Posts Tagged ‘KMP’

Kinder Morgan Management Call Buyers Hit The Jackpot

Buyers of call options on Kinder Morgan Management LLC at the end of last week and earlier this month saw huge gains in the value of those positions over the weekend with shares in KMR up 25% in early-afternoon trading to $96.14. News that Kinder Morgan Inc. (Ticker: KMI) plans to consolidate businesses through the acquisition of Kinder Morgan Energy Partners LP (Ticker: KMP), Kinder Morgan Management LLC (Ticker: KMR) and El Paso Pipeline Partners LP (Ticker: EPB), sent shares across these names skyward.

Looking at changes in open interest in options on Kinder Morgan Management, it looks like there were sizable increases in call open interest at the Feb 85.0 strike on Thursday last week and in the Sep 80.0 strike calls on Friday. In the case of the Feb 85.0 strike calls, it looks like 5,000 of the contracts were purchased on Thursday afternoon at a premium of $1.10 each. Today, these call options are changing hands at roughly ten times that amount, or $12.00 apiece. Meanwhile, the Sep 80.0 strike calls were active on Friday afternoon. Time and sales data suggests 1,500 of the 80.0 strike calls were purchased at a premium of $0.55 each. Fast-forward to today’s trade, and the Sep 80.0 strike call options are showing a bid/ask spread of $15.10/$17.90 just before 12:30 p.m. ET. 

The September 80.0 strike call options have only traded 38 contracts so far today, but the February 85.0 strike calls are active with volume approaching 10,500 contracts against total open interest of 17,805 contracts. It looks like much of the volume today is the work of sellers. Perhaps some of the selling represents profit-taking given the massive jump in the value of these now deep in-the-money options contracts.


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Testy Tuesday – How Many Times Will You Fall for the Same Thing?

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.  

To some extent, hedge funds are also speculators and usually you would assume their bets are covered but that's kind of hard to see with a 7:1 long/short ratio.  Keep in mind that Commercial Traders are institutions with business reasons to hedge – they are not going to be flip-flopping their positions so they will NOT be buying Dollars just because they get cheaper.  So, if it all hits the fan and the Funds shift to short – we could get quite a tidal-wave of Dollar selling.

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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Testy Tuesday – Have the Markets Become Comfortably Numb?

"There is no pain you are receding
A distant ship's smoke on the horizon.
You are only coming through in waves.
Your lips move but I can't hear what you're saying.
When I was a child
I caught a fleeting glimpse
Out of the corner of my eye.
I turned to look but it was gone
I cannot put my finger on it now
The child is grown,
The dream is gone.
but I have become comfortably numb
." – Pink Floyd
 

I have a theory that the markets (and the American people in general) aren't irrational, they are simply shell-shocked after suffering a very traumatic group financial experience… 

To be shell-shocked is to be "mentally confused, upset, or exhausted as a result of excessive stress" and the most common symptoms are: Fatigue, slower reaction times, indecision, disconnection from one's surroundings, and inability to prioritize – That certainly sounds like our Congress doesn't it?  Combat stress disorder was first diagnosed in WWI, when 10% of the troops were killed and 56% wounded – far worse than had been experienced in previous wars.  Our current financial crisis has similarly affected more people than any previous crisis with almost everyone knowing someone who is bankrupt or lost their jobs or homes and almost no one escaped the carnage of the downturn without some financial damage. 

Combat fatigue may go a long way to explaining the severe drop-off in volume that has plagued the markets since March, with participation now down to 25% of where we were last January and that leaves us open to the blatant sort of market manipulation that Karl Denninger caught last week as well as the usual nonsense we get daily from HFT programs that drive the market with such precision that we are able to tell how the day is going to go by simply checking our hourly volume targets.  Here's a clip from CNBC where a floor trader discusses market manipulation as a fact of trading (2 mins in).  

As Nicholas Santiago points out on In The Money Stocks,   "January is usually a very high volume month, yet it has started off the New Year even lighter than the last two months of 2009.  Light volume markets are very difficult to
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$112,291 Virtual Portfolio Update, Week 16

Next week will be the last week for our very profitable virtual portfolio, that started with $100,000 on April 10th.

This virtual portfolio has already made 19% in 16 weeks and many members wanted to start a new one from scratch.  So, by popular demand, we will be restarting a brand new virtual portfolio the week after options expiration, also with $100,000 and also a hedged virtual portfolio but this time with the goal of drawing a monthly income.  I got this idea when I went down to Florida last week and spoke to many people who asked me about their investing accounts.  Many of these "safe" accounts had been cut in half or worse and the returns they were producing were coming in at 5% year – if that and people were counting on this money for their monthly expenses.  I spoke to many people with $1M in the bank who were living off $50,000 a year in interest and dividends!

