Options See Little Hope For Near-Term Dreamworks Rally
by Option Review - November 18th, 2011 1:38 pm
Today’s tickers: DWA, GPS, SM & ACHN
DWA - Dreamworks Animation SKG, Inc. – The creator of family-favorite feature films such as the Shrek movies and more recently, Puss in Boots, popped up on our ‘hot by options volume’ market scanner this morning after a large block of call options changed hands in the December contract. It looks like the investor responsible for the transaction may be writing the calls, perhaps in the expectation that shares in Dreamworks Animation are unlikely to increase much from their current level. Shares in DWA currently trade 0.90% lower on the day at $17.24 as of 12:45 PM in New York. The investor appears to have sold 6,000 calls outright at the Dec. $17.5 strike for a premium of $0.75 per contract. The trader walks away with the full amount of premium in hand, a total of around $450,000, as long as shares in Dreamworks settle below $17.50 at expiration next month. While the calls do not appear to be tied to any simultaneous transaction in the underlying stock, it is possible the investor is already long the stock and selling covered calls. However, if the trader is naked short the call options, he could face potentially devastating losses in the event that shares spike higher in the next four weeks. In the latter scenario, the investor starts losing money on the position if shares rally 5.9% to surpass the effective breakeven price of $18.25 at expiration.
GPS - The Gap, Inc. – Shares in the operator of the Gap and Banana Republic fell 3.6% to $18.56 on Friday following the San Francisco, California-based company’s third-quarter earnings report after the final bell on Thursday. The largest U.S. clothing retailer earned $0.38 a share in the quarter, which beat average analyst expectations of $0.36 a share, however, the company reported sales of $3.58 billion, missing the consensus estimate of $3.59 billion. One bearish options trader appears to be positioning for the price of the underlying to continue to head south for the winter. It looks like the investor purchased a 1,500-lot Dec. $15/$18 put spread for an average net premium of $0.53 per contract. The strategist may profit at expiration in the event that GPS shares decline another 5.9% to breach the average breakeven price of $17.47. Maximum potential profits of $2.47 per contract are available to the trader should shares in Gap, Inc. drop another 19.2% to trade…
Retail-Bear Initiates Put ‘Fly On XRT
by Option Review - October 25th, 2010 9:04 pm
Today’s tickers: XRT, SM, AMD, MEE, EXPE, CTV & MYL
XRT - SPDR S&P Retail ETF – Pessimism on the retail ETF took the form of a put butterfly spread today, suggesting one strategist is prepared for the price of the underlying fund to decline by December expiration. Shares of the XRT, an exchange-traded fund designed to track the performance of the S&P Retail Select Industry Index, are up 0.95% this afternoon to stand at $43.75 as of 3:10 p.m. in New York trading. The XRT’s shares are higher today following reports that economists increased estimates for consumer purchases in the third quarter after retail sales rose more than expected in September. But, nearly all of the activity in XRT options took place in puts and implies a bearish slant on the fund today. The butterfly spread involved the purchase of 5,600 puts at the December $43 strike at a premium of $1.45 each [wing 1], the sale of 11,200 puts at the December $39 strike for a premium of $0.47 per contract [body], and the purchase of 5,600 puts at the lower December $35 strike at a premium of $0.19 apiece [wing 2]. Net premium paid to initiate the bearish spread amounts to $0.70 per contract, thus positioning the investor to make money if shares of the XRT fall 3.3% from the current price of $43.75 to breach the effective breakeven point at $42.30 by expiration day in December. Maximum potential profits of $3.30 per contract are available to the trader if the price of the underlying fund declines 10.85% to settle at $39.00 at expiration. The investor paid $0.70 per contract, but stands prepared to gain more than 4.7 times that amount, or $3.30 per contract, if the transaction comes good by December expiration.
SM - SM Energy Co. – Shares of the U.S. producer of oil and natural gas rose 4.05% today to $42.34 as of 3:25 p.m. The current rally may be an extension of gains realized last week on news the…
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…
Mylan Rebounds After FDA Report Signals All Clear
by Option Review - August 13th, 2009 5:07 pm
Today’s tickers: MYL, MU, ACAD, PAAS, PALM, KLAC, LDK, OIH & SM
ACAD – Shares of the biopharmaceutical company have soared upwards of 17.5% during the trading session and currently stand at $6.23. ACAD appeared on our ‘hot by options volume’ market scanner after one investor initiated a long butterfly spread in the September contract. The trader constructed the…