Wednesday Chart Watch – The International Perspective
by Phil - December 29th, 2010 7:56 am
So, how are we doing?
I liked David Fry’s tweet (is that the right word – I feel so old when I don’t know this stuff!) yesterday which said: "SPY volume again pathetic at 55M shares. What’s there to write about today? Seems many investors still stuck on planes that aren’t moving." Dave was smart enough to take the day off – me, not so much. We did pick up another .20 with up the DIA Weekly $114 calls at 10:41 in Member Chat for $1.60and those were done at 1:05 for $1.80 as the market looked too risky to me. That was kind of silly as we do know that low volume is the bulls best friend but we’re trying to get back to cash each day on quick trades – especially on calls that expire on Friday!
As you can see from the Euro chart (click to enlarge), I’m not ready to give up on my bearish premise, which is essentially that Europe may be in worse shape than the US and the Dollar and – IF the EU runs into crisis – then the Dollar looks RELATIVELY better and, despite all of Timmy and The Bernank’s best efforts to destroy it – a strong dollar will pretty much undermine everybody’s bullish premise since the only real bullish premise people have is that our worthless currency will drive people into equities and commodities since Treasury and the Fed will artificially keep bond rates so low as to make them unpalatable alternatives.
Even Glenview’s Larry Robbins, who I thought would perhaps have an original thought in his Dow 20,000 premise, does not. The man entrusted with $4.8Bn of other people’s money predicts that p/e multiples will expand by, get this, 45% by the end of 2013 – rocketing the Dow to 20,000 despite just 5% annual earnings growth. Larry Robbins thinks those investing in 10-year treasuries aren’t doing so for the paltry return. They’re in it to front run the Fed and make a quick buck at the expense of the taxpayers. Once this trade is over, Robbins says, they have nowhere to go except the high quality equities in the stock market.
Read into any bull premise and you’ll find inflation at the heart of it. The Global Economy is not really improving but the numbers are looking up because it costs more money to do everything. Now,…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Thirty-Five Trillion Yen Tuesday
by Phil - October 5th, 2010 8:24 am
Go go BOJ!!!
Acting under pressure from the Government to DO SOMETHING, the Bank of Japan announce a 35,000,000,000,000 Yen ($418Bn) monetary easing program this morning, finally taking that last step and cutting rates to ZERO. That’s right, the BOJ will literally give you money for nothing (no word yet on whether the chicks will also be free). Ironically enough, though, the logic of giving out free money now is the same as it was in the early 80′s – the BOJ is well aware that:
"We got to install microwave ovens
Custom kitchen deliveries
We got to move these refrigerators
We got to move these colour T.V.’s"
Of course, even with an economy one quarter the size of the US ($4.1Tn), $418Bn doesn’t buy what it used to so the BOJ is coming up with ANOTHER 5 TRILLION YEN in a program to buy private and public assets – let the shopping spree begin! You might think such incredibly reckless spending by the BOJ would devalue their currency somewhat BUT Noooooooooooo – the Yen ROSE back to 83.2 to the dollar (and we caught that move last night in Member Chat!) as currency traders realized that $500Bn of QE from the BOJ was only a drop in the bucket of the ocean of irresponsibility that is our own Federal Reserve.
As I had said to Members last Wednesday (and we had lots of cool currency charts): "I am seeing A LOT of money lining up on the short side of the Dollar trade. I’m very concerned that BOJ will do something to squeeze the bears and THEN I think it’s a better entry." Of course, currency manipulation was the theme of the week last week and you can get a quick review by downloading a FREE SAMPLE of our new Weekly Newsletter HERE.
"The surprise invited some yen selling, but I don’t think the BOJ’s move will be enough to produce any sustained yen weakening," said Masanobu Ishikawa, general manager of spot foreign exchange trading at Tokyo Forex & Ueda Harlow. Hirokata Kusaba, senior economist at Mizuho Research Institute echoed this view, saying "there will be no substantive effect from going from the already ultra-low 0.1% to this range. The only effect on markets will be from the surprise…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
M&A Monday – Goldman’s Golden Goose
by Phil - September 27th, 2010 7:18 am
Hope springs eternal at Goldman Sachs.
