Bullish Player Rigs Up Call Spread on Oil Services HOLDRS Trust
by Andrew Wilkinson - January 18th, 2011 4:19 pm
Today’s tickers: OIH, AFFY, CAT, EBAY, IYT & RIG
OIH - Oil Services HOLDRS Trust – Shares in the Oil Services HOLDRS Trust are up 0.50% in the final hour of trading to secure an intraday- and new 52-week high of $147.34. One options player expecting shares to continue to hit new highs through February expiration initiated a debit call spread. Shares in the OIH, an issuer of depository receipts known as Oil Service HOLDRS that represent ownership in the common stock of companies engaged in drilling, well-site management and other services for the oil service industry, are up 5.25% year-to-date, and have surged 57.75% since touching down at a six-month low of $93.36 on July 1, 2010. The optimistic options trader looked to out-of-the-money calls expiring next month, buying 3,600 calls at the February $155 strike for a premium of $1.48 each, and selling the same number of calls up at the February $160 strike at a premium of $0.58 apiece. Net premium paid to initiate the spread amounts to $0.90 per contract. Thus, the investor is prepared to make money should the price of the underlying shares rally another 5.8% over today’s high of $147.34 to surpass the effective breakeven price of $155.90 by expiration day in February. Maximum potential profits of $4.10 per contract are available to the call-spreader should shares in the OIH jump 8.6% to trade above $160.00 before the contracts expire. Options implied volatility inched up 3.2% to 26.42% by 3:55pm in New York.
AFFY - Affymetrix, Inc. – Investors are buying call options on the biotechnology company today with shares in the Santa Clara, CA-based firm rising as much as 7.6% during the session to an intraday- and 6-month high of $5.67. Bullish players expecting shares in Affymetrix to continue to rally picked up…
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Near-Term Bulls Shop Around for Call Options at Newell Rubbermaid
by Andrew Wilkinson - December 1st, 2010 4:22 pm
Today’s tickers: NWL, GRS, OIH, HIG, EWZ, MBT & XOP
NWL - Newell Rubbermaid, Inc. – The global marketer of everyday commercial and consumer products popped up on our ‘hot by options volume’ market scanner during the second half of the trading session due to bullish activity in the December contract. Shares in Newell Rubbermaid are up 3.35% to stand at $17.33 with 45 minutes remaining before the final bell. Options traders exchanged more than 3,460 call options at the December $17.5 strike, versus previously existing open interest of just 980 contracts. It looks like more than 3,000 of the calls were purchased for a premium of $0.35 per contract. Plain-vanilla call buyers are prepared to make money should shares increase another 3.00% to exceed the effective breakeven point to the upside at $17.85 ahead of December expiration day. Rubbermaid’s shares last traded above $17.85 as recently as November 5, 2010.
GRS - Gammon Gold, Inc. – Bullish players picked up call options on the gold mining company today with shares of the Halifax, Nova Scotia-based firm climbing 1.2% to $6.77 in the final hour of the session. Investors expecting Gammon’s shares to extend gains purchased more than 3,000 calls at the January 2011 $7.0 strike for a premium of $0.43 apiece. Call buyers at this strike are poised to profit should shares in Gammon Gold surge 9.75% over the current price of $6.77 to surpass the effective breakeven point at $7.43 by January expiration. More than 3,280 calls changed hands at the Jan. 2011 $7.0 strike, which is more than six times the number of contracts represented by the 531 lots of previously existing open interest at that strike. Bullish sentiment spread to the March 2011 $7.5 strike where another 1,000 call options were purchased for premium of $0.48 each.…
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Thursday – Bubble, Bubble, Toil and Trouble!
by Phil - September 23rd, 2010 7:51 am
"I’m forever blowing bubbles,
Pretty bubbles in the air,
They fly so high, nearly reach the sky,
Then like my dreams they fade and die.
Fortune’s always hiding,
I’ve looked everywhere,
I’m forever blowing bubbles,
Pretty bubbles in the air."
Gold, Treasuries, Junk Bonds, Netflix (we shorted them yesterday), PCLN (we shorted them Monday), Credit Default Swaps – take your pick of what is going to be the next bubble to burst.
We shorted TLT again yesterday ($105) as I sure wouldn’t lend the US money at those rates and neither, it seems, will the "smart money" guys anymore. The cost to hedge against losses on U.S. government debt rose to the most in six weeks as investors bet the Federal Reserve will put more cash into the economy. Credit-default swaps on U.S. Treasuries climbed 1.7 basis points, the biggest increase in more than three weeks, to 49.4, according to data provider CMA. The Fed said Tuesday that slowing inflation and sluggish growth may require further action. The statement positioned the central bank to expand its near-record $2.3 trillion balance sheet as soon as their November meeting – just in time for a Santa Clause boost for the markets.
