Market bullish, options bearish

Today’s tickers: XLI, XLY, DELL, CAT, XLF, AET, AN, EWT, SLAB, QLGC, BYD & INTC

XLI Industrial Select Sector SPDR – The industrials ETF attracted massive amounts of downside protection by investors fearing a near-term contraction in shares of the fund. The price per share is currently up by 3% to $23.19 on the day following broader market gains experienced today. However, traders have enacted a decidedly bearish position on the fund in the near-term May contract. At the May 19 strike price more than 65,100 puts were purchased for an average premium of 17 cents apiece. These option contracts will begin to yield profits to the downside beginning at the breakeven share price of $18.83. Further along, the in-the-money June 23 strike price saw traders who were likely banking gains on the rise in shares today by selling approximately 27,000 calls for an average premium of 65 cents per contract.

XLY Consumer Discretionary Select Sector SPDR – The consumer discretionary ETF jumped onto our ‘most active by options volume’ market scanner after investors bought a huge chunk of puts in the near-term May contract. Shares have rallied by 4% to $21.80 today, creating lesser cost premiums on put options. At the May 20 strike price approximately 58,100 puts were picked up for an average premium of 18 cents apiece. Investors have certainly appeared to brace themselves for bearish movements in the fund. Fleshing out the pessimistic picture was the sale of 2,290 calls at the May 23 strike for 82 cents which indicates that traders do not see today’s rally stemming too much further, particularly in the near-term.

DELL Dell Inc. – The just-in-time manufacturer of personal computers has rallied by more than 4% to $11.35 amid broad market gains today. We observed one trader who appears to have established a covered call in the January 2010 contract. It is likely that this investor bought shares of the underlying stock today or was already long the stock previously, and then sold 24,500 calls at the January 12.5 strike price for a premium of 1.50 each. The trader pockets the 1.50 premium and has locked into gains of 10% on the rise in share price should the calls land in-the-money and the underlying stock get called from him at expiration next year.

CAT Caterpillar, Inc. – Shares of CAT have rallied by more than 3.5% today to arrive at the current price of $34.00. One investor initiated a large-volume ratio put spread in the August contract, which suggests that he has locked into gains by protecting himself in case there should be a downturn over the next four months. The spread was established be the purchase of 15,000 puts at the August 29 strike price for 2.29 apiece against the sale of 30,000 puts at the August 20 strike for 57 cents per contract. The ratio of two puts sold to each purchased reduced the net cost of the spread by amount 50% to 1.15. With a breakeven share price of $27.85 on the trade the investor will begin to amass profits if shares decline by about 18% from the today’s price. Losses wouldn’t mount unless Caterpillar shares fell beneath $12.85 thanks to profits of 7.85 per contract apparent at a share price of $20.00.

XLF Financial Select Sector SPDR – With the story breaking this morning about six named banks perhaps needing added capital after the results of the stress tests are due next Monday, investors are remarkably at ease. That’s due in part to the ‘here’s how to fix the problem’ suggestion that banks can convert preferred to common equity, thus boosting capital needs. Arguably, financials are well positioned for revival from this point. The banking upgrade from Fox Pitt Kelton’s David Trone resting on the premise that banks would clear the hurdles they face by year end also soothed investors’ frayed nerves. It appears that the financials ETF, up more than 4% today to $10.85, has attracted one particularly hopeful investor looking for continued bullish gains in the near-term May contract. The sale of 50,000 puts at the May 9.0 strike price for a premium of 17 cents apiece was spread against the purchase of 50,000 calls at the May 12 strike for 20 cents each. The net cost of the trade amounts to 3 cents and begins to yield profits to the upside at the breakeven share price of $12.03. Shares would need to rise by another 11% from today’s price in order for this bullish trader to reel in the cash by expiration next month.

AET Aetna Inc. – The third-largest U.S. health insurer’s shares have slumped by more than 7.5% to $22.52 amid reports that the Hartford, CT-based company has had to spend more than expected on health benefits for workers who have lost their jobs. The decline in shares runs counter to the company’s positive first quarter earnings of 96 cents per share, which beat estimates by about 3 cents amid an increase in revenues by more than 10% to $8.6 billion. However, earnings were pared by the firm’s higher-than-expected costs stemming from increased patronage of Cobra coverage as well as a rise in the number of workers using up benefits for fear that their jobs would be terminated or their health benefits parsed in this recessionary environment. Persons who utilize Cobra tend to have higher medical costs as they are generally older and sicker. The company confirmed in an article published today that it spends about two times as much on each Cobra member as the member shells out in premiums. Options activity highlighted bullish investors looking for opportunity on the stock despite the news regarding higher expenses. Traders picked up more than 23,600 calls at the May 25 strike price for an average premium of 30 cents per contract. Rounding out the bullishness was the sale of 1,500 puts at the May 22.5 strike for 1.16 each and the sale of some 4,000 puts at the June 22.5 strike price for 1.92 apiece. The more than 45,700 lots actively traded today represent more than 60% of the existing open interest on Aetna of 75,400 contracts.

