Visa Calls Fly Off The Shelves As Shares Hit Fresh 52-Week Peak
by Option Review - September 20th, 2011 2:17 pm
Today’s tickers: V, CLGX, JEF & TEVA
V - Visa, Inc. – Volume in Visa call options jumped straight out of the gate this morning, with shares in the electronic payments company now trading 5.2% higher on the day at a new 52-week high of $94.75 as of 12:55 pm ET. The company said Monday it has partnered with Internet search giant, Google, to allow Visa account-holders to pay for store purchases with Android smartphones. Activity in call options that expire at the end of the week suggest some traders are positioning for the price of Visa’s shares to extend gains through Friday. Investors picked up in- and out-of-the-money calls in the Sept. ’23 weeklies, but focused their efforts most aggressively at the Sept. $95 call, driving volume at that strike up past 11,500 contracts. The majority of the Sept. $95 strike calls appear to have been purchased for an average premium of $0.46 each. Call buyers profit at expiration this week if shares in Visa exceed the average breakeven price of $95.46. Bullish bias in the weeklies spread to the Sept. $97.5 strike where investors paid an average premium of $0.22 apiece for more than 650 calls.
Longer-dated October contract call options are also popular on Visa this afternoon as traders position for fresh 52-week highs in the weeks ahead. Buyers out-transacted sellers in the Oct. $92.5 and $95 strike call, while mixed trading was seen in the higher Oct. $100 strike call option. Fresh prints in the Oct. $105 strike call are notable as upwards of 2,500 calls changed hands at that strike against previously existing open interest of just 3 contracts. It looks like most of these contracts were purchased for an average premium of $0.25 a-pop. Investors long the Oct. $105 strike call profit at…
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Bulls Shake Off Disney Doldrums, Position For Brighter Days Ahead
by Option Review - August 10th, 2011 2:46 pm
Today’s tickers: DIS, UBS, TEVA & PAYX
DIS - The Walt Disney Co. – The largest operator of theme parks is a far cry from the happiest place on Earth for investors in Disney today as shares realized their biggest intraday decline since September 2001. The company reported better-than-expected earnings after the closing bell on Tuesday, but the subsequent pop in DIS shares disappeared in the blink of an eye as investors began to price in concerns that slowing economic growth may hit Disney hard given its reliance on the consumer’s willingness to spend. DIS shares fell as much as 14.7% this morning to secure a new 52-week low of $29.60. Though shares tumbled today, it looks like a number of options strategists are positioning for the magic to eventually return. Contrarians betting on a rebound took to multiple expiries, buying calls and selling puts in the August contract, as well as initiating bullish spreads in longer-dated contracts. Near-term optimists employed largely plain-vanilla strategies, picking up more than 2,450 calls at the August $32 strike for an average premium of $0.49 apiece. A number of traders taking in an average premium of $0.66 per contract on the sale of 2,100 puts at the August $29 strike seem more than happy to get long the stock at that level should the puts land in-the-money at expiration next week. Of course, investors selling the puts walk away with the full amount of premium as long as shares exceed $29.00 by next Friday.
Meanwhile, longer-term bullish players appear to be purchasing call spreads. The 2,500-lot Jan. 2012 $30/$40 call spread purchased at a net premium of $2.85 per contract yields positive returns for one strategist should Disney’s shares rally above the effective breakeven point at $32.85 by expiration next year. The buyer of the spread could fetch maximum potential profits of $7.15 per contract in the event that Disney’s shares jump 27.3% over the current price of $31.42 (share price as of 12:10 pm ET) to top…
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Options Trades Nn HSBC Signal Investor Optimism
by Option Review - August 1st, 2011 4:22 pm
Today’s tickers: HBC, TEVA, TLB & CAVM
