Buy-Write Strategist Positions for Halliburton Rebound
by Andrew Wilkinson - June 3rd, 2010 5:12 pm
Buy-write strategist positions for Halliburton rebound
Today’s tickers: HAL, RDC, CHK, AMAT, M, KR, HOLX, XLF, LVS & AVNR
HAL – Halliburton Co. – The provider of services, products, maintenance, engineering and construction to oil and natural gas companies around the globe was rated new ‘accumulate’ with a 12-month target share price of $28.00 at Madison Williams today. Perhaps the new rating inspired the bullish buy-write strategy initiated on the stock in the October contract this afternoon. Halliburton’s shares rallied 1.95% in morning trading to touch an intraday high of $24.14, but inched lower during the session to trade flat at $23.68 as of 2:55 pm (ET). The optimistic options investor enacted the buy-write strategy, or covered call play, by selling 2,500 calls at the October $28 strike price for a premium of $1.17 apiece. The investor likely purchased approximately 250,000 Halliburton shares around the same time for an average price of $23.35 apiece. The sale of the call options effectively reduces the price paid per share to $22.18 each. This strategy positions the investor to accrue maximum gains of 26.23% if HAL’s shares rally above $28.00 by October expiration. If the stock does surge through $28.00, the calls will likely be exercised and the investor will have the underlying shares called from him at $28.00 each, leaving the covered-call seller with significant profits in pocket.
RDC – Rowan Companies, Inc. – Shares of the manufacturer of equipment utilized in the drilling, mining and timber industries are lower by 3.90% to stand at $23.72 in late afternoon trading after the Obama administration extended a ban on offshore drilling. Rowan’s shares have recovered somewhat after plummeting 16.7% from an intraday high of $25.58 in morning trading down to an intraday low of $21.26 this afternoon. Bearish options traders scrambled to establish pessimistic positions in the June contract. Investors purchased 1,600 puts at the June $20 strike for an average premium of $0.41 apiece, suggesting some strategists are bracing for continued share price erosion ahead of June expiration. June $20 strike put buyers make money if Rowan’s shares slide 17.4% from the current price of $23.72 to breach the average breakeven point to the downside at $19.59. Investors also purchased 1,300 puts at the higher June $22.5 strike for a premium of $0.93 each, and picked up roughly 2,400 in-the-money puts at the June $25 strike for an average premium of $1.95…
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High Tech Research Moves From U.S. To China
by ilene - March 20th, 2010 1:32 pm
High Tech Research Moves From U.S. To China
Courtesy of Mish
Goodbye Silicon Valley, hello Xi’an China. Applied Materials will do new cutting edge research on solar panels in Xi’an.
Please consider China Drawing High-Tech Research From U.S.
XI’AN, China — For years, many of China’s best and brightest left for the United States, where high-tech industry was more cutting-edge. But Mark R. Pinto is moving in the opposite direction.
Mr. Pinto is the first chief technology officer of a major American tech company to move to China. The company, Applied Materials, is one of Silicon Valley’s most prominent firms. It supplied equipment used to perfect the first computer chips. Today, it is the world’s biggest supplier of the equipment used to make semiconductors, solar panels and flat-panel displays.
In addition to moving Mr. Pinto and his family to Beijing in January, Applied Materials, whose headquarters are in Santa Clara, Calif., has just built its newest and largest research labs here. Last week, it even held its annual shareholders’ meeting in Xi’an.
It is hardly alone. Companies — and their engineers — are being drawn here more and more as China develops a high-tech economy that increasingly competes directly with the United States.
A few American companies are even making deals with Chinese companies to license Chinese technology.
Xi’an — a city about 600 miles southwest of Beijing known for the discovery nearby of 2,200-year-old terra cotta warriors — has 47 universities and other institutions of higher learning, churning out engineers with master’s degrees who can be hired for $730 a month.
On the other side of Xi’an from Applied Materials sits Thermal Power Research Institute, China’s world-leading laboratory on cleaner coal. The company has just licensed its latest design to Future Fuels in the United States.
The American company plans to pay about $100 million to import from China a 130-foot-high maze of equipment that turns coal into a gas before burning it. This method reduces toxic pollution and makes it easier to capture and sequester gases like carbon dioxide under ground.
