Testy Tuesday – How Many Times Will You Fall for the Same Thing?
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.
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.
As you…
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DiggBullish for Hansen’s Monster drinks
by Option Review - June 21st, 2011 7:01 am
Today’s tickers: HANS, SWKS & DGX
HANS - Hansen Natural Corp. – Earlier in the month the manufacturer of fruit juice and smoothies handsomely beat Wall Street’s earnings estimate by 20%. The distributor of Monster energy drink said international sales were doing well especially in Europe. During the past 12 months its share price has performed as a good bellwether for its revenue growth with shares jumping from $40 to $73.79 ahead of quarter one results. Before that one savvy investor showed up in the options market using calls at the $75 strike in an effort to profit from better times ahead. The investor paid $1.80 for 5,000 calls reserving the right to pay a fixed $75 to buy the stock ahead of expiration in September. It appears today that the investor is pushing his expectations higher following an accurate call last month. Spread trading in the name today shows the sale of those calls at a stimulated premium of $4.18 for a healthy 132% gain as the investor rolls in to the $80 strike at a $2.60 premium in the same calendar month today.
SWKS - Skyworks Solutions Inc. – A warning from an analyst at Deutsche Bank on Monday exacerbated a retreat from the sky for wireless chip-maker, Skyworks. Its options were among the most actively traded on Monday with almost four puts trading for each call in action. Yet the picture wasn’t entirely bearish. Deutsche Bank warned that its channel research left it concluding that when the credits roll out for Apple’s iPhone 5 in the fall, the Skyworks logo will be conspicuous by its absence. And as if the loss of sales wasn’t enough, Deutsche Bank warns that according to the outcome of meetings with its Asian contacts, the company has aggressively entered a price war to…
Pessimism on Alcoa Apparent as Bears Bulk Up on Put Options
by Option Review - October 15th, 2010 4:31 pm
Today’s tickers: AA, SWKS, WDC & CSC
AA - Alcoa, Inc. – Bearish options traders decided to pay Alcoa a visit this morning in order to pick up large numbers of put options in the November contract. Shares of the aluminum giant fell as much as 2.7% in the first half of the session to touch an intraday low of $12.77, but have recovered somewhat as of 11:50 a.m. to stand 0.60% lower on the day at $13.05. Pessimistic players piled into put options at the November $13 strike where more than 32,600 contracts changed hands by midday. It looks like the majority of the activity was initiated by one bearish individual who purchased approximately 23,000 puts at that strike at a premium of $0.55 per contract. The investor may be utilizing the puts to protect an existing position in the underlying shares. Alternatively, this transaction may represent an outright bearish bet on the aluminum maker. The put buyer starts to make money if Alcoa’s shares fall 4.6% from the current price of $13.05 to breach the effective breakeven point to the downside at $12.45 by expiration day next month. Alcoa’s overall reading of options implied volatility is up 6.6% at 36.02% as of 11:55 a.m. in New York trading.
SWKS - Skyworks Solutions, Inc. – Shares of the chip making company that supplies semiconductors for cellular devices such as Apple’s iPhone rallied as much as 3.1% this morning to secure a new 52-week high of $21.98. Options traders populating the stock focused their attention almost exclusively in November contract put options despite the rise in the price of the underlying shares. The majority of options volume generated on SWKS today appears to be involved in a sizeable debit put spread. It looks like one investor picked up 7,500 puts at the November $21 strike for a premium of $1.02 each, and sold the same number of puts at the lower November $20 strike at a premium of $0.62 apiece. Net premium paid for the spread…
Staples Firm – Proctor & Gamble Options Suggest Further Upside
by Option Review - November 6th, 2009 4:53 pm
Today’s tickers: PG, CTXS, LINTA, HIG, CVS, UUP, VIX, AONE, SWKS, CLX, BCSI & NVDA
PG – The Proctor & Gamble Co. – Bullish action on Proctor & Gamble today suggests one investor expects shares to continue to rally ahead of expiration in November. Shares are currently trading 1% higher to $61.13. The trader purchased 10,000 calls at the now in-the-money November 60 strike for 1.39 each, and simultaneously sold 10,000 calls at the higher November 62.5 strike for 26 cents apiece. The net cost of buying the call spread amounts to 1.13 per contract and yields maximum potential profits of 1.37 each if shares rally up to $62.50 by expiration. Shares need only rally another 2.2% from the current price to reach the $62.50-level.
