Gloomy Put Options Posturing on Financials ETF

by Andrew Wilkinson - November 2nd, 2009 4:06 pm

Today’s tickers: XLF, ETFC, CF, HGSI, EEM, BEBE, SMH, VRTX, HGSI, F & LDK

XLF - Financial Select Sector SPDR – A large bearish spread in the June 2010 contract suggests one investor feels the need for downside protection through expiration. Shares are slightly up this afternoon by about 0.25% to $14.09. The trader purchased 20,000 put options at the June 14 strike for an average premium of 1.91 apiece. He financed the long position by selling 20,000 puts at the June 11 strike for 74 cents each, and by selling another 20,000 puts at the lower June 10 strike for 51 cents premium. The net cost of the transaction amounts to 66 cents per contract. The investor responsible for the three-legged spread is possibly holding a long stock position in the XLF. The put options might then serve to protect the value of the position in the event that shares decline beneath the effective breakeven point at $13.34 by expiration. The fact that the trader is short two times as many puts indicates this investor expects a pullback but not a collapse beneath the lower strike price of $10.00.

ETFC - E*Trade Financial Corp. – The Wall Street Journal reported that ETFC withdrew its application for funding through the Troubled Asset Relief Program (TARP) because the company’s “recent capital-raising and debt-reduction efforts negates the need for the money.” E*Trade raised $150 million by selling stock in the third quarter out of some $765 million of sold stock this year. The seemingly bullish news that the company no longer plans to participate in the capital-purchase program did not do much for the current share price, which slipped 6% lower to $1.37. Our scanners picked up on interesting options activity this afternoon that may or may not have been inspired by today’s news. It appears 95,000 put options sold at the January 1.0 strike for about 5.5 pennies apiece. One may infer the transaction represents bullish sentiment on ETFC if the sale of the put options is fresh activity. If this is the case, the trader pockets the 5.5 cents premium, and expects shares to remain above $1.00 through expiration. However, the sale could also be the work of an investor closing out a long put position given the already high reading of open interest at the small number of available strike prices.

CF - CF Industries Holdings, Inc. – The manufacturer of nitrogen and phosphate fertilizer…

Tags: BEBE, CF, EEM, ETFC, F, HGSI, LDK, SMH, VRTX, XLF

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

General Electric Sees Bears Jump to Options Defense

by Andrew Wilkinson - September 24th, 2009 4:32 pm

Today’s tickers: GE, EEM, SLV, F, VALE, FCX, M, ABX & C

GE - The more than 3% decline in shares of GE today inspired bearish options activity to unfold in the November contract. One investor chose to employ a put spread by purchasing 5,500 puts at the November 16 strike for 67 cents apiece, spread against the sale of the same number of contracts at the lower November 13 strike for 14 cents each. The net cost of the pessimistic play amounts to 53 cents per contract. If the investor is long shares of the underlying stock, downside protection on the put play will kick in if shares decline beneath the breakeven price of $15.47 by expiration day. The strike prices selected by the trader indicate that while he is bracing for further declines in the stock, he does not expect GE to decline much beneath $13.00 in the next few months. – General Electric –

EEM - The EEM jumped higher on our ‘most active by options volume’ market scanner following bullish options action in the January contract. Shares of the ETF are currently down 2% to $37.85. The investor responsible for the transaction looked to the January 38 strike to purchase 6,500 calls for an average premium of 2.78 apiece. The calls were spread against the sale of 6,500 in-the-money puts at the same strike for which the trader received 2.91 each. The risk reversal results in a net credit of 13 cents to the investor. The credit is retained by the trader if shares settle at $38.00 by expiration day. Additional profits will accumulate if shares of the ETF rally through $38.00. – iShares MSCI Emerging Markets Index –

SLV - Large-volume chunks of calls traded on the silver exchange-traded fund today by one investor who appears to be taking a bullish stance in the face of a more than 3.5% decline in shares to $15.96. The trader looked to the near-term October 16 strike to purchase 30,000 calls for an average premium of 65 cents apiece. The purchase was spread against the sale of the same number of calls at the January 2011 18 strike for a premium of 2.35 each. The transaction results in a net credit of 1.70 to the investor. Perhaps this individual expects the near-term calls to land in-the-money by expiration. If this occurs, he may exercise the options and take delivery of the underlying stock…

Tags: ABX, C, EEM, F, FCX, GE, M, SLV, VALE

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Stock Market Crash - Year One Review III - March Madness!

by Phil - September 10th, 2009 5:51 pm

We left off in Part II with our Feb 23rd Big Chart Review.

