Bulls Return To Tiffany & Co. Options Despite Post-Earnings Pullback
by Option Review - November 29th, 2011 2:00 pm
Today’s tickers: TIF, BAC, NGD & MWW
TIF - Tiffany & Co. – Investors sporting near-term bullish outlooks on the high-end jewelry retailer flocked to the options market following the sharp post-earnings pullback in the price of Tiffany & Co. shares. Traders gearing up for a rebound in the price of the underlying appear to be selling puts and snapping up calls on the stock. Shares in Tiffany fell as much as 13.1% to an intraday low of $63.98 this morning, and currently trade 9.2% lower on the day at $66.86 as of 12:20 PM in New York. Investors expecting the stock to rise in the next few weeks exchanged more than 4,000 calls at the Dec. $70 strike against previously existing open interest of 1,264 contracts. It looks like the majority of the calls were purchased for an average premium of $1.35 per contract. Call buyers profit if shares in Tiffany & Co. rally 6.7% over the current price of $66.86 to surpass the average breakeven point on the upside at $71.35 by expiration day next month. Meanwhile, put selling suggests some traders believe shares are unlikely to drop much lower in the near term. More than 5,300 puts changed hands at the Dec. $60 strike against open interest of 970 contracts. Investors sold most of these put options to pocket premium of $0.67 per contract, on average. Put sellers walk away with premium in hand at expiration in December as long as shares in Tiffany & Co. exceed $60.00. Investors selling puts may have shares in TIF put to them at an average price of $59.33 each in the event that shares in the jewelry company plunge 11.3% and the options land in-the-money at expiration day.
BAC - Bank of America Corp. – Shares in Bank of America dropped to a fresh two-year low of $5.10 at the start of the session, and the prognosis for the price of the underlying over the next six month period is bleak by the looks of one options strategy initiated in the May 2012 contract. One investor appears to have paid a net $0.18 in premium per contract for a put butterfly spread; buying 2,000 puts at the May $3.0 and $5.0 strikes at premiums of $0.28 and $0.94 apiece, and selling 4,000 puts at the May $4.0 strike for a premium of $0.52 each. The trader may profit if shares in BAC, which are…
Facebook
Twitter
LinkedIn 
del.icio.us
DiggPut Player Near-Term Bullish On Pandora Post Earnings
by Option Review - August 26th, 2011 2:26 pm
Today’s tickers: P, IYR, TIF & BAC
P - Pandora Media Inc. – Demand for options covering Pandora, the online music company that went public in June, jumped after the company reported better-than-expected earnings of $0.02 a share for the second quarter. Pandora’s first earnings report since become a publicly traded company sent shares up as much as 11.5% to an intraday high of $13.90 as its top- and bottom-line results topped expectations. Despite the spike in the price of the underlying today, shares continue to trade at a substantial discount to its initial public offering price of $16.00. The positive earnings report spurred bulls to the options market, with notable volume building in September contract puts. It looks like one trader expecting Pandora’s shares to resist above $12.00 through expiration next month sold roughly 3,000 put options outright at the September $12 strike at a premium of $0.70 per contract. The put seller walks away with the full amount of premium at expiration as long as shares in Pandora exceed $12.00 and the options expire worthless. The short stance in Pandora puts suggests the trader may wind up having around 300,000 shares put to him at an effective price of $11.30 each at September expiration if the stock slips beneath $12.00 in the next three weeks. Options implied volatility on Pandora Media Inc. stand 29.2% lower post earnings at 82.54% this afternoon.
