Delta-Neutral Trade Suggests Guarded Optimism on Ventas Ahead of Q2 Earnings
by Andrew Wilkinson - July 26th, 2010 4:31 pm
Today’s tickers: VTR, BIDU, WAT, DHI, LCC, ODP, GAP & ISLN
VTR – Ventas, Inc. – Shares of the REIT with a portfolio of seniors housing and healthcare properties in the U.S. and Canada rallied as much as 2.04% this afternoon to reach an intraday- and new 52-week high of $51.57. Ventas popped up on our ‘hot by options volume’ market scanner in the second half of the trading session after one cautiously optimistic investor bought a large amount of stock in combination with a delta neutral put spread in the August contract. The transaction shows guarded optimism by one investor ahead of the firm’s second-quarter earnings report scheduled for release ahead of the opening bell on Wednesday morning. The options strategist paid a premium of $1.05 per contract for an 8,500-lot August $40/$50 debit put spread with a .32 delta tied to the purchase of 272,000 Ventas shares at $51.37 each. The investor is hoping to see shares rally to new highs following earnings, but has shelled out extra premium in order to get long downside protection in case Ventas’ shares decline.
BIDU – Baidu, Inc. – The Chinese-language internet search provider’s shares jumped 3.6% to an intraday high of $80.87 today after the firm received an upgrade to ‘buy’ from ‘neutral’ with an increased target share price estimate of $92.00 from $69.00 at UBS. Shares were also lifted higher on news Baidu is in talks with mobile phone makers to discuss use of the firm’s search box on devices sold in China. The price of the underlying stock is currently up 2.05% on the day to arrive at $79.67 as of 3:00 pm (ET). Options players itching for continued appreciation in the price of the underlying shares through the end of this month purchased weekly call options on the stock that are set to expire on July 30. Investors picked up 1,000 calls at the July $80 strike for an average premium of $1.48 each. Call buyers at this strike make money if Baidu’s shares rally another 2.3% to trade above the average breakeven price of $81.48 by expiration day. Optimistic individuals looking for BIDU’s shares to hit a new 52-week high before the week is through purchased some 2,100 call options at the higher July $85 strike for an average premium of $0.29 a-pop. Shares must increase at least 7.05% in order for July $85 strike call…
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Thrill-Ride Thursday – Wednesday Never Happened, Now What?
by Phil - May 27th, 2010 8:16 am
Poor CNBC! They are never going to get those chocolates…
I joked with Members during yesterday’s rally, after Fast Money’s bullish "Half-Time Report": "Uh oh – All the Fast Money people said buy - make sure you have your disaster hedges in place!" Indeed the market fell off a cliff almost the second they said it but we got out of our TZA calls (a little early) and did a little bottom fishing yesterday with our own buys on LYG ($3.13), Short EUO ($25.30), VZ ($27), FRO ($30.50), RIG ($58.50) and PFE ($15.10). Maybe I’m just a paranoid conspiracy theorist but I said to Members at the close:
That was a sad little show at the end wasn’t it? Nas was beaten with a stick into the close. AAPL $243, BIDU $67.46, AMZN $123… Ugly stuff. Not at all sure what they were trying to accomplish if not a flush…
Gap/RMM – Yes (we will gap) up. I just didn’t see why we would sell off like that. It seems that someone wanted to paint un ugly picture, maybe they didn’t get a good fill on Tuesday morning? Maybe not gap up tomorrow, maybe another drop and THEN we take off but I’m thinking a fund that wants to make numbers on Friday would want to flush us today and buy the SPX overnight and pump us up for a big finish so they can get back to cash on Friday and book it.
Isn’t it funny how that’s pretty much exactly what’s happening this morning? A huge gap up into the open that’s erasing the previous day’s losses when no one is trading – just like yesterday (when I get on my knees and pray - we won’t get fooled again). Fast Money got fooled out of their bullish 1:50 positions by 5pm as suddenly they relized the market is controlled by evil computer programs – not exactly news to us and no reason to shake us out of our well-hedged positions. We ignored rumors on China (and we always ignore Steve Ballmer) in chat and those seemed to be the major rumors moving the market lower yesterday.