Even though I said: "Once again we are in a market that environment that reminds me of the Simpsons episode where Homer jumps over a gorge, crashes, is taken up by a helicopter (Ben) smashing against the wall along the way only to fall all the way from the top again.  Pain, pain and more pain every time we try to get long" - we still weren’t fully prepared for the devastation that was to follow as the Dow fell from 7,500 to 6,500 in the next 10 days.  My commentary on the environment the next day was: 

According to Cap, someone on the YHOO message board was counting the number of times CNBC talking heads said "nationalization" this morning and, as of 8:15, they were up to 300 times.  Sadly, this is the fear-mongering that is driving the markets to new lows while Cramer continues to keep his sheeple out of protective ETFs like SKF.  So you have the man’s network telling you financials are going to zero while dog and pony boy tells his minions to sell ALL the financials, causing them to go to zero - even though they could hold on and protect themselves with conta-funds, if Cramer didn’t spend 3 days a week convincing his viewers contra-funds are poison.  I’ve never seen anything like this outside of a racketerring investigation.  Speaking of racketeering - Dennis Kucinich nailed it when he pinned that charge on Paulson and company back in November.

Our wall of worry continues to be a steep one.  After yesterday’s failure we do not expect too much out of today, we’ll be happy to just see a bottom at this point but it’s looking a little more likely that we’re heading into a capitulation event that can take us down to frightening levels.  The 60% line is a line the markets dare not cross but, as I pointed out yesterday, we already lost the SOX and the Nikkei, with the Hang Seng and the BSE hanging on by a thread.  Let’s take these levels very seriously, if the administration can’t turn it around this week - the downward momentum can easily pick up steam.

I’ll spare you the details other than to say we DIDN’T turn it around that week and the downward momentum DID pick up steam.  I was at war with Cramer at the time as he was blatantly ripping off my ideas and trying…

Tags: AIG, AMZN, BAC, CY, DIS, F, FAS, GE, GOOG, HCBK, IP, IWM, JPM, RKH, SKF, TGT, UNH, VNO, WFC, X

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Will They Hold It Wednesday?

by Phil - August 26th, 2009 8:25 am

This is getting very interesting!

As we expected in yesterday’s morning post, the morning pump was a great selling opportunity and we had a very good time riding the gentle dip we got in intra-day trading.  The Dow hit it’s high for the day at 10:03 and by 10:09 I had an alert out to members to ignore the consumer confidence number and go more bearish on the Dow, buying back the Sept $95 puts we sold Monday for a quick 20% profit.  We also grabbed the OIH $105 puts for $2.30 that made a nice buck during the day (43%) and we entered a couple of spreads on ERY at 10:57, well ahead of oil falling off a cliff in the afternoon.

Great call by David at the Oxen Group on making DUG his long of the day yesterday with a perfect buy in at $15.10 and hitting the 4% goal for that day trade.  It was David’s call that inspired us to pick up the very profitable (and much riskier) ERY trades, which were also an idea of his from an earlier trade so mega Kudos to the Oxen Group!   

We got a second rally on low volume around noon and my 12:09 comment to Members was: "Still a very good time to look at some of those long put plays we discussed in yesterday’s morning post" so I guess you can say we were still pretty bearish at that 9,600 line on the Dow.  Keep in mind that the top of our prior trading range was 9,100 on the Dow so the 5% rule off that mark takes us to 9,555, which was where I predicted we’d close.  We had a good chance to press our long DIA covers higher but we feared the overnight stick and we went with a 1/2 cover on our long puts, selling the DIA $95 puts for $1.75 just in case we have another crazy pre-market pump. 

As you can see from David Fry’s S&P charts, we are "outside the box," very much as we were in June but note that we held that level (S&P 950) for quite a while before getting a 10% correction into early July.  I’m not getting the feeling that we have enough energy to sustain us up here that long but, the way things have been going, we kept all of Monday’s bear covers in longer time-frames because as Chantale very aptly put it: "It s hard to predict when somebody on coke will…