This morning our favorite Banksters goosed the EU markets by upping targets on international mining operators Kazakhmys, Lonmin and BHP and that got the European markets off to a flying start out of the gate, despite the fact that UBS had just DOWNgraded the same sector on Friday. UBS said on Friday that the sector is facing difficult times concerning potential growth with government rulings on mineral leases and the proposed supertax on mining profits in Australia set to hinder metal-based stocks.
We also have a lot of M&A activity, also courtesy of GS, who are leading the resurgence this year with 225 deals to date worth $401.6Bn, accounting for about 20% of all activity going through Goldman’s sticky fingers. In a sign of the times, however, GS only generated $961M in revenues as an M&A advisor as they cut a lot of discounts in order to land the top spot in dealmaking. Although outdealt by GS, MS, Rothchild, JPM and DB all made more in fees than the Uncle Lloyd show.
In a sign of the end of times, GS’s London Headquarters has been taken over by lenders after the owner fell into receivership. GS’s landlord, Antedon, is an offshore real estate firm that bought the building for $500M at the top of the market in 2007 and GS has locked up the building through 2026 at what seems to be not enough money to keep Antedon liquid – it would be very interesting to trace the web of deals that led to this massive default.
Meanwhile, the consortium of Irish investors that own GS’s other London building are also bailing out, this action is coinciding with what Ireland’s Independent says is a campaign by Wall Street Hedge Funds to short sell Irish Government Bonds. US hedge funds Groveland Capital and Corrientes Advisors are thought to have taken major positions against Irish debt. Giant €60bn asset-manager Pictet also revealed that it had earlier bet against Irish government bonds. JP Morgan is also thought to have taken a bearish position on Irish debt. The International Monetary Fund estimated that up to €3bn of Ireland’s debt was being targeted by speculators through the uses of derivatives.
So, plenty of reasons to be cautious this week although it will be hard to cut through the fluff as our hedge fund heroes…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Testy Tuesday – Already?
by Phil - July 13th, 2010 8:19 am
Wheeeee, this is fun!
It’s only been a week since I called for "Turnaround Tuesday" and asked the question "Will CNBC Apologize to America" for their ridiculous, sickening parade of negativity that chased their poor viewers out of the market (now 600 points ago) by completely misrepresenting the economic outlook in order to protect the TERRIBLE advice given by Jim Cramer, the Fast Money Crew, their sponsors etc. etc. – it was all one national frenzy of media negativity designed to shove retail investors entirely out of the market while the cognoscenti went shopping.
It’s not just CNBC, of course, it’s a problem with the whole MSM but I ranted about corporate (top 0.01%) control of the media last week so let’s move on as we wave bye-bye to all the beautiful sheeple who were kind enough to sell us their stocks at the bottom, despite my warnings. Our 500% upside plays are now well on their way to making 500% for us and our "9 Fabulous Dow Plays Plus a Chip Shot" are also looking good already. Even the trade ideas I mentioned right in last Tuesday’s post are well on track as I said last week:
On Friday, I had said to Members right at 9:38, in the Morning Alert: "If we run up, then it will be prudent to get more neutral into the weekend but if we stay down and hold our levels, then saying a little bullish will be fine. Out of short-term short trades if you haven’t already. Keep in mind we have some great 500% upside plays you can still grab here if you think you are too short."