Future Fuels will ship the equipment to Pennsylvania and have Chinese engineers teach American workers how to assemble and operate it.
Small clean-energy companies are headed to China, too.
Locally, the Xi’an city government sold a 75-year land lease to Applied Materials at a deep discount and is reimbursing
…
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Weekend Wipe-Out, the Second Wave!
by Phil - January 29th, 2010 5:57 pm
Another week another 100 points lower.
Yep, that’s all it was, we lost all of 100 points more than last week, when we fell from 10,725 to 10,172 (553 points) and this week we dropped from Friday’s Dow close of 10,172 all the way down to 10,067 yet you would think the world had come to an end to hear the media and the traders freaking out. I’m not going to try to explain it, I can’t. Maybe it’s because going into last week we were very bearish but, starting on the 22nd, we let ourselves finally get a little more bullish AND THE MARKET BETRAYED US!
How could the market not zoom right back up? It always zooms right back up, doesn’t it? As I said a week ago Friday: "Boy, when sentiment shifts – it REALLY shifts!" My closing comment on Friday the 22nd was "Back to cash but leaving disaster hedges, which are looking great now as this is shaping up to be some disaster" and our weekend "Global Chart Review" showed us to be at some very key inflection points, letting us go well prepared into this week:
Manic Monday Market Movement
My Jets lost on Sunday so I was not in the best of moods on Monday. My outlook that morning was: "We still have our disaster hedges in case things get worse but, on the whole, we’re expecting a 1% bounce in the very least off our 5% lines (anything less will be a bad sign)." We were pretty much at the 5% rule on Friday’s close so we focused on the bounce we wanted to achieve in order to get more bullish.
I noted that the levels we were looking for were not exactly 1% retraces (see post for reasons) and our target retraces were: Dow 10,300, S&P 1,105, Nasdaq 2,225, NYSE 7,100 and Russell 625. What were the highs for the week on those indexes? Dow 10,310 (+10), S&P 1,103 (-2), Nasdaq 2,227 (+2), NYSE 7,098 (-2) and Russell 621 (-4). So that’s a net of +4 points out of 21,355 points worth of predictions on the retrace, accuracy to within .019% - not a bad showing for our patented 5% rule.
Please, under NO circumstances subscribe to our daily newsletter, where you would have this kind of information every morning and DO NOT get an Alert Membership where we send out our amazingly accurate watch levels to you every day. Having this sort of advanced information…
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Wild Weekly Wrap Up – Only Halfway Through January!
by Phil - January 16th, 2010 8:29 am
Wheee, what a ride!
The week can be neatly summed up by my 1:35 comment to Members in yesterday’s chat, summed the week up quite nicely as I said: "So funny, a whole week of gains I thought were ridiculous wiped out in 4 hours." Of course it’s easy to laugh when you play the market correctly – as I had said in the morning post, we had cashed out into Thursday’s run up and planned on going bearish through the weekend but it turned out we got our sell-off early, jumping the $100K Portfolio, for example, up 12% in one day – enough to send us back to cash rather than risk a weekend reversal.
We laid the groundwork for this little sell-off in last weekend’s posts as we put up an aggressive Buy List for Members but in my regular weekend post we emphasized the need to cover our buys with "Disaster Hedges" as we were heading to the tops I had predicted when I published the "Last Charts of the Decade," where I set resistance target of Dow 10,457, S&P 1,135, Nasdaq 2,314, NYSE 7,389 and Russell 638. As you can see, I pretty much hit them on the head, other than the Dow but that’s because our year-old 5% rule calculations did not account for the change in the Dow that replaced C and GM with TRV and CVX, who added about 100 Dow points since their inclusion so we started using 10,549 this month and we’ll make it 10,557 for today’s chart, which makes perfect sense looking at this group (I added the Transports as they are fell right off our 2,000 target, giving us the early warning that things were not right):
As you can see, the 5% Rule rules! I will apologize for being such a grump this week but the rally was really starting to annoy me as it was so blatantly forced up through our levels without a proper test that is was really getting me down about the markets. I don’t mind that the markets are manipulated, that’s been going on since markets were invented – it’s stupid and destructive manipulation that bothers me, the kind that, long term, destroys more investor confidence than it builds and squanders capital resources on the "wrong" companies (and now, ETFs!).