Tags: AIG, BAC, DUG, ERY, F, FNM, FRE, GM, OIH, SPY, WFC

Posted in Uncategorized | 156 Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Alcoa Options Busy

by Andrew Wilkinson - August 3rd, 2009 4:22 pm

Today’s tickers: AA, KEY, EWZ, F, CBS, TCK & OSK

AA – The aluminum producer has experienced a more than 7.5% rally in shares today to $12.66. Commodity stocks rose on reports indicating manufacturing has declined less than previously forecast, in addition to an unexpected increase in spending on construction. Options activity on Alcoa suggests near-term bullish sentiment and medium-term bearishness. Bullish traders targeted the August 13 strike price to buy more than 5,700 calls for 36 cents apiece. Meanwhile, one investor rolled 2,000 call options up from the August 12 strike price by selling the lots for 83 cents, which he then spread against the purchase of 2,000 calls at the higher August 14 strike for 14 cents a-pop. A much gloomier tale was inferred from the actions of bearish individuals in the October contract. The now in-the-money October 12.5 strike has approximately 12,900 calls shed for 1.15 apiece. We note that the call sales could represent the work of investors banking gains due to the existing open interest at the strike of 71,000. However, a similar picture was seen at the October 15 strike where approximately 25,000 calls were sold for 48 cents per contract. The October 15 strike previously had open interest of just 6,900 contracts compared to the more than 30,900 lots which exchanged hands there today. Perhaps call sellers do not see shares of Alcoa rising through $15.00 by expiration. Otherwise, investors could be long shares of the underlying and establishing pseudo-covered calls by shedding the contracts at the higher strike. Finally, the January 2011 5.0 strike price had 18,500 puts trade for 40 cents apiece. We believe it is likely that the investor is closing out a short put position originally established back on May 8, 2009. It appears that the trader sold 18,000 puts for 83 cents and today bought the lots back for 40 cents apiece. If this is indeed the direction of the trade, the investor has banked profits of 43 cents per contract, or a total of $774,000. – Alcoa, Inc.

KEY – Shares of the banking services firm have rallied nearly 11.5% higher during today’s trading session to stand at the current price of $6.44. One long-term options bull was observed initiating a call spread in the January 2010 contract. It appears that the investor purchased 4,000 now in-the-money calls at the January 6.0 strike price for an average premium of 1.19 apiece,…

Tags: AA, CBS, EWZ, F, KEY, OSK, TCK

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Microsoft Option Traders Geared Up For Disappointment

by Andrew Wilkinson - July 23rd, 2009 4:35 pm

Today’s tickers: MSFT, CMCSK, HIG, PNC, F, WFC, XLU & FXI

MSFT – Shares of the software company are currently higher by about 3% to $25.53, but options activity on the stock suggests investors are bracing for bearish movement in the price of the underlying through expiration in September. Traders may be feeling a bit nervous ahead of MSFT’s fourth-quarter earnings report, as the firm is expected to reveal that earnings declined to 36 cents from 46 cents in the same period last year. Investors acted on fears of potential declines in the stock by selling approximately 10,000 calls short at the September 26 strike price for a premium of 85 cents apiece in order to finance the purchase of some 10,000 puts at the September 25 strike for 1.11 per contract. The net cost of getting long protective put options amounts to 26 cents. Traders will begin to amass profits, or protect long positions in the underlying, if shares slip beneath the breakeven point to the downside at $24.74. – Microsoft Corp.

CMCSK – The provider of entertainment announced that it will be the first cable provider to offer full HBO On Demand service in high definition (HD) to its customers. Shares of CMCSK have rallied approximately 1% to $13.70 during today’s trading session. Comcast appeared on our ‘hot by options volume’ market scanner after option traders took bullish stances on the firm in the near-term August contract. Hoping for continued upward movement in the stock, investors purchase about 8,900 calls at the August 15 strike price for an average premium of 22 cents apiece. In order for these individuals to amass profits by expiration, shares would need to surge at least 11% to surpass the breakeven point at $15.22. Option implied volatility edged slightly higher to 41% this afternoon from the opening reading of 38%. – Comcast Corp.

HIG – Frenzied call-buying by bullish option traders was apparent on the insurance and financial services firm today, amid a share price rally of more than 14% to $14.03. Call options were traded five times to each put option in action on the stock, as evidenced by the call-to-put ratio of more than 5-to-1. The near-term August 14 strike had about 5,200 in-the-money calls picked up for an average premium of 73 cents apiece. We note that now the same in-the-money calls tote an asking price of 1.25 each. The higher August 15 strike price attracted bullish…

