Bulls Scoop Up Sprint Nextel Corp. Calls
by Option Review - March 10th, 2011 4:33 pm
Today’s tickers: S, FTR, JTX & SBUX
S - Sprint Nextel Corp. – Medium-term bullish positioning is building up in Sprint Nextel Corp. options today with shares in the name trading 3.00% higher on the session at $4.84 as of 12:20pm in New York. Investors expecting shares in the provider of various communications products and services to extend gains through May expiration engaged in plain-vanilla call buying, purchasing the options out-right to position for shares to potentially reach a new 52-week high in the next couple of months. Volume is heaviest at the May $6.0 strike where 20,750 calls have changed hands versus previously existing open interest of 7,482 contracts. It looks like roughly 18,000 of the calls were picked up at a premium of $0.08 each. Call buyers make money if Sprint’s shares jump 25.6% over the current price of $4.84 to surpass the effective breakeven price of $6.08 by expiration day in May. Sprint Nextel Corp. is scheduled to report first-quarter earnings before the market opens for trading on April 28, 2011.
FTR - Frontier Communications Corp. – Put volume on the communications company jumped today after sizable trades were initiated in the May contract. It looks like investors responsible for the put activity may be purchasing the contracts to brace for bearish movement in the price of the underlying stock. Shares in Frontier Communications Corp. are currently down 0.90% to stand at $8.00 as of 12:30pm. The selection of the May contract put options could be coincident with the firm’s first-quarter earnings report, which is scheduled for release before the opening bell on May 5, 2011. One trader appears to have purchased some 3,000 puts at the May $8.0 strike for a premium of $0.40 each. The investor starts to make money on the put-acquisition if shares in FTR decline 5.0% from the current price of $8.00 to breach the effective breakeven point at $7.60 by May expiration day. Volume is greatest, however, at the lower May $7.0 strike where 15,000 put options…
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DiggCharts Of Indexes Forecasted Sell-Off
by Chart School - March 10th, 2011 4:17 pm
BCSI
Classic first thrust down, puts in a bear channel, snapback rally call it what you will in pink, breaks it and it’s bombs away. One catch, the bombs away was earnings related. BUT that’s the pattern we want to see on the short side with names.
SLAB
You can see a break of the Pink Snapback rally (bear channel) that we’ve been highlighting. So could we keep going down here? Yes, as we got the break.
We’ve laid out a dark blue line in the daily charts here as they are prior support levels to be aware of. Should we get there in a hurry? It’s where our paying subscribers will lock in their short-sell gains!
To learn more, sign up for our free newsletter and receive our free report — “How To Outperform 90% Of Wall Street With Just $500 A Week.”
Crashiversary Week Continues – Thursday Thump
by Phil - March 10th, 2011 8:23 am
Wheeeeeeeee!
Looks like we picked the right day to get bearish! Of course we expected this all week because, as noted Sunday’s Stock World Weekly – it’s not a POMO day. No free money – Oh noooooooooooooooo! In Monday’s Member Chat, we discussed the flight to defensive stocks and how the unwinding of POMO could cause BIG TROUBLE for the market. While POMO is not the be all and end all of the market movements – you do have to think of it as support that props it up so lack of POMO – like we’re having today – leaves us much more vulnerable to other negative news.
There was a ton of negative news in our intra-day notes yesterday and, as I mentioned in the morning post – we’re very concerned that the consumer has been pushed to the edge of a cliff so, of course, we took the opportunity to get much more bearish during the day with several disaster hedges and, of course, the same DIA $120.75 puts at the same price we had so much fun with on Tuesday. We also, as noted in the morning post, had fun shorting oil at the $105 mark – over and over and over again as it moved between $105 and $104 but 5th time is a charm as they finally broke hard this morning and fell all the way to $102.32 on the last drop, which now makes winners of our USO puts as well so, like I said – Wheeeeeeeeeeeee!