Cramer kept the rumor mill grinding, saying: "The Chinese reportedly are debating whether or not to sell their European bonds, and that’s what killed our upward momentum." CNBC seems to have pulled the video so it’s hard to tell the tone but Cramer put up a list of a dozen stocks to buy but said to wait for…
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Wild Weekly Wrap-Up – The Madness of the Markets (Part 1)
by Phil - May 21st, 2010 11:22 pm
Where do I even begin to go over this week?
I think, to set the proper tone, let’s look at my Thursday morning Alert to Members where I said: "Get out, Get Out, GET OUT of the short-term short-side plays if we get back over the 200 dmas. Take the money and RUN. CASH OUT THE SHORT SIDE. Is that clear? We may not hold these lines but that’s why we have October Disaster Hedges, the shorter-term downside plays are huge winners and should be cashed here – we’ll find something else to short if we fall off this support level. 200 dmas need to be held and those are: Dow 10,250 (8,650 is next major support), S&P 1,100 (900), Nasdaq 2,225 (not there yet! 1,800), NYSE 7,100 (5,500) and Russell 630 (still above! 500)."
We never did hold those levels but, as I mentioned in Friday morning’s post, I thought the end of day sell-off on Thursday was a bit forced, and, in my first Alert of Friday morning I said: "TAKE THOSE SHORT PROFITS OFF THE TABLE!" Now, I am not prone to making statements in all caps in Member Chat - almost never is about how often so this was a pretty important statement. Before that Alert, right at 9:42, I had already called for the SPY $105 calls at $2.45 as our first trade of the day. Those calls finished at $4.11, up 67% for the day so a good start to our expiration day!
A good start and our other day trades did very nicely as well:
- FXI June $39 calls at .98, now $1.28 - up 30%
- DIA May $102 calls at .13, out at .45 – up 246%
- DIA May $101 calls at .95, out at .80 - down 16%
- DIA May $101 calls at .10, out at .80 – up 700%
Of course we followed our strategies and took 1/2 the DIA’s off the table at a double so the other half was a free ride (we like to gamble but we’re not crazy!) but the FXI was the only "keeper" for the day, we’ll see if that was a good idea on Monday. We also took (as I said we would in the morning post) a number of well-hedged, bullish plays on BA (from the post), TNA, TBT (have I mentioned how much I like them lately?), INTC, AAPL, VLO, FCX (I guess we’re done relentlessly shorting them!), XOM and…
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What Me Worry Thursday?
by Phil - May 13th, 2010 7:48 am
What a freakin’ recovery!
As I said on Monday: "It’s a paper tiger of a straw man we’re building for $1Tn but you HAVE to respect $1,000,000,000,000 – you just have to… Our 5% Rule series for the S&P over the 1,155 breakdown line is the very critical 1,170, followed by 1,185, 1,200 (critical), 1,215 and 1,230 and THEN we are on the way to recovery." Wow, that guy is AMAZING! Anyway, so here we are at 1,170, after two days of testing the 1,155 line as a bottom so now it’s onwards and upwards to 1,185 hopefully. I also said on Monday: "Below that, we’re not too impressed but it also won’t be very surprising if all $1Tn buys us these days is some moderate lift that isn’t strong enough to break our major technicals."
We have been casting a wide and bullish net since the crash, finally pulling some of our sideline cash for long plays on ABX, APPY, BAC, BIDU, BRK/B, BSX, C, CAT, DIA (3), DF, ERX, GOOG, LIZ, LVS, MEE, MON (3), RIG, T (2), TBT (2), TZA (shorting it), UNG and WFR. We’re hedging heavily, of course, but it feels good to have longs again after being in cash for a while. Our short-term bearish plays (mostly DIA and TZA) have been crushing us so far, which is good in a rally but yesterday was a bit much for us and we got a little more bearish but it looks like the G7 has adopted the "Better Red Than Dead" mantra as the World racks up astounding deficits to put off admitting that this little debt problem is not isolated to the PIIGS nations.