IYR - iShares Dow Jones US Real Estate Index Fund – A sizable put spread on the iShares Dow Jones U.S. Real Estate Index Fund yields maximum benefit to one bearish strategist if the price of the underlying drops substantially by the end of the year. Shares in the IYR, an exchange-traded fund that tracks the Dow Jones U.S. Real Estate Index, turned positive in the aftermath of…
Bull Call Spreads Pop Up on Peet’s Coffee & Tea
by Option Review - March 16th, 2011 4:53 pm
Today’s tickers: TIF, EWJ, FSLR, HD, PEET, EWJ, ENDP & CVC
TIF - Tiffany & Co. – The retailer of fine jewelry and other high-end luxury goods has not lost its sparkle according to some contrarian traders establishing bullish bets on the stock this morning. Shares in Tiffany & Co. fell as much as 8.8% to an intraday low of $54.58 today, but pared some of the earlier losses to stand 3.9% lower on the session at $57.52 as of 11:35am in New York. One investor betting on a recovery in the price of Tiffany & Co. shares initiated a three-legged spread to prepare for the rebound. The trader sold 2,500 puts at the January 2012 $50 strike for an average premium of $4.62 each, purchased the same number of in-the-money calls at the January 2012 $55 strike at an average premium of $8.46 per contract, and sold 2,500 calls up at the January 2012 $70 strike for an average premium of $2.77 a-pop. Net premium paid to establish the bullish position amounts to $1.07 per contract. Thus, the options player is prepared to make money in the event that Tiffany’s shares exceed the average breakeven price of $56.07 through expiration day in January. Maximum potential profits of $13.93 per contract pad the investor’s wallet in the event that shares surge 21.7% over the current price of $57.52 to trade above $70.00 by expiration next year. The jewelry retailer’s shares currently tout an all-time high of $65.76, attained back on December 21, 2010. Finally, it looks another trader pocketed profits today on a long-term bearish bet established last month on Valentine’s Day. It appears the investor originally purchased 500 puts at the January 2012 $60 strike for a premium of $5.65 each on February 14, when shares in TIF traded as high as $65.59. Today, it looks like the trader sold the now in-the-money puts for a hefty premium of $9.40 apiece. Net profits on the put sale amount to $3.75 per contract. The overall reading of options implied volatility on Tiffany & Co. is up 11.1% at 45.23% just before 11:55am. The luxury goods retailer is slated to report fourth-quarter earnings before the market opens next Monday.…
Thank Jobs It’s Friday!
by Phil - April 2nd, 2010 8:21 am
US Markets are closed today.
Most markets are closed. Japan was open and they went up 41 points (0.37%) and the MSCI Asia Pacific Index also went up 0.3% in Tokyo 1trading and Russia fell 0.1% but markets in Australia, Hong Kong, China, New Zealand, Singapore, India, the Philippines, Indonesia, the U.S. and all of western Europe are closed today for holidays. Strangley though, the Futures Market is open this morning so that can make things very tricky on a big data day like today.
The MSCI Asia Pacific Index has gained 1.7 percent this week as growth in China’s manufacturing and an increase in U.S. consumer spending bolstered optimism the global economic recovery is gaining momentum. The index this week completed its fourth consecutive quarterly advance with a 3.9 percent increase in the three months through March 31. Shares in the gauge trade at 16.4 times estimated earnings, compared with 14.8 times for the MSCI World Index of 23 developed nations. “The global macroeconomic recovery is behind the current uptrend in equities,” said Tomomi Yamashita, of $3.8Bn Shinkin Asset Management. “That trend is unlikely to change though the market is getting overheated.”
We get Non-Farm Payrolls at 8:30 and, obviously, investors are expecting a report that shows the US firmly on the road to recovery but I have already been reading a Gallup poll on Underemployment that suggests otherwise. According to the March tracking poll, 20.3% of the US workforce was UNDERemployed and that is UP 0.5% from February. . Gallup classifies respondents as underemployed if they are unemployed or working part-time but wanting full-time work. Gallup employment data are not seasonally adjusted.
Those underemployed people are mainly counted as employed in the NFP report and are a major distortion of the numbers, especially as the main delta component was a huge rise in part-time workers, from 9.2% to 9.9% and, like temps, they tend to be counted by the government as happy, happy workers. Unemployment (no job at all) measured by Gallup decreased from 10.6% to 10.4% and you can see from the following chart how those two are related:
According to Gallup, as unemployed Americans find part-time, temporary, and seasonal work, the official unemployment rate could decline. However, this does not necessarily mean more Americans are working at their desired capacity. It will continue to be important to track underemployment — to shed light on the true state of the U.S. workforce, and the millions of Americans who are searching…
Monday Medical Miracle – Health Care Finally Passes
by Phil - March 22nd, 2010 8:19 am
Paul Krugman summed it up nicely:
There is, as always, a tunnel at the end of the tunnel: We’ll spend years if not decades fixing this thing.
Love it or hate it, the US has just taken a big step towards nationalized health care so maybe now we can finally stop talking about it and move on with the investing! I think medical devices (IHI) should do well with 32M new patients – that’s a play we made quite a while ago though and, like pretty much everything else in this market – they look a little toppy.
As I noted in the Weekend Wrap-Up, we came to the decision to get back to cash on Friday, removing all uncovered bullish bets and adding our disaster plays, no longer hedges (as there’s not much to hedge) but as bets that the Global markets are due for a little correction at this point. I’m already feeling good about the decision as the futures look awful this morning (8am) as the Hang Seng dropped 2% (437 points) and couldn’t get back over 21,000 during the session and has now given up all of March’s gains. The Dow is still up about 400 points in March as well – hopefully our fall won’t be as violent as what the Hang Seng saw this morning. India held up well, only losing 1% after Friday’s surprise rate increase.