Tags: CMCSK, F, FXI, HIG, MSFT, PNC, WFC, XLU

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Energy Options Strangle Play Delivers the Goods for Investor

by Andrew Wilkinson - June 29th, 2009 4:27 pm

Today’s tickers: XLE, MFE, FITB, SLM, XHB, F, INTC & XLF

XLE – Shares of the energy fund are higher by about 1% to $48.35. We observed one energetic option investor who appears to have purchased to close an 8,000-lot strangle today, that was originally established back on May 8, 2009. It looks as though the strangle was originally sold for a gross premium of between 3.58 and 4.22 through the sale of 8,000 puts at the June 47 strike price and the sale of 8,000 calls at the June 53 strike. Today the investor bought back the position for a total of 31 cents per contract. Thus, this individual is left with net gains of between 3.27 and 3.91 each by closing out the position today. The trader has reeled in minimum profits of $2,616,000 or maximum profits of $3,128,000. – Energy Select Sector SPDR

MFE – The security technology company appeared on our ‘hot by options volume’ market scanner this afternoon amid a more than 4% rally in shares to $41.86. Bullish investors hoping for continued upward movement in the price of the underlying looked to get long of calls in the near-term July contract. Traders picked up more than 3,500 call options at the July 45 strike price for an average premium of 22 cents apiece. McAfee shares would need to climb higher by approximately 8% in order for individuals who are now long the calls to breakeven at a price of $45.22 by expiration. Option implied volatility on MFE has risen throughout the trading day from a low of 31% to the current reading of nearly 35%. – McAfee Inc.

FITB – The Ohio-based bank holding company has experienced a modest rally in shares by about 1.5% to $7.05. FITB caught our attention amid a call-to-put ratio of more than 18-to-1, suggesting bullish activity on the stock. Upon further investigation, it appears that today’s activity is the work of an investor initiating a calendar spread in the expectation of continued bullish movement in the stock through expiration in November. It looks as though this individual sold 10,000 calls at the August 9.0 strike price for a premium of 20 cents apiece and then spread the sale against the purchase of 10,000 calls at the November 9.0 strike price for 63 cents per contract. The net cost of the bullish stance amounts to 43 cents and yields a breakeven point at $9.43. Shares of…

Tags: Add new tag, F, FITB, INTC, MFE, SLM, XHB, XLE, XLF

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

The Deere Hunter

by Andrew Wilkinson - May 20th, 2009 5:33 pm

Today’s tickers: DE, XLF, V, PBR, HPQ, POT, XLB, RF & F

DE– The largest maker of farm equipment in the world has posted second-quarter earnings that exceeded analyst expectations as sales of agricultural machines remained strong even in the midst of global recession. Shares of the Illinois-based company have experienced a rally of more than 1.5% to $44.60 today after the earnings release. Ultra-optimistic Deere-hunters have targeted the July 50 strike price where more than 5,600 calls were purchased for an average premium of 1.78 per contract. The stock will need to rise at least 16% to the breakeven point at $51.78 in order for today’s tractor-enthusiasts to profit by expiration. Option implied volatility dropped as low as 44%, down from yesterday’s closing reading of 53%, but has since been driven back up to the current value of 48%. – Deere & Company

XLF– The financials ETF is off by more than 1% to $11.90, and as usual, has attracted a number of high-roller option investors to exchange more than 329,000 contracts on the fund today. One transaction that caught our eye occurred in the July contract. It appears that one banking sector-bear has sold 21,000 calls at the July 13 strike price for 54 cents each in order to finance the purchase of 21,000 puts at the July 11 strike for an average premium of 71 cents. The net cost of the protective puts amounts to 17 cents and yields profits to the downside beginning at any share price below the breakeven point at $10.83. The pessimistic investor would require that shares of the ETF fall another 9% from the current price so that profits from the long-put position would build by expiration. The XLF was trading below $10.70 back on the first of May and it appears that the put-buying pessimist highlighted above sees shares falling back down by expiration. – Financial Select Sector SPDR

V– Shares of the world’s most recognized global financial services brand have rallied more than 1% to $65.54. The company received a reinstated label of ‘outperform’ at Wachovia Capital Markets this morning and also enticed some bullish option traders to come out and play. Investors looking for significant gains in the stock have targeted the January 2010 80 strike price where more than 7,100 calls were bought for an average premium of 3.02 apiece. These Visa-optimists are hoping for shares to rally by 27% to the breakeven…

Tags: DE, F, HPQ, PBR, POT, RF, V, XLB, XLF

Posted in Uncategorized | 1 Comment »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

