Posts Tagged ‘SII’

Weekly Wrap-Up – Buffett’s Daring Derivative Deal Does Well

I was going to talk about Buffett's annual letter to investors.

Fortunately, I procrastinated and other people did some detailed reporting like Ravi Nagarajan, Andy Fry, Scott Patterson and Joe Del Bruno – who does a great job of pointing out that Berkshire's 4th quarter results were propped up by Buffett's $1.05Bn gains in derivatives betting (something Buffett himself once called "weapons of mass financial destruction" but, as we well know – if you can't beat them…), which accounted for 1/3 of Berkshire's $3.06Bn profits

Buffett's biggest bet was selling a put against the S&P 500 back in March – a move I said at the time was BRILLIANT and Buffett himself now says about his own options trading:  "We are delighted that we hold the derivatives contracts that we do.  To date, we have significantly profited from the float they provide. We expect also to earn further investment income over the life of our contracts."  

What did Buffett do?  Exactly what we teach you to do here at PSW - he took advantage of an irrational move in the markets and SOLD INTO THE EXCITEMENT, getting a fat premium from some sucker that bet the S&P would not hold 666 5 years from now.  Buffett effectively sold $5Bn worth of puts that expires worthless at S&P 700 between 2019 and 2027, putting $5Bn in his pocket and holding aside $1Bn in margin, which is how much he's already ahead on the bet.  Like a good options trader, he has a plan and he's trading his plan, making sure his investment is on track and patiently letting time do it's work as it eats away at the put-holder's premium. 

What about the risk?  Well I can't speak for Buffett's stop-loss technique but we're talking about a company that has (had) $40Bn in cash using their excess margin to make a $5Bn bet that the S&P would not stay below 700 for 10 years.  Buffett and I both tell people – NEVER buy a stock (or sell a put against one) that you are not willing to own for 10 years.  The S&P was 5% below at the time and would have had to drop, perhaps, 20% more to cost him $1Bn so let's call the stop 550 on the S&P where Buffett risked 2.5% of his cash against a posible 400% gain on his $1Bn risk allocation over 10+ years.  While it is true that if the
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Investor Removes Comcast Strangle to Bank Profits

Today’s tickers: CMCSA, HSY, GLD, ORCL, XRT, ERTS, FXI, PFE, SII & JCP

CMCSA – Comcast Corp. – A large-volume short strangle established at the beginning of the month on the entertainment and communications services firm was unraveled today, yielding one investor a nice chunk of change heading into the weekend. Comcast’s shares are up 1% to $15.89 in afternoon trading. It appears the trader originally sold roughly 35,000 calls at the July $17 strike for a volume-weighted average premium of $0.74 apiece in combination with the sale of 35,000 puts at the July $14 strike for a premium of $0.74 each. The original transaction likely occurred on February 4, 2010, and yielded a gross premium of $1.48 per contract to the trader. Today the investor purchased-to-close the short strangle, buying back the calls at a reduced premium of $0.60 each, and buying the put options for $0.56 apiece. The trader paid a gross premium of $1.16 to close out the short stance. Therefore, the investor walks away with net profits of $0.32 per contract for a grand total of $1.120 million. It is important to note, however, that the trader left a great deal of money sitting on the table. Comcast’s shares are still trading within the boundaries of the $14/$17 strike prices required for maximum profit potential. The investor would have accumulated profits of $1.48 per contract – a total of $5.180 million – if CMCSA shares remained range-bound and if the trader held the position through expiration. Perhaps this individual unraveled the strangle in anticipation of greater volatility in the price of the underlying stock going forward.

HSY – The Hershey Company – Bullish investors satisfied sugar cravings this afternoon by devouring Hershey call options. Shares of the chocolatier rallied 2.70% to $39.88 today. Option traders picked up 1,600 calls at the March $41 strike for a premium of $0.47 apiece. The higher March $42.5 strike attracted greater volume with more than 5,300 calls purchased for a premium of $0.23 per contract. Higher-strike call buyers are positioned to accumulate profits if Hershey’s share price exceeds its current 52-week high of $42.25, attained back on July 23, 2009, by expiration next month. These optimistic individuals profit if shares increase 7.15% from the current price to surpass the effective breakeven point on the calls at $42.73.