The Dollar was very strong after the Health Care vote and we’re sitting below $1.50 to the Pound and we’ve bounced off $1.35 to the Euro twice this morning – a break below there could get very interesting! The Yen is staying down at 90.5 to the Dollar, which is a relief for Japanese exporters but I’m not sure they’ll hold 90 this week. Copper broke below $3.40 on Friday – confirming our bearish turn and is at $3.32 this morning. Gold once again is testing $1,100 and silver failed $17 at $16.82 with $16.50 being a bearish signal for metals. Oil dropped all the way to $79.31 this morning and we’ll see if they can get back over $80 but we are going to be thrilled with our short plays (see wrap-up) in that sector.
“Risk aversion has come up after developments in India and Greece,” said Henrik Gullberg, a fixed-income strategist at Deutsche Bank AG in London. “Any exiting of the current accommodative policy stance…
Which Way Wednesday – Beige Book Boogie
by Phil - January 13th, 2010 8:07 am
The futures were boogying "all night long."
THIS is why we love being born-again bulls. China’s Hang Seng down 578 points on the Hangs Seng (2.5%) – It doesn’t matter! Shanghai down 3.1% – It doesn’t matter! Europe down half a point – It doesn’t matter! Germany’s economy contracted 5% in 2009, the worst decline since WWII (the big one) – It doesn’t matter! ABC Consumer Comfort Poll drops 11% with just 9% of Americans rating the economy postively – IT JUST DOESN’T MATTER - because WE are those 9% of Americans, right! OUR economy is just fine and we don’t know what that 91% contingent of babies is whining about do we?
Yes, it’s been a while since I dubbed us in a Meatball Market. The last market I labled as such was November 30th, 2006, when the Dow broke through 12,000 on the way to 14,000. Our bullish picks that day included BA, CAT, COF, DOW, GE, HD, JWN, QQQQ, TIE, TIF, XLE and XOM. Those were all, of course, fantastic picks but what I want you to do is read the October 2nd, 2007 article, where I began to turn cynical on the "Meatball Market" and I made the following statement:
Up, up and away – it’s Super Market! It’s bugdet proof, oil proof, terror (threat) proof, housing proof, inflation proof and pullback proof - 3 weeks in a row!
This is truly a Market of Steel (and the recent movement of X underscores that) and looking at the movement of the past week we really do have to believe it can fly… Is the US consumer (driver of 2/3 of the economy) really impervious to harm? What, if anything, is our stock market Kryptonite?
Unstable currency, runaway commodity prices, spiraling inflation, low savings rates, hedge fund collapses, declining home values, banks writing down their virtual portfolios, hundreds of thousands of layoffs, millions of foreclosures — it simply does not matter as long as they are LOCAL problems for the US as we are a smaller and smaller cog in the great global economy, one day we may even be granted emerging market status by our Chinese masters!
Doesn’t sound like much has changed in 2 years does it? Unfortunately, that also happened to be the day that Alan Greenspan (now working for PimpCo) decided to call China, with the Hang Seng…
Yen ETF Options Play Suggests Eternally Cheaper Currency
by Phil - January 8th, 2010 4:24 pm
Today’s tickers: FXY, EEM, PEP, TEVA, TIF, UPS & X
FXY – Japanese Yen Shares – The exchange-traded fund, which seeks to mirror the price of the Japanese Yen, is trading more than 0.50% higher today to stand at $107.12 in the aftermath of employment data undermining the U.S. dollar. Options activity in the March contract this morning suggests the price of the Yen may decline in the next couple of months. One Yen-bear sold call options in the March contract in order to finance the purchase of a put spread. The investor sold 10,000 calls at the March $110 strike for a premium of $1.20 per contract. The put spread involved the purchase of 10,000 puts at the March $105 strike for a premium of $1.70 each, marked against the sale of the same number of puts at the lower March $100 strike for $0.40 apiece. The net cost of the three-legged combination trade amounts to just $0.10 per contract for the investor. Thus, from a pure options standpoint (assuming no underlying position in shares), the investor stands to accumulate maximum potential profits of $4.90 per contract in the event that shares of the FXY plummet to $100.00 by expiration in March. FXY’s share price must decline 2% to $104.90 before the trader breaks even on today’s transaction.
EEM – iShares MSCI Emerging Markets Index Fund – Shares of the emerging markets exchange-traded fund are up less than 0.50% today to $43.01. Near-term pessimistic sentiment clouded the February contract as one investor initiated a ratio put spread on the fund. It appears the trader purchased 5,000 puts at the February $40 strike for an average premium of $0.69 apiece, marked against the sale of 10,000 puts at the lower February $35 strike for roughly $0.17 each. The ratio spread results in a net cost of $0.35 per contract. The investor responsible for the spread is likely holding a long position in the underlying stock. In such a case, the value of the share position is protected if EEM’s shares decline 8.5% from the current price and breach the effective breakeven point at $39.65 by expiration next month.