September SPDR puts active

by Andrew Wilkinson - May 8th, 2009 6:19 pm

Today’s tickers: SPY, F, DELL, SYMC, DE, FITB, ASML, SMH & UNH

SPY SPDR Trust Series – So implied volatility as measured by the fear gauge known as the VIX, the CBOE volatility index has come screaming off today after a nerve-soothing employment report. The VIX is down 2.17 points today to 31.25. The ongoing rally for equities is likely a snapback against an Armageddon-like scenario priced in to stocks throughout the first quarter. With a lessening in the economic contraction and today’s data icing the cake, investors have thrown in the towel on the bear market and have reduced demand for protection through puts. However, in the S&P index, one investor seems to feel that the rebound won’t extend beyond September and has bought a sizeable chunk of protective puts. The SPDR trades at one-tenth the value of the underlying index and today is 2.5% to the better at 93.15. Some 72,000 put options at the September contract have been purchased at the 75.0 strike for premiums anywhere between 1.84 and 2.05. Breakeven in the worst case example would be at 72.96. That would need a decline of 21.6% to come good. At some point, investors will sit around the camp fire and have a rethink after this huge counter-trend rally. What’s next?

F Ford Motor Company – The only big-three auto company in the US to remain standing without federal aid has climbed 2% to $6.20 per share today. The bullish move in shares could be due to the news that Ford may receive as much as $440 million in government loans. The money would be utilized to facilitate the conversion of a Michigan SUV (sport utility vehicle) factory to one that builds small, fuel-efficient automobiles. Ford edged onto our ‘most active by options volume’ market scanner later on in the afternoon after one individual was seen getting bullish on the stock. In the January 2011 contract the trader was seen shedding 55,000 put options at the January 2.5 strike price for a premium of 80 cents apiece. The investor pockets the premium today as he does not see shares declining through $2.50 over the next year and a half. Option implied volatility on Ford is currently at 85%.

DELL Dell, Inc. – The just-in-time provider of personal computers attracted bullish options investors despite the more than 3.5% decline in shares to $10.65. Perhaps individuals looking for upside movement in shares purposefully got…

Tags: ASML, DE, DELL, F, FITB, SMH, SPY, SYMC, UNH

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter

Regions Financial options remain bearish

by Andrew Wilkinson - April 23rd, 2009 4:32 pm

Today’s tickers: RF, MSFT, F, VMW, FXI, AGN, WYE, XRT & COH

RF Regions Financial Corporation – The banking firm has slipped by more than 5% to $5.50 today, spurring option traders to heavily favor puts by a factor of four times to every call in action on the stock. We observed one investor looking to profit from further downward movement in shares by enacting a put spread in the near-term May contract. At the May 5.0 strike price he purchased 15,000 puts for an average premium of 50 cents apiece spread against the sale of 15,000 puts at the May 4.0 strike for 25 cents each. The net cost of the spread amounts to 25 cents and yields a maximum potential profit of 75 cents if shares decline all the way to $4.00 by expiration. He begins to garner profits to the downside beginning at the breakeven share price of $4.75. Another bearish trader targeted the now in-the-money May 6.0 strike price and appears to have bought 13,000 puts for an average premium of 1.05. Pessimism on the stock spread to the June 7.0 strike price where it appears that one investor sold 2,500 calls for 70 cents apiece in exchange for getting long 2,500 puts at the in-the-money June 7.0 strike price for 2.05 per contract. The net cost of the downside protection amounts to 1.35 and has already begun to amass profits for this investor as shares are currently below the breakeven point on the trade of $5.65.

MSFT Microsoft Corporation – Shares have dipped slightly by less than 1% to $18.65 ahead of its earnings conference call scheduled for 5:30 PM (EST) today. Street estimates place third quarter earnings at 39 cents per share. Our attention was drawn to one bullish investor looking to get long of call options in the October contract. It appears that this trader sold 5,113 puts at the October 16 strike price for a premium of 1.19 apiece in order to finance the purchase of 5,113 calls at the October 21 strike for 1.11 each. The investor has banked an 8 cent credit on the trade and is looking for shares to rally by about 13% by expiration in order to for the calls to land in-the-money, and for the premium on the calls to grow richer over time.

F Ford Motor Co. – Shares of the automotive company have rallied by more than 2.5% to…

Tags: AGN, COH, F, FXI, MSFT, RF, VMW, WYE, XRT

Posted in Uncategorized | No Comments »

 Email This Post del.icio.us Digg Reddit Stumble Yahoo Facebook Twitter