The latter was a reference to our 500% upside plays. We also went with EEM July $38 calls at .99, and a QLD $50/53 bull call spread for $1.30 (selling puts as well for more profits) as well as long plays on RIMM, AA, HOV, VLO and TASR. My optimism was based on the considered TA analysis I shared with Members at 2:39:
After completing last month’s "Omega III" market pattern on the Trade Bots, it’s now time to spring the bear trap and run the "Apha II" into options expiration on July 16th. Maybe there will be as little logic to the rise as there was to the fall – who really cares – it’s just our jobs to try to
.jpg)
…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Appetite for Options on YUM! Brands, Inc. Grows Ahead of Earnings
by Andrew Wilkinson - July 12th, 2010 4:44 pm
Today’s tickers: YUM, INTC, CBRL, CASY, RMD, PG & STEC
YUM – YUM! Brands, Inc. – Traders are placing bullish and bearish bets on the operator of KFC, Pizza Hut and Taco Bell ahead of the firm’s second-quarter earnings report slated for release after the closing bell on Tuesday afternoon. YUM’s shares are up 0.97% to stand at $40.66 with 35 minutes remaining in the trading day. The overall reading of options implied volatility jumped 21.8% to 33.38% this afternoon as investors anxiously await the firm’s earnings for the second quarter. Some investors are preparing for a rally following earnings and ahead of July expiration. These optimistic individuals picked up at least 1,300 now in-the-money calls at the July $40 strike for an average premium of $1.13 apiece. Investors long the calls make money if YUM’s shares increase 1.15% to trade above the effective breakeven price of $41.13 by expiration on Friday. Bullish sentiment spread to the higher July $41 strike where 1,000 calls were purchased at an average premium of $0.57 a-pop. Traders long the higher-strike call options stand ready to accrue profits should YUM! Brands’ shares rally 2.2% to surpass the average breakeven price of $41.57 by expiration day. In contrast to the bullish behavior observed, pessimistic players purchased put options on the stock to position for disappointing second-quarter earnings from the firm. Bears bought approximately 4,900 puts at the July $40 strike for an average premium of $0.95 per contract. Put buyers make money if YUM’s shares decline 3.95% from the current price of $40.66 to breach the average breakeven point to the downside at $39.05 by July expiration.
INTC – Intel Corp. – Options investors are hard at work populating the chip maker with various trading strategies ahead of Intel’s second-quarter earnings report scheduled for release after the closing bell tomorrow. Thus far in the session more than 144,700 option contracts have changed hands on INTC with investors exchanging 2 call options on the stock for each single put option in play today. The semiconductor manufacturer’s shares are currently up 1.40% to stand at $20.53 as of 3:10 pm (ET). One options trader expecting Intel’s shares to remain range-bound through expiration in January 2012 opted to sell a strangle in the first half of the trading session. It looks like the investor sold 5,000 calls at the January 2012 $25 strike for a premium of $1.54…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Covered-Call Sellers Make Note of Exits on American Airlines Parent Corp.
by Andrew Wilkinson - March 9th, 2010 4:14 pm
Today’s tickers: AMR, AIG, C, GME, HD, XLP, ALL, CMC, QLGC & YUM
AMR – AMR Corp. – Bullish investors engaged in covered-call selling on AMR Corporation this afternoon after its subsidiary, American Airlines, revealed February passenger unit revenue increased between 6.5% to 7.5% as compared to roughly the same time a year ago. The so-called buy-write strategy took off amid an 11% rally in the price of the underlying stock to $9.93. Options traders sold approximately 16,300 calls at the March $11 strike for an average premium of $0.09 apiece, and simultaneously purchased an equivalent number of AMR-shares when the stock was trading at approximately $9.84 each. The net price paid per AMR-share amounts to $9.75 apiece because of the $0.09 per contract financing provided by the sale of the call options. Investors utilizing the buy-write strategy are positioned to accumulate maximum potential gains of 12.82% if shares rally through $11.00 by expiration day. The covered-calls provide an effective exit strategy for investors, who walk away with 12.82% profits if AMR shares rally to $11.00, and if the underlying shares are called from them at expiration.