HBC - HSBC Holdings PLC – Shares in the financial services provider increased 2.9% to $50.30 at the start of the trading week on news Europe’s largest bank by market value agreed to sell its upstate New York branch network to First Niagara Financial Group for around $1 billion. The London-based company said it plans to cut $3.5 billion in costs over the next two years by trimming 10% of its workforce and closing offices. HSBC posted better-than-expected first-half earnings ahead of the opening bell this morning. Options players cheered HSBC today by ditching downside protection, selling puts and engaging in light call buying in the front month. Approximately 4.1 put options are changing hands on HSBC for each single call option in action today. Investors expecting shares to exceed $49.00 through August expiration sold roughly 2,300 puts at the August $49 strike for an average premium of $0.74 apiece. Open interest at that strike suggests traders purchased around 2,000 of the Aug. $49 puts on Friday at an average premium of $1.41 each. Put sellers may be purging protective or bearish positions on HSBC post-earnings, or may be selling the puts outright to rake in available premium on the options. Investors engaging in the latter strategy keep the full amount of premium received as long as HSBC’s shares exceed $49.00 through expiration day in a few weeks. Similar put-selling took place at the August $48 strike where some 1,555 puts sold for an average premium of $0.39 a-pop, while 1,000 puts were sold at the August $47 strike at an average premium of $0.19 per contract. Meanwhile, investors expecting shares in the financial services company to continue to rise picked up some 560 in-the-money calls at the August $49 strike at an average premium of $1.35 each, and purchased around 620 calls at the August $50 strike for an average premium of $0.68 apiece. Call buyers profit at expiration if shares in HSBC rally above…
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Strangle-Strategist Targets Boeing
by Option Review - May 25th, 2011 4:27 pm
Today’s tickers: BA, CSCO, TIN & TEVA
BA - Boeing Co. – Boeing’s shares may be headed for the stratosphere or ready to crash and burn over the next few months according to the buyer of a sizable long strangle on the producer of commercial jetliners today. Shares in the Chicago, IL-based company are up 0.90% at $76.27 in early-afternoon trade, recovering up from earlier losses following disappointing April durable goods data. The strangle-strategist it seems is at least looking for implied volatility on the stock to climb if not the actual price of the underlying shares. The trader purchased approximately 7,500 calls at the August $85 strike for a premium of $0.56 each, and purchased the same number of puts at the August $65 strike at a premium of $0.88 a-pop. Net premium paid to initiate the strangle amounts to $1.44 per contract, thereby preparing the trader to make money should the stock swing sharply in either direction away from the current price. Profits are available on the upside at expiration if the stock is trading above the upper breakeven point at $86.44, while profits on the downside require shares trade below the lower breakeven point at $64.56 at expiration. Boeing’s shares would need to jump 13.3% higher, or drop 15.4%, from the current price to break-out of either point in the next few months. But, as mentioned previously, the stock need not move at all for the buyer of the strangle to benefit from the position. What is required are rising expectations of turbulent days ahead for BA’s shares, in other words, higher implied volatility. The combined value of the call and put options should increase if implied volatility on Boeing climbs going forward. The investor may be able to sell the strangle ahead of expiration for more than the $1.44 per contract required to purchase the position today given favorable moves in the level of volatility on the stock. Boeing reports second-quarter earnings on July 27 ahead of the opening…
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Boo-yah for Limelight Networks Inspires Demand for Calls
by Option Review - September 30th, 2010 4:14 pm
Today’s tickers: LLNW, LPS, TEVA, XRT, MON & AEO
LLNW - Limelight Networks, Inc. – Call options on the provider of Internet distribution services for video, music, games and other media and entertainment content are in high demand today with shares rising as much as 14.8% at the start of the trading session to touch an intraday high of $6.35. Limelight’s shares jumped after “Mad Money” host Jim Cramer said he’s bullish on the firm’s long term prospects. LLNW’s shares tapered off significantly during the course of the day and are currently up a lesser 5.60% to stand at $5.84 with less than 30 minutes to go before the final bell. Bullish investors picked up 1,000 in-the-money calls at the October $5.0 strike for an average premium of $1.11 each. Call buyers at this strike are poised to profit should LLNW’s shares exceed the effective breakeven price of $6.11 by October expiration. Trading traffic in calls was heaviest, however, at the December $5.0 strike where some 4,600 in-the-money calls were purchased at an average premium of $1.51 a-pop. Investors long the calls make money if the price of the underlying stock jumps 11.5% over the current price of $5.84 to surpass the average breakeven point at $6.51 by expiration day in October. Options implied volatility is still up 12.1% on the day to arrive at 83.75%, but earlier jumped 25.92% to touch a high of 94.10% today.