So why does this not make us bullish? Well, as I said to Members on Tuesday, it was an anticipated statement with no immediate action and we’re at the top of a 10% run for September so, as I said in yesterday’s post, we anticipate a pullback of 2%, back to our 4% line (see post). Also in yesterday’s post, I mentioned our IWM 9/30 $67 puts ($1.10) and the DIA Oct $105 puts (.89) both of which were good for a reload on yesterday’s silly spike, where I said to Members in the 9:56 Alert:
I like the same IWM and DIA puts as yesterday as we test 10,800 on the Dow – I don’t think it’s going to last. Tomorrow we lose the usual 450,000 jobs for the week and we have Existing Home Sales at 10, which can now disappoint as Building Permits were a big upside surprise yesterday. We also get Leading Economic Indicators at 10 but they are expected up just 0.1% and I doubt they go negative. Friday we have Durable Goods, which should be down 2% and New Home Sales at 10, also now set up to disappoint even
…
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Thank Jobs It’s Friday!
by Phil - July 2nd, 2010 8:23 am
Do I know what the jobs data will be at 8:30? Nope.
Then why would I title a post "Thank Jobs It’s Friday!" – what if the report sucks and we go down? Well, at this point, even if that does happen, I think that will be the end of it. We’ve been building up to this "terrible" jobs number all week and we got a rotten ADP Report and a rotten Unemployment Report so everyone is expecting a rotten Non-Farm Payroll report. When everyone expects the same thing, we like to bet against it. Sometimes we’re wrong and sometimes we’re right but you make some amazing money when you are right. The magnitude of the short squeeze that would follow a significantly BTE NFP Report could send up up 300 points or more on the day, likely with a big finish this afternoon and some follow-through on Tuesday as the rest of the world plays catch-up.
A bad report, on the other hand, is already baked into the cake and we have yet to test S&P 1,000 so we can expect support there. It wouldn’t be pleasant, but we should be able to scramble and protect ourselves if we head lower so the smart move is to play for the mega-move higher, and that’s where we are. Of course, it’s also a balance issue. In our last Weekly Wrap-Up, we had the following open trade ideas going into June 21st (we had gotten bearish at the end of the previous week):
- APOL July $40 puts spread at .46, now .60 – up 30%
- BBY Jan $37 puts sold for $4, now $3 – up 25%
- BP July $30/32 bull call spread at $1, now .70 – down 30%
- YRCW at .21, now .15 – down 28%
- BP Oct $33/July $33 ratio backspread (3:5) at net $225, now $524 – up 132%
- TZA July $7 calls .08 (net of spread), now $1.50 – up 1,775%
- SIRI 2012 $1 puts sold at .33, still .33 – even
- USO July $33 puts at .51, now $1.08 – up 131%
- GLL July $37 puts, sold for $1.30, now .35 – up 70%
- TBT July $38 puts sold for $1, now $2.05 – down 105%
- OIH June $104.10 puts at $2.02, now $8.70 – up 330%
- TZA July $6/8 bull call spread for .55, now $1.48 – up 169%
- TZA July $6 puts sold for
…
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Testy Tuesday – Bottom Busting or Big Bounce?
by Phil - June 29th, 2010 8:27 am
Wheeee, what a ride!
Finally all our very boring sitting around at 75% cash makes us feel smart as the market makes what we hope is that final blow-off bottom to re-test our lows. I already sent out an Alert to Members this morning so a lot of this is old news to them but nothing has changed since 4:30 so here’s a quick reprise – What we are mainly seeing in the futures this morning is 2 major factors that are driving the markets lower:
1) Japan, where too strong Yen (88.6), -0.1% industrial output, -1.7% exports, rising unemployment (just 5.2%) AND lower houshold spending (-0.7%) numbers sent the Nikkei down 1.25% today to 9,570. If you think about it though, pretty much all of that is a strong Yen issue because it lowers demand for the exports (making them more expensive) and then factories slow down and people get laid off and household spending drops from that PLUS the fact that it’s now cheaper for them to buy imports so they can buy the same stuff at lower prices.
So, overall, nothing people shouldn’t have expected but ugly to read about.