Nonetheless, the global markets are rallying in unison – even while the Pound ($1.47) and the Euro ($1.26) collapse and even the Yen jumped back up last night, falling off the very BS 93.63 to the dollar it hit at 3am to psych up the Nikkei exporters back down to 92.75 this morning. I noted weeks ago how the Yen knocked down for Japan’s open and then drifts lower into the US open virtually every night – it’s what currency traders call the "Goldman Trade" because you can bet it every single day and have a perfect quarter. Sure it’s blatant manipulation designed to fool an entire nation of investors but, what else is new – Fuggedaboutit…
So, a TRILLION Dollars down the rabbit hole in Europe – Fuggedaboutit! I pointed out to Members in yesterday’s…
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Weak Weekly Wrap-Up – Charting Uncertain Waters
by Phil - May 8th, 2010 5:43 am
I’m just doing a quick wrap-up this week because, surprisingly, it MIGHT be time for a new Buy List!
I had said to Members on Cinco de Mayo, in our 5% Rule Review, that if we broke below 1,155 we would retrace all the way to 1,100 with our 5% Rule resistance points around 1,100 at 1,155, 1,114, 1,100, 1,073 and 1,045. We actually spiked as low as 1,066 on Thursday but finished the week at a very sad 1,110 as we watched for that "weak bounce" zone to be broken all day. This does not bode technically well for the markets next week but I told Members we would have to give the markets a pass for the day. Based on the uncertainty of the weekend, we can’t expect a lot of capital commitments ahead of the EU decision. After all, we’re in cash – why shouldn’t other smart funds be too?
When I predicted we’d hit 1,000 on Wednesday, I did not think it would be on Thursday! The markets are now negative for the year and the S&P has spiked almost to the Feb low of 1,044 (and our lowest close was 1,056). That’s right, these 5% Rule numbers are the SAME ones we used back then and it’s the same series we used to measure our winter run at the end of last year. We expect a bounce here, hopefully at least a test of 1,155 on a relief rally if Greece is "fixed" yet again on Monday but we’re not going to be too impressed until we’re over that line.
Still that means it’s time to at least lay out a new Watch List, which is the prelude to a Buy List – giving us a list of stocks we’d like to get into at lower prices. Our last Member Watch List was back in December and by Feb 6th we had our famous Buy List, which we triggered at Dow 10,058 for a very successful run through March 18th ("Bye Bye Buy List!"), when we closed 2/3 of the positions and we have since cashed out the rest as I got more and more worried about the rally, finally calling for all cash last week.
Speaking of last week, for those of you who say I don’t pick enough straight stocks – I listed 33 short trade ideas from my unofficial "Sell List" last Friday (4/30) when the Dow was way up at 11,167…
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GDWheee Friday – Could be a Wild Ride!
by Phil - April 30th, 2010 8:30 am
Attention ladies and gentlemen:
The stock market will soon be leaving the station, please secure all personal items, pull down the safety bar (our Disaster Hedges) and keep all body parts inside ride at all times. Well you know you can follow all of the safety instructions and STILL get smacked in the face with a black swan (like our friend Fabio, pictured here) which is why we elected to get back to cash ahead of this report. The markets were just too insane this week and who the heck knows if Europe will still be a Union on Monday or what the GDP number is going to be (but I do think it’s a miss).
