Posts Tagged ‘Long Put’
Thursday, February 3rd, 2011
While dire weather forecasts may have sent anxious shoppers to Costco (NASDAQ:COST) to stock up on non-perishables, paper goods, and booze, an investor apparently took a bearish stance on the warehouse-style retailer in Wednesday’s trading. Specifically, the March 70 put saw more than 26,000 contracts trade versus open interest of 145 contracts. The stock popped up on the list of put/call ratio leaders, as more than 31,000 puts traded across all option series compared to roughly 2,500 calls.
The lion’s share of today’s option volume on the March 70 put – 19,490 contracts, to be specific – traded in one block around 10:20 a.m. Central Time. This trade crossed the tape at $1.13 apiece, which was the ask price at the time. Trading on the offer price suggests the puts were opened on the buy side, most likely by traders with a bearish outlook on the stock. The entire block cost $2.2 million in premium for the investor in question. (more…)
Tags: Bearish Option Strategies, COST, Costco Wholesale, Long Put
Posted in blog, What's Hot | No Comments »
Wednesday, November 17th, 2010
After a mixed earnings report, Lowe’s Companies (NYSE:LOW) investors are trying to decide their next move. Third-quarter results topped analysts’ estimates by a penny but failed to match expectations from a revenue perspective. Looking ahead, LOW issued a fourth-quarter guidance that was in line with expectations.
This ambivalence is reflected in the stock’s price; LOW shot higher out of the gate on Monday following its earnings report and declined throughout the session, ultimately closing in the red. In 2010, LOW has been vacillating in a range between 20 and 28; the stock is off about 8% year-to-date.
One thing LOW has in its favor is a decent dividend yield of about 2%. The retailer is an interesting name to consider, especially when it comes to options trading. Range-bound stocks aren’t of much use to stock traders but even the most inert of securities can potentially be a profitable investing opportunity with the right option strategy. (more…)
Tags: Buy Write, Covered Call, Long Put, LOW, Lowe's, Options Strategies
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Thursday, October 21st, 2010
American Airlines parent AMR Corp. (NYSE:AMR) and Delta Airlines (NYSE:DAL) were active among option traders yesterday after their respective earnings reports. AMR investors seem to be looking for way downside hedges in the long term while Delta traders were apparently targeting short-term upside.
In early-morning trading, blocks of 19,900 contracts traded at the AMR 2012 5-strike put and the 2013 4-strike put. Both blocks traded at the same time and were marked as spreads. We believe the investor bought the later-dated, lower-strike puts for 84 cents apiece and sold the higher-strike puts for 81 cents apiece. (more…)
Tags: AMR, AMR Corp., DAL, Delta Airlines, Long Call, Long Put, Options Volume
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Friday, October 1st, 2010
Despite the strongest September in nearly 70 years, the market has yet to recover to its early-May levels – the area at which stocks were trading before the infamous May 6 “flash crash” that took the Dow 1,000 points lower in a matter of minutes. It’s been almost five months since this unsettling event, and officials are still looking for a culprit.
Those tracking the Securities and Exchange Commission officials researching the matter say new trading regulations could be announced soon that would hopefully prevent a similar event from transpiring in the future. One professional investor – Joe Saluzzi of Themis Trading – said the regulatory commission could opt to prohibit stop-loss orders (or at least limit the situations in which they can be used).
A stop-loss, also called a “stop order,” is an order type that allows investors to close a losing position, possibly limiting losses. A market stop order is simply an order to automatically buy (or sell) a position at the market, once that position has crossed a pre-determined price threshold. A limit stop order has a similar goal but limits the exit to the specified price. (more…)
Tags: Flash Crash, Limit Orders, Long Call, Long Put, long stock, Short Stock, Stop-Loss Orders
Posted in Advanced Trading, blog | No Comments »
Google Inc.
Google (NASDAQ:GOOG) has been all over the news lately, so let’s briefly hit the highlights. Last Wednesday, JP Morgan cut its earnings estimates for the second quarter and lowered its 12-month price target on the shares to $566 from $639 (though keeping a bullish rating of “overweight”). In a similar move on Thursday, an analyst with Oppenheimer trimmed his earnings outlook on the Internet giant and dropped his price target to $500 from $715 (keeping an “outperform” rating). Both “overweight” and “outperform” are essentially equal to a “buy” recommendation.