AN AutoNation, Inc. – The automotive retailer has experienced a 3% rally in shares to $18.00, just 70 cents off the 52-week high for the stock of $18.70. We observed one investor who has utilized options in order to assume a nearer-term bearish position in the July contract and a more bullish stance in the further-term October contract. The trader, who is likely long of AutoNation stock, established a put spread by purchasing 5,000 puts at the July 17.5 strike price for 2.00 apiece spread against the sale of 5,000 puts at the July 12.5 strike for 40 cents each. The net cost of the downside protection amounts to 1.60 for the trade and yields a maximum potential profit of 3.40 if shares were to decline to $12.50 by expiration. The investor is likely revved up by the recovery in shares to date, and has thus locked into protective puts in case shares should reverse direction in the next 3 months. The final puzzle-piece that completes this trader’s big picture is the purchase of 5,000 calls at the in-the-money October 15 strike price that cost 4.79 per contract. These call options are likely an expression of an opinion that the entire auto sector will have successfully traversed all of its speed bumps come October expiration, or at the very least that investors can see recovery six months down the road.

EWT iShares MSCI Taiwan Index – Shares of the ETF have leapt upwards by more than 12% to stand at $9.80 today. EWT claimed the top spot on our ‘hot by options volume’ market scanner after one investor traded some 40,000 contracts today on the previous total open interest for the fund of just 15,213 lots. Despite the share price rally the trader looks to have taken a bearish stance on the stock by selling 20,000 calls at the June 10 strike price for 34 cents each in order to purchase 20,000 puts at the June 8.0 strike for 17 cents apiece. The trader receives a net credit of 17 cents for the trade and amasses profits to the downside beginning immediately at the lower strike price of $8.00 in addition to collecting the net premium. Other investors seemed to follow along with the pessimistic view as another 2,800 puts were picked up at the May 9.0 strike for an average 20 cent premium per contract.

SLAB Silicon Laboratories Inc. – The provider of mixed-signal integrated circuits has surged by more than 10% to stand at $32.04 per share after the company reported sales and earnings that exceeded analysts’ expectations. The Austin, Texas-based SLAB announced earnings of 22 cents per share which trumped the average consensus of approximately 13 cents. Investors got bullish on the stock by picking up more than 1,600 calls at the June 35 strike price for an average premium of 67 cents apiece. Shares would need to rally by an additional 11% to the breakeven point at $35.67 in order for bullish traders to profit by expiration in June. SLAB appeared on our ‘top option implied volatility % losers’ market scanner as volatility on the stock dissipated from 50% yesterday to 36% following the firm’s positive earnings results.

QLGC QLogic Corporation – The designer and developer of storage network infrastructure components has experienced a share price rally of more than 9% to $14.61 ahead of earnings expected for release tomorrow afternoon. One news source reported rumors of a potential takeover of the company by EMC Corporation which may have contributed to the surge in option implied volatility on the stock which is up to 61% from the reading of 53% yesterday. Option traders jumped into bullish calls in the May contract by purchasing more than 6,300 contracts at the 15.0 strike for an average premium of 37 cents apiece. In order to profit from the call options by expiration, shares need only increase by another 5% from the current price to the breakeven point at $15.37.

BYD Boyd Gaming Corporation – Shares of the gaming company, which owns some 15 casinos, attracted bullish investors who were eager to play with options on the stock. BYD appeared on our ‘hot by options volume’ market scanner amid a more than 8% share price rally to $8.70. Individuals looking to get bullish heavily favored the May 10 strike price where more than 11,900 calls traded hands with approximately 7,500 of the contracts purchased for an average premium of 50 cents apiece. The call-to-put ratio currently stands at more than 18-to-1 indicating that 18 call options were traded for every single put in action. Shares would need to continue to climb by about 15% from the current price in order for the May 10 calls to land in-the-money by expiration.

INTC Intel Corporation – The semiconductor chip maker has experienced a share price rally of more than 1.5% to $15.32. We observed one options investor who is hoping to see shares continue to climb through expiration in June as he employed the covered call strategy. It appears that this individual bought shares of Intel and simultaneously sold 15,000 calls at the June 17 strike price for a premium of 24 cents per contract. This transaction provides an exit point if shares rise through $17.00 by expiration and yields the trader gains of about 11% on the stock in addition to the 24 cent premium enjoyed today.

 
 
 

Zero Hedge

Belgian F-16 Pilot Ejects Before Fiery Crash, Gets Caught In High Voltage Power Lines

Courtesy of ZeroHedge View original post here.