Since our biggest weekend fear is financial panic in Europe, our cash US dollars will become more valuable in a crisis and if the market drops, all the better as we can ride back in and do some bargain hunting. If the market takes off on good GDP and Greece is "fixed" and Spain is "fixed" and Portugal and Ireland are not really a problem (especially for MS and JPM) and the CRIMINAL charges against Goldman look beatable and and the Financial Reform Bill doesn’t disrupt the market with a disorderly breakup of the big banks and the Bank of International Settlements Report continues to be ignored and the run on the Greek banks doesn’t spread to other STUPID counties – well, then we can BUYBUYBUY because, if all this doesn’t matter, then it’s very likely that the entire planet Earth could explode but Wall Street will keep ticking higher.
Yep, I can’t wait to ride this baby mindlessly higher! After all, what can go wrong? BIDU is ONLY $710 a share, BLK is $190, CMP is $76, GOLD is $84, BUCY is $65, FAST is $56, MMM is $90, FOSL $40, F $13.50, DECK $149, SHOO $55, TPX $35, LZB $14, CTB $22, NOG $16, CEO $176, FTI $75, CLB $150, CIB $46, BBD $19, TD $75, BCA $45, BAP $87, ITUB $22, EDU $94, WYNN $93, FFIV $72, CY $14, CREE $77, UPS $70, UNP $78…
These were stocks I was looking at last week, when I told members I thought it was easier to construct a Sell List than our usual Buy List for this market but, if we’re heading…
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Thursday – The Pain in Spain will Hardly be Contained
by Phil - April 29th, 2010 7:28 am
The S&P downgraded Spain yesterday.
That sent our markets tumbling to the day’s lows and rightly so. After all, how much better does our economy look than Spain’s (8th largest in the world)? It’s certainly worse on a debt to GDP basis by a wide margin and so is Austria, Belgium, France, Germany, Greece, Hungary, Italy, Ireland, Japan, Netherlands, Portugal and, of course, the UK – who are particularly worrying because they also have one of the largest bank assets to GDP ratios (570%), which means the country would be hard-pressed to stop a major slide in the financials, which is what, ultimately, undid Iceland.
Wouldn’t it be lovely if we didn’t have to worry about these things? We’ve grown accustomed to facing Greek debt and no one is even asking why can’t the English pick a government but just you wait, because it will take more than a little bit of luck before this market is off to the races and we can once again dance all night instead of worrying about what’s going to happen in the morning. Until, then, we’re going to be staying mainly in cash, although some would say that ain’t nothin’ but trash - so we hedge it with TBT, of course!
Yesterday morning’s news prompted me call for an EDZ hedge in Member chat, which is an ultra-short on the emerging markets and Spain’s very close ties to South America make it a very prominent domino if things begin to fall apart. Things are already falling apart in China, where the Hang Seng dropped another 170 points this morning and 200 of them came after lunch, right into the close. That drops the Hang Seng all the way to 20,778, down 1,000 points (just under 5%) since Monday and now 7.5% below the April 12th high at 22,400. India also got whacked for 1.7% and the Shanghai continued to tumble while Japan was mercifully closed today:
If this set of charts made you spit coffee on your keyboard, you are not alone – that’s what happened to me when I pulled up the 2-month set this morning! Yes, this is the planet Earth – although obviously not a part of the planet covered by the US media, nor part of the planet where the FOMC (not you Hoenig – you are…
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BIDU Weekly – Update
by Chart School - April 7th, 2010 12:15 pm
This is perhaps one of the best examples of Allan’s trend trading system. Allan says that BIDU is an excellent trender and his system would have got you in sometime in January, though the last weekly signal was back in 2009. For you bears, his system should catch a reversal early. (It’s hard not to look at that chart and anticipate a BID adieU moment, but maybe that’s just me.) Anyway, Allan’s system is easy to trade and you’d only be looking at signals on Monday morning. - Ilene
BIDU Weekly – Update
Courtesy of Allan
I wrote up the Weekly Trade Model of BIDU back in January. It has turned into one of big success stories of the Trend Models:
We knew in January that BIDU trended well and was a good stock to trade in a longer-term model. Although they all don’t trend this well, having one or two that do, make up for any that don’t. Another "Basket" idea in the making?
