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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Phil's Favorites

Bloomberg's Ted Merz Joins Me on Panic with Friends to Discuss Financial Journalism and Information Dissemination in the Age of Social Media

 

Bloomberg’s Ted Merz Joins Me on Panic with Friends to Discuss Financial Journalism and Information Dissemination in the Age of Social Media

Courtesy of Howard Lindzon

My friend Ted Merz at Bloomberg has one of the most interesting jobs in the world. Ted has been at Bloomberg since 1991 and today heads Bloomberg’s Global News Product. That is a complicated job and this is a complicated era of news considering the 24/7/365 flow of information, misinformation and of course news. Ted makes it all look easy. I mi...



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Zero Hedge

Microsoft Patents AI-Chatbots That Imitate Dead People 

Courtesy of ZeroHedge View original post here.

The United States Patent and Trademark Office (USPTO) granted Microsoft one of the most bizarre patents to date: chatbots using deceased people's personal information. 

...



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Kimble Charting Solutions

Bitcoin Parabolic Rally Reversal Faces Big Support Test!

Courtesy of Chris Kimble

One of the biggest breakouts of 2020 came by way of Bitcoin. And it was epic.

The coronavirus crash saw the cryptocurrency retest its 2018 lows before rocketing higher in parabolic fashion.

Did Bitcoin Peak? What’s Next?

Today we examine a “weekly” chart of Bitcoin, highlighting its parabolic rally… and recent reversal lower.

The rally in Bitcoin surged all the way to the 361% Fibonacci extension level at (1) before creating the largest bearish reversal in years.

In just a few weeks time, Bitcoin is testing its 261% Fibonacci level near 31,000 at (2). This is a big test of support for the cryptocurrency. A “weekl...



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ValueWalk

Hybrid Electric Vehicles: A Stay of Execution for NiMH Batteries

By Jacob Wolinsky. Originally published at ValueWalk.

Hybrid Electric Vehicles: A Stay of Execution for NiMH Batteries, Explores IDTechEx

Q4 2020 hedge fund letters, conferences and more

NiMH Batteries Are Still Commonly Used

When we talk about battery-electric vehicles, the lithium-ion battery is dominant; however, for full hybrid electric vehicles (those that have electric-only modes but do not plug-in), NiMH batteries are still the most common battery on the road. With the growing market for hybrid electric vehicles (HEVs), will this drive further demand for NiMH batteries and stop them from being eliminated from the automotive market?...



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Chart School

RTT browsing latest..

Courtesy of Read the Ticker

Please review a collection of WWW browsing results. The information here is delayed by a few months, members get the most recent content.



Date Found: Saturday, 11 July 2020, 05:26:16 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: This is lack of liquidity means support is likely to break if it is tested hard!



Date Found: Saturday, 11 July 2020, 09:51:58 PM

Click for popup. Clear your browser cache if image is not showing.


Comment: Nasdaq losing momentum.



Da...

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Politics

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

 

What is the 'boogaloo' and who are the rioters who stormed the Capitol? 5 essential reads

Rioters mass on the U.S. Capitol steps on Jan. 6. Samuel Corum/Getty Images

Courtesy of Jeff Inglis, The Conversation

In the wake of the insurrection on Jan. 6, the U.S. is bracing for the possibility of additional violent demonstrations and potential riots at the U.S. Capitol and state capitol buildings around the nation. W...



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Biotech/COVID-19

The simple reason West Virginia leads the nation in vaccinating nursing home residents

 

The simple reason West Virginia leads the nation in vaccinating nursing home residents

By mid-January, only about a quarter of the COVID-19 vaccines distributed for U.S. nursing homes through the federal program had reached people’s arms. Paul Bersebach/MediaNews Group/Orange County Register via Getty Images

Courtesy of Tinglong Dai, Johns Hopkins University School of Nursing

The urgency of vaccinating nursing home residents is evident in the numbers. The COVID-19 pandemic has claimed the lives of mo...



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Mapping The Market

The Countries With The Most COVID-19 Cases

 

The Countries With The Most COVID-19 Cases

By Martin Armstrong, Statista, Jan 12, 2021

This regularly updated infographic keeps track of the countries with the most confirmed Covid-19 cases. The United States is still at the top of the list, with a total now exceeding the 22 million mark, according to Johns Hopkins University figures. The total global figure is now over 85 million, while there have been more than 1.9 million deaths.

You will find more infographics at ...



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Digital Currencies

Bitcoin: why the price has exploded - and where it goes from here

 

Bitcoin: why the price has exploded – and where it goes from here

B is for blast-off (but also bubble). 3DJustincase

Courtesy of Andrew Urquhart, University of Reading

Bitcoin achieved a remarkable rise in 2020 in spite of many things that would normally make investors wary, including US-China tensions, Brexit and, of course, an international pandemic. From a year-low on the daily charts of US$4,748 (£3,490) in the middle of March as pandemic fears took hold, bitcoin rose to ju...



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The Technical Traders

Adaptive Fibonacci Price Modeling System Suggests Market Peak May Be Near

Courtesy of Technical Traders

Our Adaptive Fibonacci Price Modeling system is suggesting a moderate price peak may be already setting up in the NASDAQ while the Dow Jones, S&P500, and Transportation Index continue to rally beyond the projected Fibonacci Price Expansion Levels.  This indicates that capital may be shifting away from the already lofty Technology sector and into Basic Materials, Financials, Energy, Consumer Staples, Utilities, as well as other sectors.

This type of a structural market shift indicates a move away from speculation and towards Blue Chip returns. It suggests traders and investors are expecting the US consumer to come back strong (or at least hold up the market at...



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Lee's Free Thinking

Texas, Florida, Arizona, Georgia - The Branch COVIDIANS Are Still Burning Down the House

 

Texas, Florida, Arizona, Georgia – The Branch COVIDIANS Are Still Burning Down the House

Courtesy of Lee Adler, WallStreetExaminer 

The numbers of new cases in some of the hardest hit COVID19 states have started to plateau, or even decline, over the past few days. A few pundits have noted it and concluded that it was a hopeful sign. 

Is it real or is something else going on? Like a restriction in the numbers of tests, or simply the inability to test enough, or are some people simply giving up on getting tested? Because as we all know from our dear leader, the less testing, the less...



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Insider Scoop

Economic Data Scheduled For Friday

Courtesy of Benzinga

  • Data on nonfarm payrolls and unemployment rate for March will be released at 8:30 a.m. ET.
  • US Services Purchasing Managers' Index for March is scheduled for release at 9:45 a.m. ET.
  • The ISM's non-manufacturing index for March will be released at 10:00 a.m. ET.
  • The Baker Hughes North American rig count report for the latest week is scheduled for release at 1:00 p.m. ET.
...

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Promotions

Free, Live Webinar on Stocks, Options and Trading Strategies

TODAY's LIVE webinar on stocks, options and trading strategy is open to all!

Feb. 26, 1pm EST

Click HERE to join the PSW weekly webinar at 1 pm EST.

Phil will discuss positions, COVID-19, market volatility -- the selloff -- and more! 

This week, we also have a special presentation from Mike Anton of TradeExchange.com. It's a new service that we're excited to be a part of! 

Mike will show off the TradeExchange's new platform which you can try for free.  

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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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