A Belgian F-16 fighter jet crashed in Northwestern France on Thursday, leaving one of its pilots hanging by his parachute from high voltage electricity lines, according to the BBC

Both pilots had minor injuries after they ejected from the plane, which clipped the roof of a house and crashed in a field near Pluvinger. The pilot stuck in the 250,000 volt power lines was brought down after a two hour rescue operation by French emergency ser...



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Phil's Favorites

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Digital Currencies

Buyer beware: How Libra differs from Bitcoin

 

Buyer beware: How Libra differs from Bitcoin

Recent revelations about the lack of privacy protections in place at the companies involved in Facebook’s new Libra crytocurrency raise concerns about how much trust users can place in Libra. (Shutterstock)

Courtesy of Alfred Lehar, University of Calgary

Facebook, the largest social network in the world, stunned the world earlier this year with the announcement of its own cryptocurrency, Libra.

The launch has raised questions about the difference between Libra and existing cryptocurrencies, as well as the implications of private companies competing with s...



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Lee's Free Thinking

Look Out Bears! Fed New QE Now Up to $165 Billion

Courtesy of Lee Adler

I have been warning for months that the Fed would need new QE to counter the impact of massive waves of Treasury supply. I thought that that would come later, rather than sooner. Sorry folks, wrong about that. The NY Fed announced another round of new TOMO (Temporary Open Market Operations) today.

In addition to the $75 billion in overnight repos that the Fed issued and has been rolling over since Tuesday, next week the Fed will issue another $90 billion. They’ll come in the form of three $30 billion, 14 day repos to be offered next week.

That brings the new Fed QE to a total of $165 billion. Even in the worst days of the financial crisis, I can’t remember the Fed ballooning its balance sheet by $165 bi...



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The Technical Traders

Is A Price Revaluation Event About To Happen?

Courtesy of Technical Traders

Skilled technical traders must be aware that price is setting up for a breakout or breakdown event with recent Doji, Hammer
and other narrow range price bars.  These types of Japanese Candlestick patterns are warnings that price is coiling into
a tight range and the more we see them in a series, the more likely price is building up some type of explosive price breakout/breakdown move in the near future.  The ES (S&P 500 E-mini futures) chart is a perfect example of these types of price bars on the Daily chart (see below).

Tri-Star Tops, Three River Evening Star patterns, Hammers/Hangmen and Dojis are all very common near extreme price peaks and troughs.  The rea...



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Kimble Charting Solutions

India About To Experience Major Strength? Possible Says Joe Friday

Courtesy of Chris Kimble

If one invested in the India ETF (INDA) back in January of 2012, your total 7-year return would be 24%. During the same time frame, the S&P 500 made 124%. The 7-year spread between the two is a large 100%!

Are things about to improve for the INDA ETF and could it be time for the relative weakness to change? Possible!

This chart looks at the INDA/SPX ratio since early 2012. The ratio continues to be in a major downtrend.

The ratio hit a 7-year low a few months ago and this week it kissed those lows again at (1). The ratio near weeks end is attempting to...



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Insider Scoop

10 Biggest Price Target Changes For Friday

Courtesy of Benzinga

  • Credit Suisse raised IHS Markit Ltd (NYSE: INFO) price target from $68 to $76. IHS Markit shares closed at $67.75 on Thursday.
  • Wedbush boosted Restoration Hardware Holdings, Inc (NYSE: RH) price target from $170 to $185. RH shares closed at $169.49 on Thursday.
  • Mizuho lifted Seagate Technology PLC (NASDAQ: STX) price target from $46 to $50. Seagate shares closed at $52.94 on Thursday.
  • UBS raised the price target for Weight Watchers Intern...


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Chart School

Crude Oil Cycle Bottom aligns with Saudi Oil Attack

Courtesy of Read the Ticker

Do the cycles know? Funny how cycle lows attract the need for higher prices, no matter what the news is!

These are the questions before markets on on Monday 16th Aug 2019:

1) A much higher oil price in quick time can not be tolerated by the consumer, as it gives birth to much higher inflation and a tax on the average Joe disposable income. This is recessionary pressure.

2) With (1) above the real issue will be the higher interest rate and US dollar effect on the SP500 near all time highs.

3) A moderately higher oil price is likely to be absorbed and be bullish as it creates income for struggling energy companies and the inflation shock may be muted. 

We shall see. 

...

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Biotech

The Big Pharma Takeover of Medical Cannabis

Reminder: We are available to chat with Members, comments are found below each post.

 

The Big Pharma Takeover of Medical Cannabis

Courtesy of  , Visual Capitalist

The Big Pharma Takeover of Medical Cannabis

As evidence of cannabis’ many benefits mounts, so does the interest from the global pharmaceutical industry, known as Big Pharma. The entrance of such behemoths will radically transform the cannabis industry—once heavily stigmatized, it is now a potentially game-changing source of growth for countless co...



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Mapping The Market

How IPOs Are Priced

Via Jean Luc 

Funny but probably true:

...

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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

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About Phil:

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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