And the market as a whole?
Says Allan: Back to Trends.
Notwithstanding my personal trend line, the market’s trend has been up since mid February.
The beauty and simplicity of this directional model cannot be overstated. The up-trend continues, as it will until it reverses. Trade accordingly.
Allan just launched a newsletter, “Trend Following Trading Model,” to go with the trading system he’s been working on for years. His trend-following method is chart-based and objective. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction to the Trend Following Trading Model newsletter and trading system, read this introductory article. - Ilene
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BIDU Weekly
by ilene - April 7th, 2010 12:12 pm
This is perhaps one of the best examples of Allan’s trend trading system. Allan says that BIDU is an excellent trender and his system would have got you in sometime in January, though the last weekly signal was back in 2009. For you bears, his system should catch a trend reversal early. (It’s hard not to look at that chart and anticipate a BID adieU moment, but maybe that’s just me.) Anyway, Allan’s system is easy to trade and you’d only be looking at signals on Monday morning. – Ilene
BIDU Weekly – Update
Courtesy of Allan
I wrote up the Weekly Trade Model of BIDU back in January. It has turned into one of big success stories of the Trend Models:
We knew in January that BIDU trended well and was a good stock to trade in a longer-term model. Although they all don’t trend this well, having one or two that do, make up for any that don’t. Another "Basket" idea in the making?
And the market as a whole?
Says Allan: Back to Trends.
Notwithstanding my personal trend line, the market’s trend has been up since mid February.
The beauty and simplicity of this directional model cannot be overstated. The up-trend continues, as it will until it reverses. Trade accordingly.
Allan just launched a newsletter, “Trend Following Trading Model,” to go with the trading system he’s been working on for years. His trend-following method is chart-based and objective. Most trades last for weeks to months. Allan’s offering PSW readers a special 25% discount. Click here. For a more detailed introduction to the Trend Following Trading Model newsletter and trading system, read this introductory article. – Ilene
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6-Point Weekly Wrap-Up
by Phil - March 27th, 2010 2:27 pm
Wheeee – the S&P is up 6 points this week!
I know, I can hardly contain my own excitement either. It almost makes my cash-out decision of the 19th (where we did open at 1,166) seem silly what with us missing a 6-point (0.5%) rally this week and all.. Of course, you have to look at the bigger picture like the year-to-date, which has us up a whopping 34 points since January 4th although, to be fair, 18 of those 34 points were gained by Jan 19th, then we had that sell-off thing and THEN we had a nice rally, all the way back to 16 points over the Jan 19th high. See, I’m not early with my top call – I’m 2 months late! We could have taken a vacation from Jan 19th to today and missed very little upside action.
We don’t cash out just because we’re at a top. Hell, we love playing tops, bottoms, middles – whatever… We cash out when it’s no fun to play and, as many, many members commented this week – it’s much less fun to play when the market turns toppy and churny like it is now. My cash out call was for a Market Mental Health Break ahead of earnings season and we did have a very nice, relaxing week just hanging out in Member Chat and, yes, making the occasional play but it’s more like when you go to the track and toss a couple of bucks on a race to keep it interesting – and that makes it fun!
Monday Medical Miracle – Health Care Finally Passes
We passed the Health Care Bill on Sunday and, instead of ending the Universe as promised by Republicans and Tea Party enthusiasts alike, it actually sparked a huge dollar rally that gave us a full 2.5% run for the week, closing at a year high of 81.60. We were thrilled as we had taken gold shorts and SCO (ultra-short oil) longs the week before, when oil was testing $83 a barrel – now back at $80 on the nose to close out this week.
Seven banks were shut down by the FDIC last weekend (and 4 more bit the dust last night), Greece was still up in the air, TIF missed earnings and the Four Seasons in Maui missed a mortgage payment but the thing that made me gladdest we were on the sidelines was…
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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
(