So, let’s see which of the things we’ve been ignoring suddenly matter today:
- Japan’s GDP shrank 1.3% last quarter on LESS consumer spending and LESS capital investment. "Gee, I don’t know George, we raised all our prices and people bought less stuff – who’d have thunk?"
- China posts biggest trade deficit in 7 years. Prices go up and people buy less junk – even if it’s cheap junk.
- Moody’s downgrades Spanish debt. Really? Gee, we never saw that coming, did we?
- Borrowing costs for the PIIGS are back to crisis highs. Same year-old link as above.
- Only one in seven Americans believe we are in a lasting recovery and over 50% say they are WORSE OFF than they were two years ago. (And – don’t forget – they don’t even poll people
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OPKO Health – Sick or Dead?
by Insider Zone - March 10th, 2011 2:05 am
By Ilene
Pharmboy thinks OPKO Health (OPK) is just a little unwell. OPKO’s CEO Philip Frost appears to agree and bought around $3M in OPK stock yesterday.
We wrote about OPKO Health (OPK) in Stock World Weekly on February 27. OPKO is specialty healthcare company involved in discovering, developing and commercializing pharmaceutical products, vaccines, medical devices, and diagnostic and imaging technologies. Its medical research is in areas of oncology, infectious diseases, and neurological disorders. Recently, insiders have been buying shares.
In Stock World Weekly, Pharmboy wrote, “With the recent pull back in the stock, it is time to consider an initial 1/4 round of shares under $4.50. Options are lightly traded, but the September $5 Puts seem to be a favorite, so selling a 1/4 entry ($1.20 or better) might be good for another round of stock if it gets put to you. This is a small cap stock, and no more than 3-5% of a portfolio should be dedicated to these types of companies.”
The small pullback Pharmboy noted at the end of February quickly turned into a larger pullback, and the stock closed on Wednesday March 9 at $3.59.
MIAMI--(BUSINESS WIRE)-- OPKO Health, Inc. (NYSE Amex: OPK) today announced that it intends to offer and sell $100 million of its common stock in an underwritten public offering. The Company expects to grant the underwriters an option to purchase up to an additional $15 million of common stock offered to cover overallotments of shares, if any. The offering is subject to market conditions, and there can be no assurance as to whether or when the offering may be completed, or as to the actual size or terms of the offering.
Opko’s prospectus said that an offering of $4.74 a share – the closing price on March 1 – would require it to issue 21.1 million shares of common stock. The company did not finalize a price for the offering.
MIAMI--(BUSINESS WIRE)-- OPKO
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Traders Build Up Bullish Positions on IBM Corp.
by Option Review - March 9th, 2011 4:07 pm
Today’s tickers: IBM, CHSI, TCB & BC
IBM - International Business Machines Corp. – Bulls positioning for shares in IBM to extend gains flocked to the options market today, populating weekly as well as longer-dated expiries with signs of optimism. Shares in the computer services company increased as much as 3.35% during the session to secure an intraday- and new all-time high of $167.72. The stock jumped after a number of analysts raised their share price targets in the aftermath of IBM’s analyst meeting on Tuesday. Investors expecting the uptrend to continue at least through the end of this week purchased March $165 and $170 strike calls, and sold nearly 2,000 of the March $165 strike puts in the weekly contract set to expire on Friday. Bullish sentiment spread to the March contract call options set to expire on the 18th of this month, with investors buying around 2,000 in-the-money calls at the March $165 strike for an average premium of $2.60 each. Call volume is greatest at the higher March $170 strike where more than 9,950 calls changed hands on open interest of 5,480 contracts. It looks like the majority of the calls were purchased for an average premium of $0.62 apiece. Investors long the higher-strike calls are poised to profit should shares in IBM rally another 1.7% to surpass the average breakeven price of $170.62 by expiration day. IBM is scheduled to report first-quarter earnings after the market closes for the day on April 18, 2011.
