Posts Tagged ‘Long Call’
Wednesday, March 2nd, 2011
The broad market took it on the chin yesterday, losing around 1.5%, and Alcoa (AA) was among the worst-performing names in the Dow, shedding more than 3% of its value. The aluminum company’s CEO said Tuesday that while U.S. industrial demand for the metal is improving, he doesn’t feel “the current environment is such that [Alcoa] want[s] to bring capacity back” to pre-recession levels.
Some traders seem to have viewed pullback as a buying opportunity. Two large blocks traded on in-the-money, intermediate-term calls during Tuesday’s session. (more…)
Tags: AA, Alcoa, Long Call, options trading
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Tuesday, February 15th, 2011
Teva Pharmaceuticals (NASDAQ:TEVA) hasn’t had the greatest week as far as analyst opinion is concerned. Research analysts at Deutsche Bank reduced their 12-month price target on the stock to $64 from $66 on Wednesday, albeit keeping a “buy” rating on the shares.
Elsewhere, Morgan Stanley lowered its earnings estimates on TEVA through 2012. The firm expects 2011 earnings of $5.05 – down from earlier projections of $5.29 – and 2012 earnings of $5.78, from its previous estimate of $6.04 per share.
In terms of price action, TEVA has been virtually flat over the past six months and is down 1% year-to-date, including a sharp drop last week after failing to match analysts’ earnings expectations for the fourth quarter of 2010 or the 2011 fiscal year. (more…)
Tags: Long Call, Option Strategies, Put Butterfly, Stock Replacement Strategy, TEVA, Teva Pharmaceuticals
Posted in blog, Bulls Vs. Bears | No Comments »
Tuesday, February 8th, 2011
A company’s fundamental backdrop, including anticipated news events like earnings, FDA meetings, or product announcements, typically plays a prominent role in any trader’s research. This tends to be true whether one is primarily investing in stocks or in options.
The excitement of event-based trading and the enduring importance of earnings results converge once every quarter as earnings season plays out. Earnings season has the potential to be especially exciting for those option traders looking to take advantage of implied-volatility shifts. One bullish options strategy traders might employ ahead of an earnings report is a bull put spread (selling a higher-strike put and buying a lower-strike put to collect a net credit).
If and when implied volatility is unusually high on the underlying’s options, traders might be tempted to sell put spreads in lieu of buying calls. High implieds mean that options are naturally pricier, making premium-selling strategies potentially more attractive than premium-buying ones. There are, of course, important differences between bullishly configured strategies such as long calls and short put spreads. (more…)
Tags: Bull Put Spread, Long Call, Options Strategies
Posted in blog, Trading on OptionsHouse | No Comments »
Monday, December 27th, 2010
2010 has been a solid year for Coca-Cola (NYSE:KO). The blue chip has risen roughly 15% year to date and is up 25% from its early-July low. Shares of the soft-drink titan are now trading around the $65 level, at their highest point since last millennium.
It’s times like this that try traders’ souls. Do you go with the trend or look for a pullback? Is Coke likely to continue its ride higher or take a breather?
Citigroup is in the bullish camp, recently upping its price target to $72 from $65 (and maintaining a “buy” rating). The firm also lifted its earnings estimates for the company, citing “higher expected merger synergies.” In fact, all of Wall Street is optimistic toward KO; the OptionsHouse Research tab indicates that all 16 of the analysts following the stock have named it a “buy” or an “outperform.” (more…)
Tags: Coca-Cola, KO, Long Call, Options Strategies, put ratio spread
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Friday, December 17th, 2010
Jim Cramer doesn’t look like a Namaste kind of guy, but who knows what his hobbies are in his personal time. We do know, thanks to his spirited rants on Mad Money, that he’s a fan of upscale yoga gear purveyor Lululemon (NASDAQ:LULU).
Cramer flagged this name as one of four “junior growth stocks” earlier this week and said it “can be [a] winner.” This outlook has certainly been true of late. Last week, the company forecast fourth-quarter profit of 46 cents per share or better, topping analysts’ consensus view by a nickel. On this news, the stock spiked to a new all-time high.