2) China, where the Shanghai fell 4.27% today to 2,427, which is a lot because they are a 10% limit down market on individual stocks so you can bet the selling isn’t done if the AVERAGE was down 4.27%. The Hang Seng was ugly too, falling 2.3% to 20,248. What sent China off a cliff was kind of silly. The Conference Board, which is a NY-based research firm had reported that Chinese economic indicators rose 1.7% in April – something at the time (June 15th) we thought sounded a bit high. Well, funny thing is it turns out the people at the Conference Board must have been high on something because it turns out they made a "calculation error" and the correct number was just 0.3%.
There is a third factor in play and, earlier this morning I thought it was too silly to be considered but, apparently, you can panic retail investors over pretty much anything. On Thursday, there are $547.5Bn worth of bank-loans from last year’s special liquidity program that are due to roll over and there are rumors circulating that the ECB won’t renew the facility at all. The ECB has, in fact, already promised to replace it with rolling 3-month loans at the…
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Advanced Pattern Recognition: Omega III Weekly Wrap-Up
by Phil - June 19th, 2010 6:46 am
What a fine and predictable week it was!
How can you not have fun when the market does exactly what you expect it to do every day? Why it’s almost as if we stole Goldman Sach’s evil playbook (and the Russell once again is at 666) so we too can make profits EVERY SINGLE TRADING DAY – just like they do! This is a real testament to my famous saying:
We don’t care IF the game is rigged, as long as we know HOW it is rigged so we can place our bets accordingly.
Remember it was last summer that Goldman’s secret trading program was stolen. At the time, Goldman Sachs asserted that: "There is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." I believe this was a misquote and what GS meant to say was that there was a danger someone ELSE could use it to manipulate the markets in unfair ways. Was it just a coincidence that the indictment of computer thief Sergey Aleynikov on Feb 11th coincided with the beginning of this year’s massive rally or was that the day GS regained sole control of their pet program?
Does this sound conspiratorial? Well perhaps then you haven’t read Tim Lavin’s "Monsters in the Markets," where he points out: "Algorithms now trigger 70 percent of all trades in U.S. equities. The speed and volume of everyday trading have propelled the market into a new and esoteric dimension, and rendered traders in the pits largely obsolete… At least a few high-frequency traders have learned to make a killing by detecting the more simplistic algo strategies deployed by basic pension funds and mutual funds, buying the next stock the funds plan to buy, and then selling it to them at a higher price. This may not be illegal, but it’s almost certainly unfair to the funds’ investors. “It is increasingly clear that there are quite a number of high-frequency bandits in the high- frequency-trading community who pump up volume statistics, front-run investor orders, increase transaction costs, and hurt real liquidity,” according to former NASDAQ vice-chairman David Weild."
We certainly know better than to trust our money to fund managers! Last Friday ("Pattern Recognition 101"), we determined that the TradeBots were following the rally pattern we now call Omega III and that meant we expected the day to finish…
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Wonderful Weekly Wrap-Up
by Phil - June 12th, 2010 8:28 am
I love it when a plan comes together!
Last week, I felt like I was going to have to call Animal Control to help me fight off the bears. As I mentioned in last week’s Wrap-Up, all 14 misses (out of 55 trade ideas for the week) we had were bullish plays that we were grabbing on the way down. On Friday we went bullish on USO, SSO, DIA, TBT (well, we’re always bullish on TBT), AET, ABX, Copper Futures and even poor BP. Those followed up on bullish plays we had taken on Thursday on TSRA, USO, MEE, FCX, EEM, ERX and XOM. We went into the weekend still bearish but we were excited about flipping back to bullish. My closing comment in the Wrap-Up was: " I’m hoping for a blow-off spike down on Monday with heavy volume, hopefully followed by a recovery over the next few days" and, gosh darn it, wouldn’t you know that’s EXACTLY what we got.
I don’t MAKE the markets do these things, I simply tell you what is going to happen and how you can make money on it… Needless to say, we had a LOT of fun this week at PSW! Last weekend, however, was such a bearish frenzy in the MSM that it was making our Members nervous and THAT I do not tolerate so I wrote : "The Worst-Case Scenario: Getting Real With Global GDP!" to illustrate why I felt our bottoms would hold and I began a Top 20 Buy List on Sunday and boy did we get some fabulous entries this week!
Monday Market Movement – Will We Survive?
