
Japan had a huge GDP beat (+1.2% for the Q, 4.8% annualized)) and they leaked it early (to oil executives!) but, strangely, deflation is accelerating at the same time. That’s great news for stimulus watchers as the government can continue to pump money into the economy, even while it’s growing and, of course, the carry trade can continue.
Despite the robust third-quarter report, Japanese officials said they were still concerned about the economy’s strength going forward, and didn’t intend to pull back plans for further spending to ensure continued growth.
"There is no change in the severe condition of the country’s economy," Naoto Kan, the deputy prime minister, told reporters after the report’s release. "We are concerned about whether the economy falls into a deflationary situation," he added.
The domestic demand deflator — a measure of changes in prices of goods and services, excluding exports and imports — plunged 2.6%, the fastest pace since 1958. It was the third straight quarter of falling prices.
Another sign of concern in the report: The contribution of private consumer spending to growth slipped in the third quarter, suggesting measures to convert Japan from export-led growth to domestic-demand-led growth were facing limits. In the third quarter, private consumer spending, rose 0.7%, compared with a revised 1% climb in the second quarter.
It’s all stimulus but there’s no sign stimulus is stopping so party on markets. Japan also got a huge benefit from the Chinese auto sales – more stimulus! The Nikkei itself isn’t thrilled and is up just 0.25%, barely hitting Friday’s high on a stick-save into the close but that didn’t stopping the futures from jumping up more than half a point and gold from hitting $1,130. I sent out an Alert to Members at 2:24 this morning saying:
"Once the Nikkei closes (2am EST) the Hang Seng will have an hour to themselves and that should top out our futures (the Hang Seng is up at 22,900 (+1.5%). The shorting move on gold futures is to short them as they cross below $1,130 with zero tolerance for holding gold above that line. The same can be done with the S&P futures at 1,100, the Dow at 10,316 and the Nas at 1,800 and you can even use the 2 out of 4 rule to short one of the laggards only AFTER two others break down to be a little…
Friday Morning – Goldman’s Global Goose!
by Phil - August 21st, 2009 8:27 am
We have talked about manipulation all week but this takes the cake!
The Nikkei was plunging 250 points this morning as the dollar collapsed (in a move to boost commodities and the US markets – more on that later) below the critical 94 Yen mark and, EXACTLY AT THE MOMENT the Nikkei crossed the critical 10,200 line we’ve been watching all week (11 am, just as they were closing for lunch), Kathy Matsui, chief equity strategist at Goldman Sachs, jumped on the phone and literally stopped the presses by calling for a 73% increase in Japan’s corporate profits next year buoyed by cost cuts, a weaker yen and rising demand. “People are going to be surprised at how sharp the recovery will be,” Matsui said in a phone interview.
Goldman’s estimates equate to 48.9 yen in earnings per share for the Topix in the financial year ending March 2011, placing the benchmark at 19.4 times estimated earnings. The brokerage also reversed its forecast among all industries to a 23.3 percent increase in pretax profits this year from a 15 percent decline. “Our forecasts for both the March 2010 and March 2011 financial years exceed consensus estimates largely due to our expectations of stronger global growth, continued restructuring benefits, and a weaker yen,” Matsui wrote in a report titled “Back in Black.”
Note that Ms. Matsui is the only analyst who sees this Asian miracle occurring this year as Global emerging-market equity funds posted their biggest weekly outflows of 2009 as investors pulled money out of China on concern banks expanded credit too rapidly, EPFR Global said. Funds that invest in emerging-market stocks worldwide lost $946 million, while China funds had their worst week since the first quarter of 2008, according to the Cambridge, Massachusetts-based research company. Investors pulled $810 million from Asia excluding-Japan funds, the most in 24 weeks, while Latin America and Europe, Middle East and Africa funds had “modest inflows,” said EPFR, which tracks funds with $10 trillion worldwide.
This amazing 200% reversal of forecast timed at 10pm on option expiration eve East Coast time, took the S&P futures from 996 all the way back to 1,010 and took the Dow futures from 9,250 (down 100 from Thursday’s close) all the way to 9,375. The Nikkei managed a "stick save" and finished the day down "just" 1.4% at 10,250 and the Hang Seng was able to rally back 300 points…
Thoughtful Thursday Morning
by Phil - August 20th, 2009 8:26 am
Maybe I am being too bearish on the economy.
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…
Gold and silver ETFs shine as dollar declines
by Option Review - May 22nd, 2009 4:16 pm
Today’s tickers: GLD, SLV, SHLD, NTAP & DOW
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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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