Using options and good hedging strategies, we have been able to produce a return in our virtual portfolio of 19% in just 16 weeks (12% cash, 7% unrealized).  I'm not advocating someone take a whole $1M and shift it to stocks and options but, if you can make 20% on $200,000 while your other $800,000 makes a "safe" 5%, your annual income goes from $50,000 to $80,000 – that's a lot of early-bird specials!  I will, of course, be happy to answer any adjustment questions on this virtual portfolio anytime during chat but we will no longer be tracking it weekly or making new plays.  The goals of the new virtual portfolio will be similar and the new trade ideas can be applied whether you are looking to draw an income or just start building long-term set of holdings for reinvestment.

In the last $112,007 Virtual Portfolio Update, from July 28th, we remained bullish and it really paid off with another $2,117 in unrealized gains ($6,690 not included in above total) as we made a very well-timed bottom call the week before and ran with it.  We have haven't had to call an "audible" in two weeks, sticking to our plan as the market held up nicely.     

The first few weeks after you sell options are usually the worst and the rising VIX had boosted the premiums of the puts and calls we sold but none of that matters because we played a…
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Hedging Your Way To Healthy Dividends – Part 3

We're going to go out with a bang here and give you a 3-for-1 in this final post on the issue.

In Part 1, we discussed the idea of going after former dividend payers who may bounce back while creating an artifical dividend through option hedging.  In Part 2 we looked at using the buy/write strategy to give ourselves a nice discount on the stock, giving us a 30% hedge on the stock on top of the dividends.  Today we will look at a couple of ways to play the safer bets and how to simply and effectively boost your dividend yield while also protecting your investment.

In Tuesday's post we had 21 dividend payers divided into 3 categories.  We'll look at what we consider a "pretty safe" dividend payer, PGH, who pay a MONTHLY dividend of about 8 cents on a $8.11 stock (12%) as well as our long-time favorite, KMP who pay about $1 per quarter and our Blue-Chip selection will be CAT, who have a 4.9% dividend and are trading at a nice, cheap $34.31.

As we have 3 trades here I'm not going to go too heavily into the merits of each one.  Suffice to say we like them at these prices and we like the option hedges we can put to work on the postions… 

PGH is a stock we went crazy for back in March, when they were under $5 but that was when they were in the category of stocks where people felt the dividend was in jeopardy.  It didn't take much for them to fly back to $8.11 but, through the magic of hedging, we can knock that price back to an entry price of $5.29 by selling the Jan $7.50 puts and calls.  As always, our major risk is that the stock falls below $7.50 and another round of shares are put to us at that price on Jan 15th.  That would create an average entry of $6.40, which is 21% below the current price.  Should we get called away as $7.50, that would be a $2.21 gain on cash so 42% PLUS 7 months worth of dividends, perhaps another .56.

Sticking with our $5,000 per position maximum risk, we can make the play the following way:

  • Buying 400 Shares at $8.11 ($3,244)
  • Selling 4 Jan $7.50


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Zero Hedge

WeWork Board, Softbank Officials Push For CEO Neumann's Ouster

Courtesy of ZeroHedge View original post here.

The odds of WeWork co-founder and CEO Adam Neumann becoming "the world's first trillionaire"  maybe about to take another major hit.

In what appears to be the latest attempt to salvage the farce that is the WeWork IPO (and the massive hole it will leave in Masayoshi Son's balance sheet and credibility), ...



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Insider Scoop

Notable Insider Buys In The Past Week: AbbVie, Kraft Heinz And More

Courtesy of Benzinga

Insider buying can be an encouraging signal for potential investors.

A packaged food giant and two drugmakers saw notable insider buying activity this past week.

Some of this insider buying occurred alongside insider sales.

Conventional wisdom says that insiders and 10% owners really only buy shares of a company for one reason — they believe the stock price will rise and they want to profit. So insider...



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Phil's Favorites

Peloton IPO Guide... And Why It Makes No Sense

Courtesy of ZeroHedge

By Scott Willis via Grizzle.com

BOTTOM LINE

At the end of the day, Peloton is a gym membership pretending to be a tech company.

We fully admit the product is exciting and unique in the market, but Peloton still faces the same problem...



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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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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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