Boo-yah for Limelight Networks Inspires Demand for Calls
by Andrew Wilkinson - 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 Andrew Wilkinson - 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 Andrew Wilkinson - 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 to be worth rummaging through the utility companies looking for good dividend payers who are on sale. SO…
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Yen ETF Options Play Suggests Eternally Cheaper Currency
by Phil - January 8th, 2010 4:24 pm
Today’s tickers: FXY, EEM, PEP, TEVA, TIF, UPS & X
FXY – Japanese Yen Shares – The exchange-traded fund, which seeks to mirror the price of the Japanese Yen, is trading more than 0.50% higher today to stand at $107.12 in the aftermath of employment data undermining the U.S. dollar. Options activity in the March contract this morning suggests the price of the Yen may decline in the next couple of months. One Yen-bear sold call options in the March contract in order to finance the purchase of a put spread. The investor sold 10,000 calls at the March $110 strike for a premium of $1.20 per contract. The put spread involved the purchase of 10,000 puts at the March $105 strike for a premium of $1.70 each, marked against the sale of the same number of puts at the lower March $100 strike for $0.40 apiece. The net cost of the three-legged combination trade amounts to just $0.10 per contract for the investor. Thus, from a pure options standpoint (assuming no underlying position in shares), the investor stands to accumulate maximum potential profits of $4.90 per contract in the event that shares of the FXY plummet to $100.00 by expiration in March. FXY’s share price must decline 2% to $104.90 before the trader breaks even on today’s transaction.
EEM – iShares MSCI Emerging Markets Index Fund – Shares of the emerging markets exchange-traded fund are up less than 0.50% today to $43.01. Near-term pessimistic sentiment clouded the February contract as one investor initiated a ratio put spread on the fund. It appears the trader purchased 5,000 puts at the February $40 strike for an average premium of $0.69 apiece, marked against the sale of 10,000 puts at the lower February $35 strike for roughly $0.17 each. The ratio spread results in a net cost of $0.35 per contract. The investor responsible for the spread is likely holding a long position in the underlying stock. In such a case, the value of the share position is protected if EEM’s shares decline 8.5% from the current price and breach the effective breakeven point at $39.65 by expiration next month.
PEP – PepsiCo, Inc. – Global beverage, snack and food company, PepsiCo, received an upgrade to ‘buy’ from ‘hold’ at Edward Jones today despite slight share price declines of less than 0.50% to $60.76. Bullish investors initiated a couple of different strategies…
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Blackberry Bull Banks Profits as RIMM Shares Rebound
by Andrew Wilkinson - December 7th, 2009 4:13 pm
Today’s tickers: RIMM, BAC, VZ, CAG, NYB, RMBS, TEVA, DIS & NVDA
RIMM – Research in Motion Limited – Blackberry maker, Research in Motion, revealed a distribution deal with Digital China – a unit of Legend Holdings – aimed at expanding its business in China. Shares stood 2.5% higher to $60.22 thirty minutes before the closing bell. One option investor banked profits on a previously established call position in the January 2010 contract today. It appears the trader originally purchased 25,000 calls at the January 80 strike for 30 cents apiece on December 4, 2009. Today the investor shed all 25,000 lots for 43 cents each. Net profits on the closing sale amount to 13 cents per contract for total gains of $325,000. Option implied volatility on the stock is up slightly on the day to 59.91%.
BAC – Bank of America Corp. – A bearish risk reversal on Bank of America this afternoon suggests one investor expects shares to suffer significant declines by expiration in May 2010. BAC’s shares slipped 2% to $15.98 in late-day trading. It appears the pessimistic player shed 7,500 calls at the May 22 strike for 36 cents apiece in order to partially offset the cost of buying the same number of put options at the lower May 13 strike for 70 cents premium each. The net cost of the transaction amounts to 34 cents per contract. The effective breakeven point on the put options of $12.66 is 20.77% lower than the current price per BAC share. The investor responsible for the reversal could be taking an extremely bearish bet on Bank of America. If this is the case, the investor expects shares to nosedive down to lows experienced at the end of July 2009. Alternatively, the trader could be long the stock, and financing cheap downside protection by selling covered call options. The long puts serve as protection in case the stock tumbles, whereas the short calls suggest the investor is happy to have the underlying stock position called from him at $22.00 each. Shares of BAC would need to rally 38% from the current price in order for the March 22 strike calls to land in-the-money.
VZ – Verizon Communications, Inc. – Option traders displayed mixed near-term sentiment on the communications company this afternoon. Shares edged 2% higher to a new 52-week high of $33.36 with less than one hour remaining in the…
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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
(