As I said on Monday Morning: "I already stuck my neck out calling a bottom so now we’re just waiting patiently." We were disappointed to have not gotten a stronger statement from the G20 over the weekend but it was just the Finance Ministers, so we weren’t expecting too much until the big boys meet at the end of the month. While we were in a buying mood, I cautioned against getting too bullish until we took back our anticipated "weak bounce" levels, which were the orange lines on Monday’s Multi-Chart:
I pointed out (on another Multi-Chart) that Europe was already gathering strength so we were pretty confident things would go our way but, as I said in the 9:50 Alert to Members, SOX 340 and TRANQ 2,000 had be taken back before we could feel confident. My outlook for the day was:…
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Fast and Furious Four-Day Wrap-Up
by Phil - June 5th, 2010 7:12 am
Wheeeee, what a ride!
Like any good car race, the lead changes often in the markets. Yesterday the bears took the lead as the combination of Hungarian debt issues and a disappointing jobs number were like a tire blow-out for the bulls, who were forced to pull in for a pit stop. Fortunately, we had our seat belts on and had assumed the crash position as I had warned Members on THURSDAY Morning at 10:04:
Watch that 666 line on the RUT – we don’t want to lose that or even show weakness there… ISM a bit disappointing, now we’ll see what holds but I’m out of short-term, unhedged, upside plays here.
I felt strongly enough about it that we also posted it on Seeking Alpha, to warn as many people as possible, under the heading: "Phil Calls Short-Term Top." I don’t post live trade ideas on Seeking Alpha but in Premium Member Chat (and you can subscribe here) I followed right up at 10:17 Thursday morning with the following trade idea:
BGZ (large-cap bear) is at $15.27 and I like them as a hedge here with the (June) $14/16 bull call spread at .75, selling the July $14 puts for .95 and that’s a net .20 credit on the $2 spread with about $2.70 in margin so you can do a 10 contract spread for a $200 credit and $2,700 in margin (according to TOS standard) with a $2K upside if the market even twitches lower. Worst case is you own BGZ as a hedge to a dip below Dow 10,600 (your put-to area) at net $13.80 (9% lower than current price).
That’s what hedged trade ideas look like in our Member Chat. At PSW, you need to put some time in LEARNING how to trade and, more importantly, how to hedge. This is a fairly complicated options play but we take it BECAUSE IT WORKS! There are many, many simpler ways to play that don’t work (or carry far more risk) but we prefer to teach our Members how to do the things that do work. As it stands, just 48 hours later, BGZ is up 10% on Friday to $16.89 (so the spread is now 100% in the money) and June $14/16 bull call spread is now $1.50 while the July $14 puts are Down to .60 so net .90 already on the spread that already paid…
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Wild Weekly Wrap-Up – The Madness of the Markets (Part II)
by Phil - May 23rd, 2010 6:33 am
Well this is a first.
For some reason I keep getting an error trying to continue the previous post so I’m just going to continue here. Sorry about that but it’s too early on a Sunday to wake up the programmers. So, where were we? Oh yes, we had just finished getting full circle back to last weekend’s post, where we reiterated bearish positions. My target for this week kept falling from 10,700, to 10,500 to 10,200 as we lost all confidence in the ability of our indexes to recover and, of course, Europe fell quickly apart:
Monday Monetary Madness – Ewwwwro!
It’s amazing how quickly people can lose faith in one of the World’s 3 major currencies. So amazing that I can’t believe you can sleep at night! Have I mentioned how much I like TBT lately? The Euro dropped from $1.51 in November to a low of $1.21 on Tuesday, that’s our 20% rule, by the way and a retrace to $1.27 (20% of the drop) is not going to be very impressive until we’re well over it.
Unless you are an exporter (and who in America does that anymore?) then a strong dollar is kind of nice but the dollar isn’t actually strong, we’re down 6% against the Yen this month, it’s just the Euro is very weak. Unfortunately for Japan – everyone there is an exporter because their own people stopped spending money in 1990, when their market fell off a cliff and Japan’s people lost all faith in investing schemes and sham financing deals – you know, the stuff that pretty much drives the US economy…
The Media talks about Japan’s lost decade, but this is the start of decade 3 of their deflationary cycle as the Nikkei has dropped from 40,000 in 1990 to 20,000 in 2000 to 10,000 in 2010. Remember when Japan was the next big thing and they were going to take over the World and US executives were learning Japanese and US firms were rushing to tie up business in Japan etc., etc? Thank goodness we’re too smart to fall into a trap like that again!
Nonetheless, I called a top at $25 on EUO and you can see us getting out on Monday as it topped out for the day. Tuesday they ran it up to $25.43 but that was when we went short (I’m fickle that way) so…
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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
(