CHSI - Catalyst Health Solutions, Inc. – Options on the full-service pharmacy benefit management (PBM) company are active today on news it agreed to purchase Walgreen Company’s PBM business for $525 million. Shares in Catalyst Health Solutions jumped 18.3% during the session to hit an intraday and all-time high of $52.69. One options player appears to have nearly doubled his money in the span of three weeks by taking profits on a bullish stance initiated back on February 16, 2011, when shares in CHSI closed at $45.65. It…
Dark Horse Hedge is Rocking On
by Sabrient - March 9th, 2011 2:42 pm
By Scott at Sabrient and Ilene
For those about to rock, we salute you – AC/DC
Dark Horse Hedge is Rocking On
With February and the most of earnings season passing, we decided to "stand up and be counted" with a summary article on the VIRTUAL Dark Horse Traders’ Hedge (DHH) virtual portfolio.
Our mission has been to generate absolute returns through the use of a tilted Long/Short strategy that remains market neutral, but with a partial bias towards momentum (as defined by measuring the S&P 500 relative to its 50 and 200 day Moving Averages). We have been tilted to the long side since October 2010.
Over the long term, reasons for using such a strategy include being positioned to take advantage of both bull and bear runs. As evidenced by the near zero returns of the market over the last 10 years, buy-and-hold strategies are majorly flawed. The market also teaches hard lessons to those who attempt to predict direction, and has forced many retail investors to reconsider their strategies after being pounded in 2001 and 2008.
Alpha is a measure of a return over and above a benchmark index’s return, and Beta is a measure of the virtual portfolio’s performance as it is correlated to movements of the market. With DHH, we strive to optimize Alpha while minimizing Beta to protect our virtual portfolio in up and down markets. Beta is reduced by holding both Long and Short positions and using a rules-based approach to determine which stocks have the best chacteristics to benefit when the market is rising, and conversely to determine which stocks are most apt to perform poorly when the market is falling. In other words, we want to be long stocks of the best companies and short stocks of the worst companies – we want to identify the "tails" of a market, index, sector or basket of stocks.
Once a virtual portfolio of Long and Short stocks is established, then it is a matter of gaining the desired exposure using the available…
Which Way Wednesday – Happy Crashiversary!
by Phil - March 9th, 2011 8:07 am
Can you believe it was just 100% ago that the market collapsed?
I talked about the blood in the streets and all the fun we had in Monday’s post. The chart shows the S&P, DAX and Hang Seng all up almost exactly 100% (1,333 or bust is still our goal on the S&P) with the FTSE dragging along at 70%, the Nikkei up just 50% (although not bad for a country that is "mired in deflation") and the Shanghai isn’t even trying with a 40% gain in 24 months. The star of our show is the Bombay Sensex, which is up 125% since March 9th of 2009 but it doesn’t feel like it as they were up about 160% in November.
The Hang Seng has also pulled back about 20% since November but everyone else is catching up with even the Shangai bouncing while the Hang Seng consolidates. Our 100% lines on the US indexes are 12,938 on the Dow, 1,333 on the S&P, 2,530 on the Nasdaq, 8,362 on the NYSE and 684 on the Russell. The Russell is our leader, up 140% in two years (which is REALLY good for the RUT $390 Index calls we bought back on crash day for just $10!) and the Nasdaq is up 119% off their 1,265 low but we liked buying AMZN at $62.50 better than risking the basket of the index at the time and that too has worked out well with AMZN now $167 (up 167% coincidentally).
We were already in AAPL and GOOG etc – the usual suspects as we had gone bullish the week before the crash in March of 2009 – all the crash did was flash a big SALE sign at us while we were already at the mall with cash to spend. Most of my picks on that actual day were financials: SKF shorts, FAS longs, XLF long, RKH long, BAC long (at $3.14!) and then some staples like GE, DIS, TGT and HOV (at 0.65!) along with the Russell, which was our "index most likely to succeed" selection.
So you can’t blame us for hoping we have another nice correction – especially with values currently so stretched. We don’t want to be bearish but, when there’s nothing to buy you either stay in cash or get a little short and, as much as we liked AMZN at $62.50, we have…
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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
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