Then on Friday, the stock was boosted higher after Google renewed its license with China, allowing it to keep operating the google.cn website within the People’s Republic. This is currently the world’s largest market when it comes to online users, but there had been speculation for months that Google would choose to exit the country due to censorship laws. The stock moved higher on this news, outperforming the broad market on Friday.
Investors who believe Friday’s gains could carry through into next week could be considering bullish strategies such as the bull call spread we’ve outlined below. On the other side of the fence, contrarian investors could be looking into a variety of strategies that would benefit if GOOG heads lower. The examples below are hypothetical and should not be interpreted as buy/sell/hold recommendations. Always consider your risk/reward parameters before placing any new trades. Prices are given as of Friday afternoon, when GOOG was trading at $464.48, up $7.92 (1.7%) on the day.
To learn more about option trading strategies or our online option platform, visit our events page and check out schedule of free weekly webinars. Upcoming classes include tomorrow’s in-depth look at covered calls in the Two Traders, One Strategy series.
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Tags: Bear Call Spread, Bull Call Spread, GOOG, Google, JPM, jpmorgan chase & Co., Long Put
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FedEx (NYSE:FDX) and its close rival United Parcel Service (NYSE:UPS) have been popular names in the analyst world lately. Thursday, UBS upgraded its ratings on both companies to buy from neutral, noting that the recent pullbacks in both stocks have presented buying opportunities that may be “compelling for investors.” UBS sees solid fundamentals from both companies and has set price targets of $100 per share for FDX and $74 for UPS. Earlier in the week, Macquarie initiated coverage on UPS and FDX with respective ratings of outperform and neutral (and price targets of $70 and $85).
The pullback UBS was referencing has dropped FDX from a mid-April high of $97.75 to its current level just below $72 – a 26% drop in about two months. Along the way, the shares violated several trendlines of support and took out their early-February low. The stock is currently trading in territory not seen since early September and is perched on its 100-week moving average, at $70.81.
Although UBS analysts and others are limited to a three-point “buy-hold-sell” scale, option traders have a much wider variety of strategies to choose from. Two potential option trades in FedEx – one bullish, one bearish – are outlined below. Remember these are hypothetical examples, not recommendations. Consider your risk/reward parameters and trading goals before executing any new trades.
*Prices given as of Thursday afternoon. FDX was trading at $71.79. (more…)
Tags: Bull Call Spread, FDX, FedEx, Long Put
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Wednesday, June 23rd, 2010
Tuesday morning, Mattel (NYSE:MAT) was upgraded at Caris & Company to a “buy” rating from an “above average” designation. The firm also adjusted its 12-month price target to $32 from $29 (representing a change of 46% from current levels) and lifted 2010 earnings estimates by nine cents to $1.75 per share (which is, oddly enough, still below the consensus view of $1.81).
The brokerage noted that MAT shares could benefit from Toy Story 3 revenue, as the Pixar film (which features Barbie and other MAT toys) has set box-office records for the studio. Looking ahead for 2011, the covering analyst expects the company to benefit from the release of Cars 2 and Green Lantern, as well as lower costs for plastic resin.
MAT shares rose initially on this vote of confidence but settled lower on the day, edging back below its 50-day simple moving average. The shares are fighting higher from their early-June bottom but have consolidated around the $22 mark for the last several sessions. Caris’ projected target would place MAT shares at an all-time high; the stock hit its previous peak of $29.71 in April 2007.
While traditional brokers are confined to the scale of “buy,” “hold,” and “sell,” ratings, options traders have access to a full arsenal of strategies to use depending on the situation. These can be fine-tuned depending on an investor’s trading thesis and can be impacted by forces other than just the stock itself (including time and implied volatility). Two option strategies on MAT – one bullish, one bearish – are detailed below. Remember these are hypothetical examples, not recommendations. Consider your risk/reward parameters and trading goals before executing any new trades.