GLD – SPDR Gold Trust ETF – Shares of the gold exchange-traded fund,…
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Bullish Trader Quenches Thirst for Calls by Assembling Ratio Spread on PepsiCo

Today’s tickers: PEP, ODP, PFE, EK, AET, PFE, EWT, BIDU, ZION & SII

PEP – PepsiCo, Inc. – Global beverage and snack company, PepsiCo, attracted the attention of bullish option traders in late afternoon trading. PEP’s shares appreciated just less than 1% during the session to stand at $62.05 with 45 minutes remaining before the closing bell. It looks like one trader initiated a ratio call spread on the stock in order to position for continued upward momentum in the price of the underlying through expiration in April. The investor purchased 6,000 calls at the April $62.5 strike for an average premium of $1.93 apiece, spread against the sale of 12,000 calls at the higher April $65 strike for roughly $0.92 each. The net cost of the transaction amounts to just $0.09 per contract. Shares need only rise $0.54 over the current price in order for the investor to breakeven on the trade. Maximum available profits of $2.41 per contract accumulate if the price of PEP’s shares rally 4.75% to $65.00 by expiration day in April.

ODP – Office Depot, Inc. – A sold strangle play on the global supplier of office supplies this afternoon indicates one investor expects shares of Office Depot to remain range-bound for the next several months. ODP’s shares improved 1.25% during the trading day to arrive at $6.61 each. It appears the investor sold 15,000 calls at the April $7.5 strike for a premium of $0.30 apiece, and sold 15,000 put options at the lower April $6 strike for an average premium of $0.47 each. The strangler pockets a gross premium of $0.77 per contract, which he keeps in full as long as shares of the office supplies company trade within the strike prices described above, through expiration. Lower volatility in the price of the underlying shares as well as declines in option implied volatility on the stock benefit the investor in this case. The trader is exposed to losses, however, if shares of Office Depot swing outside of the upper breakeven price of $8.27, or if the stock declines beneath the lower breakeven point at $5.23 by expiration.

PFE – Pfizer, Inc. – Massive chunks of long-dated call options traded on the pharmaceutical company this afternoon. It is unclear what the exact motivation or position of the responsible party is, but it certainly appears to be the work of a Pfizer-bull. Shares continue to…
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New Bank of America CEO Gets Thumbs Up From Investors

Today’s tickers: BAC, HES, SII & DHI

BAC – Bank of America – A New Year and a fresh start in the corner office for incumbent CEO Brian Moynihan at Bank of America. Comments from his maiden voyage speech at a conference today noted that banks had over lent and consumers had taken on too much debt. It’s time to get back to work and as a responsible lender Mr. Moynihan wants to take the lead and do the right thing. His point that the worst of the crisis is now behind us in the context of credit seems to have been taken to heart by investors surrounding BAC’s shares today lifting it 3.9% to $15.65. Option investors appear to have taken profits on January call options at the $14 and $15 strikes instead favoring the $16/$19 strikes to play a bullish call spread combination. Volume patterns suggest the sale of around 33,000 call options for three cents at the upper strike while the $16 calls appear to have been purchased for around 18 cents thus lowering the breakeven at this point to a further rally of 3.1%. Investors also appeared to sell 22,000 puts expiring this month at the $15 strike – a sustained rally would render these worthless at expiration. Puts expiring February at the same $15 strike were also ditched at a premium of 73 cents, while option implied volatility remained unchanged at 37%.

HES – Hess Corp. – A New Year jump in commodity prices was largely inspired by a sustained bout of cold weather sending crude oil prices on the rise above $80. Shares in oil companies rose with those at Hess up 4% at $62.92, while one long-term option bull appeared to purchase 6,750 bullish call options using the January 2011 expiration. The $75 strike price traded at an average price of $4.60 per contract implying a break even share price at expiration of $79.60, requiring an annual rise for shares at Hess of 26.5% from its current level.