AIG – American International Group, Inc. – Insurance firm, American International Group, already reported plans to sell two units for $51 billion, but speculation that it may sell additional assets sparked rampant options trading activity on the stock this afternoon. Shares surged more than 18% to $34.34 at times during afternoon trading. Options investors exchanged more than 224,000 contacts on AIG as of 2:30 pm (ET), and traded more than two call options on the stock for each single put option in play. Two-way trading traffic in out-of-the-money call options is evident, but it looks like – in most cases – more calls are being purchased than sold. The nearest-to-the-money March $35 strike had more than 37,000 calls trade today versus that strike’s previous existing open interest of just 12,297 contracts. More than 12,300 calls were purchased for an average premium of $0.89 apiece. The higher March $40 strike had 12,900 calls picked up by bullish individuals who paid an average $0.25 premium per contract. Finally, the March $45 strike attracted buying interest in the amount of 3,200 calls for an average premium of $0.18 each. More than 7,000 contracts changed hands at the March $45 strike, which trumps existing open interest of just 2,489 lots. It is likely that a large portion…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
$5,000 Portfolio Update – Week 6 – $5,614
by Phil - August 15th, 2009 4:04 am
Well we’re back to cash…
After getting off to a great start, up 12% in the first 3 weeks, we were lucky this week to get back to 12% after having a run of bad luck (or bad skill actually, as we went bearish too early and got punished for it). The goal of the $5,000 portfolio is to play around the volatility of earnings and make no mistake, it’s a high-risk way to trade $5,000 and is meant to be a small portion of a large portfolio – not something you would want to do with your only $5,000. Of course the usual disclaimer is, this is a virtual portfolio, don’t try this at home, trading is dangerous, always consult a professional financial adviser, etc, etc. The idea is to practice different option strategies and we’re learning from our successes and failures – I hope!
Our first play 5 plays that we closed were on AA, DIA, SGR, MCD, and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha’s Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there. A full review of Stock Talk commentary regarding the $5KP is available here and please make sure you click "Follow" on my picture so that you will be able to track further updates.
We closed positions on WFC and AXP, up $258 in our last review on July 25th and we have since closed our YUM position with a $256 loss on the 28th, which was a shame as we gave up on 8 Aug $35 calls at .45 ($360) and they flew up to $2 ($1,600) just a week later. Unfortunately, in a small portfolio, you don’t have the luxury of riding out your losses and, at the time, we felt lucky to escape this underperfomer with a relatively small loss.
A VNO put spread we couldn’t fill the week of the 21st, was an easy fill the next week and 3 Sept $50 puts were in at $3.70 ($1,110) and 3 Aug $50 puts were sold for $2.90 ($870). The premise of this play is a tough…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
Which Way Wednesday – Beige Book Edition
by Phil - July 29th, 2009 8:30 am
Today we get the "anecdotal" information on the current economic conditions from each of the twelve Federal Districts, we find these reports very useful as they tend not to be sugar-coated and the last BBook release (June 10th) marked a clear top to the the last round of irrational market exuberance when there was no significant improvement in the Fed’s outlook despite the market having rallied 10% in the month leading up to it.
That’s all it takes to pop a bubble – the simple lack of additional air. Members would do well to review the comments of that day as we got a quick read on the Book, which backed up our generally toppy view of the market and we jumped right on POT $105 puts for $1.15 at 2:03 as I had been targeting them as the most ridiculously overpriced stock and my quick read from the Fed confirmed it. POT fell from $117.88 that day to $92.72 on expiration day and bottomed out at $82 on July 13th. This is the way to play the Beige Book, you need to have a premise that is either confirmed or denied by the facts and you can make a play accordingly but you can’t simply REACT to the information, it can quickly be too late by the time you figure out what to do. Having a plan and alternatives based on various outcomes allows you to take advantage of market data as it comes out. That’s why we get so excited when we get our Beige Book!
BBook days are often market movers. This year’s Books came out Jan 14th (down 250), March 4th (up 100 ahead of huge drop) and April 15th (up 100) and June 10th where we went down 130, up 100 and finished the day back down just 24 points. Going back to my June 10th post, I see a lot of similarities, including the China bubble – which I also said was overdone at that time ahead of a 2,000-point pullback that began on the 12th. Oil was $71.50 that morning and it’s "just" $65.50 now and that’s a ray of sunshine if it heads lower. That was also the day I called for a class action suit against GS for their blatant manipulation of the energy markets – something I still have not found a law firm brave enough to take on!