LPS - Lender Processing Services, Inc. – The provider of integrated technology and outsourced services to the mortgage lending industry attracted a bevy of long-term bearish put buyers this afternoon. Shares are down 0.40% at $33.31 heading toward the close, but did manage to eke out an early-morning rally of 0.25% to touch an intraday high of $33.52 perhaps after being rated new ‘buy’ at Fagenson & Co. with a 12-month target share price of $38.00. Put players may be buying the puts outright because they expect the firm’s shares to decline, or they could be building up downside…
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Strangle Strategist Sees Range-Bound Shares at The Cheesecake Factory
by Option Review - September 7th, 2010 4:03 pm
Today’s tickers: CAKE, LVS, IYR, TEVA, EEM, S, CREE & EXPE
CAKE – The Cheesecake Factory, Inc. – One premium-hungry options strategist sold a strangle on the full-service dining restaurants operator this afternoon in the expectation that its shares are set to trade within a narrow range through October expiration. Cheesecake Factory’s shares fell 1.45% late in the session to trade at $25.38 by 3:35 pm ET. The investor sold 3,000 puts at the October $25 strike for premium of $1.05 apiece and sold 3,000 calls at the October $26 strike at a premium of $1.05 each in order to pocket gross premium of $2.10 per contract. Full retention of the premium received today occurs as long as shares of the underlying stock trade between $25.00 and $26.00 through October expiration. Wayward shifts in the price of CAKE’s shares could give this strangle-player a severe stomachache as losses start to build should shares rally above the upper breakeven price of $28.10, or if shares dip under the lower breakeven point at $22.90, ahead of expiration day in October.
LVS – Las Vegas Sands Corp. – Shares in casino resort operator Las Vegas Sands commenced the session in the red but rallied in afternoon trading to stand 1.05% higher on the day at $31.32 as of 3:45 pm ET. Earlier in the day shares increased as much as 1.5% to secure a new 52-week high of $31.46. One long-term bullish investor hoping to see continued appreciation in the price of the underlying stock established a covered call in the March 2011 contract. The trader sold 10,000 calls at the March 2011 $40 strike for premium of $1.73 per contract. The transaction had a delta of .30 and was tied to the purchase of LVS shares at $31.20 each. Premium received on the sale of the calls effectively reduces the price paid by the investor to get long the stock. The bullish player is poised to accumulate maximum potential gains of 35.7% on the run up in LVS shares from an effective purchase price of $29.47 to $40.00 if the calls land in-the-money at expiration and the underlying position is called away from the trader at that time.
IYR – iShares Dow Jones U.S. Real Estate Index ETF – The construction of a debit put spread on the IYR, an exchange-traded fund that corresponds to the Dow Jones U.S. Real Estate Index…
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TEVA
by ilene - April 15th, 2010 11:31 am
Courtesy of Allan
In the midst of a mindless rally, a new Short has garnered my attention; TEVA. Why has a hot stock in a hot sector (Generic Pharmaceuticals) flipped to a Sell in its Daily Trend Model? We don’t know, nor do we care. Respect.
Below are two TEVA charts. The first one uses the standard Trend Model 2.0 and the second one uses my new beta version Trend Model 4.0 with wider settings that result in fewer trades at the expense of efficiency in both entry and exits. This will be a good test and example of how these two models differ in their approach to trend following.
Under current parameters, TEVA triggered Short at the close Wednesday. Under the wider settings in the beta version of the Trend Model, a TEVA is still Long but will trigger Short on Daily close under 60.07. If the beta version it does trigger Short, it will represent a powerful confirmation of the first Short signal. Stop loss is at 63.94 according to the standard settings.
(Bar colors & price entries are from Model 2.0)
*******
Allan’s newly launched newsletter, “Trend Following Trading Model,” goes with the trend-following trading system he’s been working on for years. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction, read this introductory article.
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TEVA
by Chart School - April 15th, 2010 10:36 am
TEVA
Courtesy of Allan
In the midst of a mindless rally, a new Short has garnered my attention; TEVA. Why has a hot stock in a hot sector (Generic Pharmaceuticals) flipped to a Sell in its Daily Trend Model? We don’t know, nor do we care. Respect.
Below are two TEVA charts. The first one uses the standard Trend Model 2.0 and the second one uses my new beta version Trend Model 4.0 with wider settings that result in fewer trades at the expense of efficiency in both entry and exits. This will be a good test and example of how these two models differ in their approach to trend following.
Under current parameters, TEVA triggered Short at the close Wednesday. Under the wider settings in the beta version of the Trend Model, a TEVA is still Long but will trigger Short on Daily close under 60.07. If the beta version it does trigger Short, it will represent a powerful confirmation of the first Short signal. Stop loss is at 63.94 according to the standard settings.