SII – Smith International Inc. – Oil services provider, Smith international is also higher by 2.8% today at $27.92 while our scanners picked up unusual options volume. We’re missing one data point to completely and accurately identify this trading strategy, but we think we get the gist. The option combination involved the purchase of puts expiring in April at the $23 strike where an investor…
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Zero Hedge

Hong Kong Rocked By Biggest March Yet After Extradition Bill Pulled; Millions Demand Lam Resign

Courtesy of ZeroHedge. View original post here.

Despite City Executive Carrie Lam's major concession to the protest movement - that is, the (not really) 'indefinite' suspension of the extradition bill that catalyzed the protests - a planned protest march went ahead as scheduled on Sunday, marking the second consecutive Sunday of street protests in Hong Kong.

...



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Phil's Favorites

Colorado Hits $1 Billion In Marijuana State Revenue

Courtesy of ZeroHedge

Colorado has passed another major marijuana milestone, surpassing $1 billion in state revenue since it legalized the drug in 2014.

Source: Colorado.gov

Up to May of this year, Statista's Niall McCarthy notes that the state has seen more than $6 billion in total marijuana sales since ...



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Biotech

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

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

 

Consumer genetic testing customers stretch their DNA data further with third-party interpretation websites

If you’ve got the raw data, why not mine it for more info? Sergey Nivens/Shutterstock.com

Courtesy of Sarah Catherine Nelson, University of Washington

Back in 2016, Helen (a pseudonym) took three different direct-to-consumer (DTC) genetic tests: AncestryDNA, 23andMe and FamilyTreeDNA. She saw genetic testing as a way...



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Kimble Charting Solutions

Gold Bugs Index Attempting 8-Year Breakout, Says Joe Friday

Courtesy of Chris Kimble.

Are Gold Bugs fans about to receive positive news they haven’t had in years? Possible!

This chart looks at the Gold Bugs Index (HUI) on a weekly basis over a couple of decades. The index has spent the majority of the past 20-year inside of rising channel (1).

The index hit the top of the channel in 2011, where it peaked and started creating a series of lower highs for the past 8-years, which has formed line (2).

The index is now kissing the underside of falling resistance and the underside the 2016/2017 lows at (3).

Joe Friday Just The Fa...



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Insider Scoop

Wedbush: Apple's Stock Could Gain $20-$25 From US-China Trade Deal

Courtesy of Benzinga.

The Sino-American trade dispute and near-term developments could prove to be a "major swing factor" for Apple Inc. (NASDAQ: AAPL), according to Wedbush.

The Analyst

Daniel Ives maintained an Outperform rating on Apple with an unchanged $235 pric...



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Chart School

Silver Review

Courtesy of Read the Ticker.

The folks in the federal reserve will debase the US dollar currency to an extreme degree silver will finally lift off the floor.. 

Note: Readers should re watch the silver back screen news video, here.

The following video looks at price action and Wyckoff logic.

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Chart in video

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If gold moves, silver wi...

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Digital Currencies

Cryptos Are Crashing As Asia Opens, Bitcoin Back Below $8k

Courtesy of ZeroHedge. View original post here.

Having survived the day's bloodbath in US tech stocks, cryptos are crashing in the early Asian session, apparently playing catch-down to the day's de-risking.

While no catalyst is immediately evident, there are some reports noting 13 large global banks are preparing to launch digital versions of major global currencies next year, though we suspect this drop was more algorithmic that fundamental-driven.

...



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ValueWalk

More Examples Of "Typical Tesla "wise-guy scamminess"

By Jacob Wolinsky. Originally published at ValueWalk.

Stanphyl Capital’s letter to investors for the month of March 2019.

rawpixel / Pixabay

Friends and Fellow Investors:

For March 2019 the fund was up approximately 5.5% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 1.9% while the Russell 2000 was down approximately 2.1%. Year-to-date 2019 the fund is up approximately 12.8% while the S&P 500 is up approximately 13.6% and the ...



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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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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

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

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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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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