CTXS – Citrix Systems, Inc. – Software developer, Citrix Systems, attracted bullish option traders to the November contract today amid a 1% increase in shares to $38.80. Investors displayed optimistic sentiment on the stock by selling approximately 10,600 puts at the November 35 strike for 10 cents premium apiece. Put-sellers retain the full dime-per-contract as long as shares remain above $35.00 through expiration this month. Shares of CTXS have traded above $36.00 since September 4, 2009.
LINTA – Liberty Media Corp. – Shares of the broadcasting and entertainment company rallied 1% during the trading session to $12.14. Plain-vanilla call buying action on the stock today suggests some investors expect shares to rise significantly by expiration in January 2010. Traders purchased about 11,800 calls at the January 15 strike for an average premium of 25 cents apiece. Call-buyers will accumulate profits if shares surge at least 26% from the current price to surpass the breakeven point at $15.25 by expiration.
HIG – Hartford Financial Services Group, Inc. – Medium-term investors placed bearish bets on the insurance and financial services firm today. Shares are currently trading less than 0.25% higher to $24.16 after suffering significant erosion throughout the week. One pessimistic trader initiated a bearish risk reversal in the January 2010 contract. The investor sold 4,500 calls at the January 27 strike for an average premium of 78 cents apiece to partially finance the purchase of the same number of put options at the lower January 21 strike for 1.68 each. The net cost of the transaction is reduced to a more palatable 90 cents per contract, but does leave the investor exposed in the event of…
Earthlink calendar spreader maintains pessimistic stance
by Option Review - March 16th, 2009 5:41 pm
Today’s tickers: ELNK, HBC, CECO, XLE, C, CMCSK, SWKS & ARNA
ELNK Earthlink , Inc. – The internet service provider has experienced a 5% decline in shares today to $6.29. ELNK popped onto our ‘hot by options volume’ market scanner after one investor initiated a calendar roll. At the March 7.5 strike price 5,200 puts were sold for a premium of 95 cents each, while at the April 7.5 strike price 5,200 puts were purchased for 1.15 per contract. Maybe this investor sees Earthlink continuing to fall through next month, and therefore has rolled his in-the-money long-put position previously established in March into the next month’s contract.
HBC HSBC Holdings Plc ADS – As with many other financials today, shares of HBC have rallied 4% to $27.05. One trade of interest occurred at the March 30 strike price where an investor appears to have purchased a straddle by picking up 7,500 calls for 15 cents apiece and 7,500 puts for 3.20 per contract. You may be thinking, given where shares are with today’s rally – why on earth would someone pay a combined premium of 3.35 in the hope that shares of the bank swing to either breakeven point located at $33.35 on the upside and at $26.65 on the downside? While it is possible that this investor’s motivation for the trade is to see profits amass on falling share price, we believe there may be a different explanation. Perhaps this trader had previously sold the options leaving him short and now he is buying back the contracts in order to close out his short position. It appears that about 7,500 of the existing open interest for calls and puts at the March 30 strike was built up between February 5th and 6th. Thus, we propose that this investor may have originally sold the straddle in February and is not buying it back before the March contract expires on Friday.
CECO Career Education Corporation – Shares of the global education company have fallen 12% to $20.24. CECO is an on-ground provider of education at various levels and also has a significant presence in online education. The company edged onto our ‘hot by options volume’ market scanner after one investor established plays in the March and April contracts. At the March 22.5 strike price it appears that one investor initiated a credit spread by purchasing 5,000 calls for 38 cents apiece…
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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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