I sent…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
$5,000 Portfolio Update – Week 3 – $5,598
by Phil - July 25th, 2009 8:25 am
We’re up 12% in 3 weeks – not bad…
The goal of the $5,000 portfolio is to play around the volatility of earnings and make no mistake, it’s a high-risk way to trade $5,000 and is meant to be a small portion of a large portfolio – not something you would want to do with your only $5,000. Of course the usual disclaimer is, this is a virtual portfolio, don’t try this at home, trading is dangerous, always consult a professional financial adviser, etc, etc. The idea is to practice different option strategies and we’re having a a very exciting first few weeks!
Our first play 4 plays that we closed were on AA, DIA, SGR, MCD and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha’s Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there.
On Wednesday, we also had an open a ratio backspread play on YUM and we sold 6 Aug $37 calls for $1.15 ($690) and bought 4 Aug $35 calls for $2.20 ($880). The idea of a trade like this into earnings is that a large drop will hurt your callers more than it hurts you and, to the upside, you have net $800 in the net $190 spread before you have to pay your 2 open callers a penny. That means they would each have to go up $3 before wiping out your profits. Since YUM was at $36 at the time and we did not feel it would be likely to go to $40, even on great earnings, the play made sense. YUM had very poor earnings and dropped right down to $34, below our strike. We decided to buy back the 6 Aug $37 calls for .40 ($240), so a gain of $450 on that leg. That left us with the 4 naked Aug $35 puts, which we paid $880 for, less the $450 gains so we are in those 4 calls for an average of $1.13 per contract. We have since doubled down that position at .40 leaving us with 8 at an average entry of .77 per contract. Currently, they are trading at .50…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
$5,000 Portfolio Update – Day 9 – $5,424
by Phil - July 17th, 2009 6:16 pm
We had a pretty good week with our new portfolio.
The goal of the $5,000 portfolio is to play around the volatility of earnings and make no mistake, it’s a high-risk way to trade $5,000 and is meant to be a small portion of a large portfolio – not something you would want to do with your only $5,000. Of course the usual disclaimer is, this is a virtual portfolio, don’t try this at home, trading is dangerous, always consult a professional financial adviser, etc, etc. The idea is to practice different option strategies and we had a very exciting first week!
Our first play 4 plays that we closed were on AA, DIA, SGR, MCD and DELL, which had a total gain of $629 in our first 6 days. For details on those trades, go to the Day 6 post. We have been posting all of the moves for the $5KP in member chat, of course, but also on Seeking Alpha’s Stock Talk, where we have discovered the added bonus that, like Twitter, you do not have to refresh the page to see new comments! If you want to follow these trades, just click on "Follow" under my picture and you will automatically see any comments made there.
On Wednesday, we also had an open a ratio backspread play on YUM and we sold 6 Aug $37 calls for $1.15 ($690) and bought 4 Aug $35 calls for $2.20 ($880). The idea of a trade like this into earnings is that a large drop will hurt your callers more than it hurts you and, to the upside, you have net $800 in the net $190 spread before you have to pay your 2 open callers a penny. That means they would each have to go up $3 before wiping out your profits. Since YUM was at $36 at the time and we did not feel it would be likely to go to $40, even on great earnings, the play made sense. YUM had very poor earnings and dropped right down to $34, below our strike. We decided to buy back the 6 Aug $37 calls for .40 ($240), so a gain of $450 on that leg. That left us with the 4 naked Aug $35 puts, which we paid $880 for, less the $450 gains so we are in those 4 calls for an average of $1.13 per contract. The calls have fallen to .70 so we are down .43 on those ($172) so far. While we do feel that YUM…
Email This Post
del.icio.us
Digg
Reddit
Stumble
Yahoo
BlinkBits
BlinkList
German
Spanish
French
Italian
Portuguese
Japanese
Korean
Russian
Chinese
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
(