(Bar colors & price entries are from Model 2.0)
*******
Allan’s newly launched newsletter, “Trend Following Trading Model,” goes with the trend-following trading system he’s been working on for years. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction, read this introductory article.
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Optimistic individual Initiates Mammoth Bullish Risk Reversal Play on Conseco
by Option Review - March 31st, 2010 6:20 pm
Today’s tickers: CNO, OSIP, HIG, FXI, JDSU, ARQL, GNW, TEVA, KO & UBS
CNO – Conseco, Inc. – The holding company for a number of insurance companies, such as Colonial Penn Life Insurance Co. and Washington National Insurance Co., popped up on our ‘most active by options volume’ market scanner late in the session after a massive bullish risk reversal was established on the stock in the January 2011 contract. Conseco’s shares declined 0.80% during the course of the trading day to stand at $6.18. It looks like one optimistic options player sold 33,727 puts at the January 2011 $5.0 strike for a premium of $0.50 apiece in order to partially finance the purchase of 33,727 calls at the same strike for $1.80 each. The net cost of the transaction amounts to $1.30 per contract. Thus, the investor responsible for the reversal is prepared to amass profits if Conseco’s shares rally through the breakeven price of $6.30 ahead of expiration day in January. The 67,454 contracts involved in the spread trump existing open interest on the stock of 48,756 lots.
OSIP – OSI Pharmaceuticals, Inc. – The outline of a slightly lopsided iron condor appeared in the May contract on OSI Pharmaceuticals, indicating one options investor expects shares of the biotechnology company to trade within a specified range through expiration. OSIP’s shares surrendered 0.85% during afternoon trading to stand at $59.55 perhaps after The Wall Street Journal reported that Astellas Pharma, Inc. is extending its tender offer for OSI Pharmaceuticals – valued at $3.5 billion – by three weeks to April 23, 2010. The investor responsible for the iron condor play essentially enacted two credit spreads, one using put options and the other calls, in order to pocket options premium. On the call side, the trader shed 4,000 contracts at the May $60 strike for a premium of $1.90 apiece, spread against the purchase of the same number of calls at the higher May $62.5 strike for $0.90 each. As for the puts, the investor sold 4,000 lots at the May $55 strike for a premium of $0.94 per contract, marked against the purchase of 4,000 puts at the lower May $50 strike for $0.62 each. Notice that the put credit spread is wider than the spread on the call side, which creates a lopsided iron condor in this case. The net credit pocketed by the trader amounts to $1.32…
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Love Letters (Weekend Reading on Valentine’s Day)
by phil - February 14th, 2010 8:25 am
Happy Valentine's Day!
Last Valentine's Day was as Saturday, following a frightening Friday the 13th, where we had fallen through the 8,000 line on the Dow. I wrote a very interesting post that morning discussing how I came about my political views, which is good for new Members to check out. We also flipped short that day on SKF, too early at $130 but that ended well as we kept after them and it was our biggest bet by March 6th, which eventually returned over 1,000%. We also stopped shorting GOOG at $350 (it did keep going to $300 but the upside was nice too). I closed the morning post with:
For us, it’s all about the levels as we try to remain unbiased as investors, no matter how voraciously we defend our political views. Dow 7,800, S&P 820, Nas 1,460, NYSE 5,100, Russell 437 and SOX 203 all better continue to hold today but, even if they do, we’re nowhere near where we want to be and we’re going to take some bearish covers into the weekend – just in case. So whether you are a witch celebrating the horrors of the 13th or waiting for a rose from your true love the next day, remember to be careful out there – we are certainly still deep, deep in the woods!
That Tuesday (Monday was President's day) we fell 300 points and another 300 points by the end of the week! That was a fitting way to mark the 80th anniversary of the St. Valentine’s Day Massacre when Al Capone’s "South Side" gang, dressed as cops, rousted a garage run by Bugs Moran’s "North Side" gang and had them stand against the wall and then executed all 7 men. They shot them 70 times with machine guns and made their escape by using the Capone men dressed as cops to "arrest" the other Capone men and drive them away from the scene in broad daylight. Now that's what I call a good plan!
Here's a great chart that summarizes our year to date. Someone else found this, I wish I knew how to use StockCharts this well, they have tons of good things in there:
It's a bit worrying that XLU is doing so poorly – so much for diversification keeping you safe… It's going…
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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...
Ilene is editor and affiliate program
coordinator for PSW.