In this case, very precious investor capital is being steered into commodities, which is a…
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2010 Outlook – A Tale of Two Economies
by Phil - December 27th, 2009 6:54 am
"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way--in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only." – Charles Dickens, 1859
Dickens famous novel (which was originally written as a weekly series in 31 installments) depicts life in the time of the French revolution but was also a parable, meant to warn the British aristocracy that they should not ingore the parallels to the social inequities that existed at the time in England. Dickens warned the nobles that the seeds of revolution were planted through unjust acts and surely there would be a time of reaping yet to come.
It is said that the French Revolution was sparked by outrage over a statement by the Queen Mary Antoinette who, when told that the peasants had no bread to eat, supposedly replied (she never actually said this) "Qu’ils mangent de la brioche" or "Then let them eat cake." It’s hard for us to imagine the impact of this statement in modern times but "peasants" were 90% of the population at the time and bread was 90% of what they ate, consuming 50% of the average family’s income (people weren’t silly enough to pay for housing back then – they just found a bit of land, bought some wood and nails and built their own homes). Brioche was a luxury combination of bread enriched with flour and butter so the statement "Qu’ils mangent de la brioche" implies both lack of caring and cluelessness on the part of the Queen.
The United States had what passes for a revolution between 2006 and 2008 as we threw out the Republicans and went with a Democrat-controlled government. While the Bush administration, the Republican Congress and Fox News may have been as clueless as a French Queen to the plight of the people – the fact of the matter is that the base pay…
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Technology Bull Boosts Optimism
by Andrew Wilkinson - December 10th, 2009 4:32 pm
Today’s tickers: XLK, EEM, XLP, WLP, DTV, AMAT & EEM
XLK – SPDR Technology Select Sector ETF – A massive calendar roll was initiated on the Technology Select Sector exchange-traded fund today. Shares of the ETF, which corresponds to the performance of publicly traded equities of companies in the technology sector, rallied nearly 0.5% to $22.29 during the session. One investor sold roughly 73,900 calls at the now in-the-money December 22 strike for a premium of 41 cents per contract. The trader likely purchased the options for 40-49 cents premium per contract back on September 18, 2009, when shares of the XLK were at $20.87. The closing sale of the original call position today was spread against the purchase of 73,900 fresh calls at the higher January 23 strike for 24 cents each. The calendar roll indicates the investor expects shares of the fund to reach a new 52-week high by expiration in January. Profits amass on the new bullish stance if shares rally above the breakeven price of $23.24.
EEM – iShares MSCI Emerging Markets ETF – A large-volume put spread traded in the June contract on the emerging markets fund this afternoon. Shares of the ETF stand 0.15% higher to $41.03 as of 1:45 pm (EDT). It looks like investors, who are likely long shares of the underlying, are purchasing long-term downside protection on the EEM. Approximately 49,000 puts were picked up at the June 38 strike for an average premium of 2.95 apiece, and spread against the sale of roughly 43,000 puts at the lower June 28 strike for 65 cents each. Perhaps put spreaders fear emerging markets could encounter a few speed bumps as the global economy continues to fight its way out of recession in 2010. Traders employing the put plays are protected if shares of the fund dip back down through $38.00 by expiration in June.
XLP – Consumer Staples Select Sector SPDR – The XLP ticker symbol launched to the top of our ‘most active by options volume’ market scanner today after a huge chunk of call options changed hands. Shares of the fund, which replicates the total return of the Consumer Staples Select Sector of the S&P 500 Index, gained 0.5% during the trading day to $26.90. Approximately 106,000 call options traded at the January 27 strike for an average premium of 32.5 pennies per contract. Open interest of 116,354 contracts at…
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ACE Call Options in Demand – Option Implied Volatility Explodes
by Andrew Wilkinson - December 1st, 2009 4:17 pm
Today’s tickers: ACE, EFA, HAL, AMAT, WHR, DE, JTX & WCG
ACE – ACE Limited – The surge in demand for call options on the insurance company today drove option implied volatility up 19.75% to 28.67%, while shares gained more than 2% to $49.78 during the trading day. Investors populating the December contract exhibited bullish sentiment on ACE by selling puts and buying calls. Approximately 3,000 puts were shed at the December 50 strike for an average premium of 1.51 apiece, while some 2,100 calls were purchased at the same strike for roughly 89 cents each. Call volume at the January 50 strike sky-rocketed to 21,666 contracts – on previous existing open interest of just 1,402 calls – as traders scooped up about 20,000 lots for a premium of 1.42 per contract. Investors long the January contract call options are positioned to accrue profits if ACE’s shares trade above the breakeven price of $51.42 by expiration.