*Prices given as of Tuesday afternoon. MAT was trading at $21.93. (more…)
Tags: Analysts, Bull Call Spread, Long Put, MAT, Mattel, Options Trading Strategies, Pixar, Toy Story 3, Upgrades and Downgrades
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Thursday morning, Credit Suisse lifted its rating on First Solar (NASDAQ:FSLR) to “outperform” from “neutral,” which is essentially raising a “hold” rating to a “buy.” The firm also bumped the 12-month price target to $150 from $110.20.
Credit Suisse analysts expressed that the upside in pricing for the second and third quarters has not yet been reflected in the stock’s price. This suggests roughly 20% of upside from current levels. The Street appreciated this vote of confidence, sending the stock up more than 4% against the backdrop of an uninspired market.
FSLR dipped along with the broad market over the past several weeks, losing 34% of its value from its April 29 high to its June 8 low. In the past week-and-a-half, however, the shares have attempted recovery, tacking on more than 20%. Thursday’s gains boosted the shares above their 50-day moving average.
Investors who want to jump on the bull side of FSLR might find the stock’s price tag a bit off-putting – 100 shares currently costs nearly $12,400. The typical requirement of less initial capital is one reason traders have continually flocked to the option markets, whether they are bullishly or bearishly inclined. Two option strategies on FSLR – one bullish, one bearish – are detailed below. Remember these are hypothetical examples, not recommendations. Consider your risk/reward parameters and trading goals before executing any new trades.
Want to learn more about different options strategies or the OptionsHouse platform? Stop by our events page to review our schedule of free weekly webinars and sign up for one that interests you. Next week’s strategy webinar is a look at the risks and rewards of long puts.
(more…)
Tags: Alternative Energy, Credit Suisse, First Solar, FSLR, Long Put, Synthetic Long Stock, Upgrades and Downgrades
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Thursday morning, an analyst with MKM Partners lifted his rating on eBay (NASDAQ: EBAY) to “neutral” from “sell.” (Neutral is essentially a “hold” rating). MKM maintains a 12-month price target of $20. The analyst noted that while his firm still has concerns about EBAY’s drooping market share in the e-commerce segment, they are “hard-pressed to identify a near-term negative catalyst that might drive the shares below our … fair value estimate.” In other words, EBAY may not move higher, but it might not move lower either, at least according to MKM Partners.
Looking at an EBAY chart, it’s clear that the stock has been relatively range-bound for several months. Since September 2009, the stock has made minimal movement below 21 or above 25, despite historically high volatility in the broader market and the tech sector.
There isn’t much a stock trader can act on when it comes to a “hold” or “neutral” rating. After all, it seems counterintuitive to buy a stock that isn’t going up or sell a stock that isn’t going lower. That could be where option strategies come in. Two hypothetical option strategies on eBay – one neutral, one bearish – are outlined below. Remember these are merely examples, not recommendations. Consider your own risk/reward parameters and personal trading goals before executing any new trades. (more…)
Tags: Bear Call Spread, EBAY, Iron Condor, Long Put, Options Strategies, options trading, Technical Analysis, Upgrades and Downgrades
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In an episode of Mad Money last week, host Jim Cramer said that while he appreciates how Starbucks (NASDAQ: SBUX) CEO Howard D. Schultz is running the company, he sees no dividend-yield support and doesn’t like the stock overall. While SBUX has been in a long-term uptrend since late 2008 (more than tripling in value since its November 2008 low), the shares’ upward momentum appears to have slowed of late. In Friday’s trading midday, the stock was little changed at $25.66.
Some investors may side with Cramer, expecting the tide to turn for the coffee giant, and others may be anticipating further upside (or may have the habit of going against whatever Mr. Cramer recommends). Either way, there are additional ways to invest in SBUX that do not involve shorting the shares or devoting the capital to buy shares outright. There are a number of options strategies, ranging from very conservative to extremely aggressive, that can cater to an investor whether he or she is screamingly bullish, moderately bearish, or just expects the underlying stock to trade in a range.
Two hypothetical options trades are described below. Remember, these are just examples, not recommendations, and be cognizant of your personal risk/reward parameters before executing any new trades. (more…)
Tags: Bul Call Spread, Long Put, Options Strategies, options trading, sbux, starbucks
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