The stock has rocketed up more than 45% in the last month and is nearly 130% higher year-to-date. The bullish camp might argue that “the trend is your friend” and LULU will continue to rally until a fundamental change warrants a reversal. The skeptics might be wary of a stock that has run so far, so fast. (more…)
Tags: Long Call, LULU, Lululemon, Married Put, Options Strategies, options trading
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Tuesday, December 14th, 2010
Bank of America (NYSE:BAC) has seen mixed reports of late, including rumors of a WikiLeaks exposure. The shares have gained more than 5.5% from Wednesday’s close but are still off more than 15% year to date. Has the stock truly begun to recover or will this be a mere hiccup as part of a longer-term downtrend? And if stock traders want to explore strategic alternatives using options, what can they consider?
For BAC bulls and bears, we have outlined two option strategies below. These write-ups are educational in nature and should not be regarded as buy or sell recommendations. All prices are as of Tuesday morning, when BAC shares were trading at $12.62, up eight cents on the day. (more…)
Tags: BAC, Bank of America, Long Call, Risk Reversal, Synthetic Short Stock
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Friday, December 3rd, 2010
The holiday season has begun! Consumers everywhere are doing their part to stimulate the economy, and more and more holiday shopping these days is being done online. Some of the beneficiaries of this activity (other than the recipients of said gifts) are the major shipping companies, namely UPS (NYSE:UPS) and FedEx (NYSE:FDX).
When Amazon.com (NASDAQ:AMZN) and other retailers send things across the world, they obviously employ someone to do the legwork. And that’s not to mention all the shipping people will do to out-of-town family and friends. If “Black Friday” and “Cyber Monday” retail numbers are any indication, consumers are shopping more than they did last year. That means they’ll be shipping more too, and FedEx is a proxy for the shipping business as a whole. (more…)
Tags: FDX, FedEx, Long Call, Put Butterfly, Stock Replacement
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Tuesday, November 2nd, 2010
 Steel.jpg "Nucor (NUE) options activity")
Iron and steel mining name Nucor (NYSE:NUE) has settled into a trading range of late, bouncing back and forth between the 35 and 40 levels since early July. Judging from some volume in the Nucor options pit Monday, it looks as though a large-scale investor may be targeting a breakout from this range but not until several weeks in the future.
An hour after the trading week kicked off, large blocks traded in the NUE November 40 and December 40 calls. It looks as though the investor sold 17,304 of the November-dated calls for 51 cents apiece and bought 8,652 of the December calls for $1.02 each creating a one by two calendar spread. Twice as many short-term calls were sold, making this a costless trade before commissions ($0.51 credit times two = $1.02 debit). (more…)
Tags: Calendar Spread, Long Call, Nucor, NUE, Ratio Spread, Short Stock
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Wednesday, October 27th, 2010
In early trading on Tuesday, an investor appears to have made a large-scale bullish play in Research in Motion Limited (NASDAQ:RIMM). What’s more, this investor is likely looking at the long-term outlook by scooping up LEAP positions.
Yesterday, shortly before 10 a.m. , Eastern Time, a block of 10,000 January 2012 90-strike calls hit the tape, trading for 95 cents apiece. This was the offer price at the time, indicating that they likely were initiated by a buyer. The block accounted for $950,000 in total premium paid.
This call currently has a delta of 13, meaning it will theoretically gain/lose 13 cents whenever RIMM gains/loses $1. While 13 cents may not seem like much, consider that a $1 advance in RIMM is equal to a 1.8% move in the stock to $55.84; a 13-cent move in this option is a 13.6% move in the option premium to $1.08. (more…)
Tags: LEAPS, Long Call, Option Trading, Research in Motion, RIMM
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Tuesday, October 26th, 2010
Some investors who like the Internet-search sector but who can’t or don’t want to pay $617 per share for Google (NASDAQ:GOOG) shares have taken an international approach with Baidu.com (NASDAQ:BIDU). The so-called Google of China, BIDU is up more than 160% YTD, gaining 41% in the last three months alone and recently overtaking the psychologically important $100 per share mark.
Last week, ahead of the company’s positive earnings surprise on Thursday evening, brokerage firm Kaufman Brothers upped its 12-month price target on the shares to $115. This is a 34% increase from its earlier target of $86. On Monday, with earnings out of the way until February, HSBC adjusted its price target to $116 from $80. It seems as though the professionals are being somewhat guarded in terms of the amount of upside in the near term, but they seem comfortable shifting their outlooks to a “new normal.” (more…)
Tags: baidu, Bear Put Spread, BIDU, Long Call, Options Strategies
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