Bullish Player Forecasts Sunnier Skies Over B of A by August Expiration
by Option Review - February 9th, 2010 4:07 pm
Today’s tickers: BAC, PBR, UAUA, BIIB, USO, MAC, NLY, NYX, CVS & KGC
BAC – Bank of America Corp. – Options trading in the August contract on Bank of America suggests a significant recovery in the value of the underlying shares within the next seven months to expiration. Shares spent the majority of the trading session in the red, but rallied in late-afternoon trading, improving 0.20% to $14.51. It looks like one trader sold 6,000 put options at the August $12 strike for a premium of $0.86 each in order to partially finance the purchase of 6,000 calls at the higher August $16 strike at a premium of $1.12 apiece. The net cost of the bullish risk reversal amounts to $0.26 per contract, positioning the investor to accumulate profits above a breakeven share price of $16.26. Shares of the underlying stock must rally at least 12% over the current price for the trader to break even on the transaction by August expiration. We note that B of A’s shares traded above $16.50 as recently as January 20, 2010.
PBR – Petroleo Brasileiro SA ADR – Shares of Brazil’s state-controlled oil company, Petroleo Brasileiro SA, rallied 3.70% to $39.60 today perhaps after the company stated natural gas output will increase to 93 million cubic meters in 2011, up from 85 million cubic meters in the current year. PetroBras-bulls stampeded the February contract this afternoon to sell roughly 15,000 puts at the February $39 strike for an average premium of $0.83 apiece. Investors selling short the puts retain the full premium received today as long as shares of the underlying stock trade above $39.00 through expiration day. Put-sellers are apparently happy to have shares put to them for an effective price of $38.17 each should the put contracts land in-the-money at expiration.
UAUA – UAL Corp. – Shares of the owner and operator of United Airlines surged 17% to a new 52-week high of $15.27 today amid better-than-expected unit revenue for the month of January. Optimistic option traders dabbled in both calls and puts to take bullish positions on UAL Corp. Investors sold 2,300 puts at the February $13 strike, taking in an average premium of $0.16 per contract. Put sellers retain the full premium as long as UAUA’s share price remains above $13.00 through expiration. One the call side, traders picked up roughly 2,000 contracts at the now in-the-money February $15…
Monday Market Movement – Pattern Recognition
by phil - November 2nd, 2009 8:24 am
Here’s a scary chart pattern for you from our Chart School:
Elliot Wave Trends points out that the S&P has fallen into a fractal patten that may be repeating the behavior of the great drop of ’08, right here, right now. Of course patterns do SEEM to repeat themselves all the time – until they don’t – but it will be interesting this week and next to see if we follow-through with a flatline, followed by a drop to 1,000 from which we falsely back to 1,050 and then plunge to our doom as Santa foresakes us and we run all the way back down to our lows.
That’s where they lose me. Charts are fun and all but I see no basis for going back to our lows as our lows were ridiculous and caused by panic-selling in a doomsday scenario. Hard to imagine things will fall apart that badly between now and Jan earnings although I do believe we will have a rough time — just not that rough!
Barron’s surveyed Money Managers this weekend and they don’t seem to think things will be rough at all. 52% of those surveyed think there is NO WAY we will have a double dip recession. 76% believe that the decline in corporate profits has ended and 68% believe our GDP wil grow more than 2.5% in Q4 while just 10% believe it is possible for commodity pricing to fall in the next 6 months. You know what they say about when everyone is on the same side of a bet of course!
These are the people we give our money to – the biggest and "brightest" of hedge fund managers who control over $1Tn of assets under management. Favorite stocks in the group are: MSFT, ABT, BAC, BRK.A, CVS, GE, GS, LEG and QCOM. Stocks that are considered overvalued are: AIG, AAPL, GOOG, CAT, AMZN, C, GE, GMCR, VZ and YHOO. Ony 7% think Asian stocks are heading lowed, just 1% less than 8% who feel oil is going down; 92% don’t feel oil will go down.
Everybody likes Tech (just 0.9% think it will be the worst performing sector) and nobody likes the Financials (22.5% think it will be the worst performing sector) followed by Consumer Cyclicals (20.7%) and, oddly, Utilities (15.3%). The sectors picked as the best performers for the next 6-12 months are Tech (18.9%), Energy (17.1%) and Health Care (17.1%). Only…