PEP – PepsiCo, Inc. – Global beverage, snack and food company, PepsiCo, received an upgrade to ‘buy’ from ‘hold’ at Edward Jones today despite slight share price declines of less than 0.50% to $60.76. Bullish investors initiated a couple of different strategies…
Option Trader Irons Out Bullish Risk Reversal on Vale
by Option Review - November 25th, 2009 10:06 pm
Today’s tickers: VALE, GLD, BKC, VIX, IYR, GPS, CTXS, JPM, JCG, BKC, & TIF
VALE – Vale S.A. – Iron ore producer, Vale, experienced a more than 2.5% rally in shares during the trading session to arrive at a new 52-week high of $29.64. A bullish risk reversal in the March 2010 contract today indicates at least one investor is positioning for continued upward movement in the price of VALE shares by expiration. The trader sold approximately 3,300 puts at the March 26 strike for an average premium of 1.29 apiece in order to finance the purchase of roughly 3,300 calls at the higher March 32 strike for 1.59 each. The net cost of the transaction amounts to 30 cents per contract and positions the investor to amass profits if shares surpass the breakeven price of $32.30 by expiration. Shares must jump at least 9% from the current price to breach the effective breakeven point on the trade.
GLD – SPDR Gold Trust ETF – Shares of the gold exchange-traded fund, which replicates the performance of the price of gold bullion, rose 1.5% today to yet another all-time high of $116.43. We observed bullish activity in the June 2010 contract by one investor who initiated a call spread on the fund. It appears the trader purchased 13,265 calls at the June 125 strike for an average premium of 5.95 each, spread against the sale of the same number of calls at the higher June 150 strike for 2.10 apiece. The net cost of the gold-spread amounts to 3.85 per contract. The investor responsible for the trade accumulates profits if shares rally 11% from the current price and surpass the breakeven point at $128.85. Maximum potential profits of 21.15 per contract are available to the trader in the event that shares of the GLD surge 29% to $150.00 by expiration day in June of 2010.
BKC – Burger King Holdings, Inc. – Burger King-bulls bought nearly 4,700 calls at the in-the-money December 17.5 strike for an average premium of 50 cents apiece. Such activity suggests investors expect shares to rally through $18.00 – the breakeven point on the calls – by expiration in December. Bullish sentiment on the flame-broiled burger maker is perhaps inspired by strength in the fast-food restaurant sector. Cash-strapped consumers, wary of the 10.2% unemployment rate, are likely trading down from moderately priced eateries to cheaper nosh provided…
Will We Hold It Wednesday?
by Phil - October 7th, 2009 7:53 am
When your first trade of the day is a cover, you know you are too bearish!
That’s what happened to us yesterday when I sent out a 9:47 Trade Alert to Members for the QQQQ $41/42 bull call spread at .57 to cover the too bearish stance I was worried about in the morning post. We exited that trade at .70 (up 22%) and that served it’s purpose of giving us some cash to put into rolling up our puts, following through on the strategy laid out in the morning post. As I said at the time, these are the moves we’re making BEFORE we capitulate and our short plays will form a base from which we can aggressively go long once we clear our targets.
I called off that QQQQ trade at 11:32, about 9 cents off the high of the day as they looked about to fail our 42 target which, as you can see from David Fry’s chart, is right about the middle of the weekly range so it’s a level we have to respect on multiple fronts. We’re still waiting for a proper test of that 40 line, a 5% drop from here and PSQ (short QQQQ) calls are the main protection in our $100K Virtual Portfolio at the moment. Any move below 40 on the Qs can re-shape the chart to a much more bearish formation long-term.
We also covered up our long DIA puts, which flipped us more bullish overall and ended the day half-covered – neutral and confused but with more aggressive puts than we had on Monday so some small progress was made. In addition to rolling up our bear plays like GLD puts, we added hedged January bullish plays on EDZ and TZA, went bullish on RIMM as they sold off to $65, bearish on MOS as they ran up to $49, bullish on WFR at $16, bearish on FCX at $70, April bullish and hedged on SKF, bearish on OIH at $118.50, Jan bearish and hedged on TIF at $40.75, bullish and hedged on April SCO and bullish on FXP at $9.45. Overall a pretty busy and bearish day of trading.
As I said to members in my closing comments, the XLF couldn’t hold $15 and the Qs couldn’t hold 42, which were both watch levels for us during the day. The index levels we were targeting were a mixed bag as we were looking for…
Low Cost Calendar Spread in the Homebuilders ETF
by Option Review - July 24th, 2009 5:24 pm
Today’s tickers: XHB, YHOO, S, MSFT, WFC, TIF, AMZN, & COF
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(