EFA – iShares MSCI EAFE Index ETF – The exchange-traded fund, which includes stocks from Europe, Australasia and the Far East, attracted bearish option players despite the 2.5% rise in shares today to $56.88. One investor, who may hold a long position in the underlying stock, unfurled a ratio put spread in the January 2010 contract. The trader purchased 10,000 puts at the January 55 strike for an average premium of 1.39 each, and sold 20,000 puts at the lower January 52 strike for about 70 cents apiece. The investor pockets a net credit of 1 penny per contract on the trade and establishes downside protection in case shares of the EFA decline ahead of expiration. The 1 cent credit is ‘free money’ for the trader as long as the shares remain above $55.00 through expiration in January.
HAL – Halliburton Co. – Options activity on the oil and gas company today suggests at least one investor is bracing for potential share price erosion through expiration in January. Halliburton’s shares rose 1% during the session to $29.57. The trader responsible for the bearish ratio put spread is likely holding a long position in the underlying stock. If this is the case, today’s transaction provides downside protection for the investor. It appears 5,000 puts were purchased at the January 29 strike for an average premium of 1.24 apiece, spread against the sale of 10,000 puts at the lower January 24 strike for 18 pennies each.…
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Chunky Put Play Hits Natural Gas ETF
by Andrew Wilkinson - September 28th, 2009 4:42 pm
Today’s tickers: UNG, QCOM, PXP, XRX, ALL, AMAT, MU & CMCSA
UNG - Shares of the natural gas exchange-traded fund are currently off by more than 1% to $11.80. One investor has picked up some serious downside protection on the fund today by purchasing a large chunk of put options in the April 2010 contract. We believe the trader is likely holding a long stock position in the UNG. It appears the trader purchased 31,000 puts at the April 9.0 strike for a premium of 75 cents per contract. The net cost of the put options amounts to $2,325,000. Shares of UNG would need to decline 30% from the current price before downside protection kicks in beneath the breakeven point at $8.25. Perhaps the put buyer expects the fund to reach a new 52-week low by expiration in April. The current 52-week low of $8.94 was attained on September 3, 2009. We note that it is always possible the trader is essentially shorting the stock and placing a large bearish bet on the ETF in order to profit from downward movement in the share price. – United States Natural Gas ETF –
QCOM - A tech-sector rally fueled by an analyst upgrade of Cisco Systems (CSCO) this morning helped boost shares of QCOM 2.5% during the trading session to $45.82. The manufacturer of wireless network products attracted optimistic option traders to the November contract. We observed plain-vanilla put selling at the November 42 strike where it appears 5,000 lots were sold short for an average premium of 92 cents apiece. Investors shorting the contracts will retain the full 92 cent premium as long as shares of QCOM remain higher than $42.00 through expiration. But, if the November 42 strike puts land in-the-money, investors short the contracts will have shares of the underlying put to them at $42.00 each. Finally, a sold strangle was initiated through the sale of 1,200 puts at the November 43 strike for 1.07 apiece, in combination with the sale of 1,200 calls at the higher November 50 strike for 81 pennies each. Investors ‘strangling’ QCOM receive a gross premium of 1.88. The full premium is retained by these individuals as long as the stock trades within the confines of the strike prices described through expiration in November. Traders face losses in the event that shares swing 13% higher to surpass the upper breakeven point at $51.88, or if…
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Bullish Option Play at State Street Despite Weaker Shares
by Andrew Wilkinson - May 27th, 2009 4:51 pm
Today’s tickers: STT, HPQ, AMAT, PBR, BYD, AMD, VALE & ITUB
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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. She manages the Favorites backup site
(