Earnings Plays of the Day 2.23.2012

CRM TRADE:

Trade: I bought the CRM March 120-140 Strangle and sold the Feb weekly 120-140 Strangle for $2.69 total. 
Profitable:
 I make money on this trade if CRM closes between $120-$140 and the March volatility does not get crushed too bad.
Break-even:
 I break-even on this trade if CRM Stangle Swap is worth $2.69.
Unprofitable:
 This trade is unprofitable if CRM Strangle Swap is worth less than $2.69.  This is a very hard trade to explain, but I basically want to the front month Strangle to be worthless and have March volatility not get crushed, so the March strangle is worth more than $2.69.

UPDATE 2.24.2012 I like to think of the earnings trades as one day bets, takes profits or losses then move on.  I sold 25% of this Calendar spread for $3.15, 25% at $3.50 and I have half still on.  I will take this trade off before the end of the day, but it looks like I will turn $2.69 into $3.50ish, good for 30% profit in one day.

DECK TRADE:

Trade: I sold the DECK March 92.5-95 Call Spread for $1.05. 
Profitable:
 I make money on this trade if DECK closes below $93.55 by March 16, 2012.
Break-even:
 I break-even on this trade if DECK closes at $93.55 by March 16, 2012.
Unprofitable:
 This trade is unprofitable if DECK closes above $93.55 by March 16, 2012.  The most I can lose on this trade is the amount this spread can be worth $2.50 minus the amount I sold it for $1.05 for a total of $1.45

UPDATE 2.24.2012 With DECK getting slammed, this spread that I sold for $1.05 is now worth $.15.  I put a $.05 bid in the “Order Book” to take the trade off and move on to the next one, another HUGE winner.

GPS TRADE:

Trade: I sold the GPS March 24-25 Call Spread and 22-21 Put Spread for $.48 total. 
Profitable:
 I make money on this trade if GPS Closes between $21.52-$24.48 by March 16, 2012.
Break-even:
 I break-even on this trade if GPS Closes at $21.52 or $24.48 by March 16, 2012.
Unprofitable:
 This trade is unprofitable if GPS Closes under $21.52 or above $24.48 by March 16, 2012.  The most I can lose on this trade is the amount this spread can be worth $1 minus the amount I sold it for $.48 for a total of $.52.

UPDATE 2.24.2012 With GPS selling off and staying above $22, this spread is decreasing in value, because premium and volatility gets crushed after earnings.  I put a $.30 bid in the “Order Book” and will be looking to take profits and move to the next trade.

Trade of the Day (SNE) 2.23.2012

Reason I like this Trade: There are unusual options activity orders, then there was an order in SNE that I needed to jump on.  Someone bought 2500 SNE July 23 Calls, they paid $.90 for it and I decided not to trade SNE just yet.  Then when someone else, or maybe the same person bought another 2500 of them for $.95, I decided I could not just sit back and watch, so I jumped on board.  Later today, I saw someone buy 3485 SNE July 22 Calls for $1.40 and someone else sell 5000 SNE July 16 Puts for $.35, making my belief that SNE will rally higher much stronger.  I will be looking to piece of it it, just like I took profits in SEE, SYY, and SVU.  The chart looks strong and could test $24 very soon.  (See Disclaimer)  

UPDATE 2.24.2012 With SNE ripping higher by more than $.55 today, these Calls are really working out.  Yesterday I sold 10% of my position for $1.10 and today they are worth $1.20.  I am offering 25% of my position in these Calls at $1.30.  I still think SNE can trade $22.50, so I will leave the majority of my position on for more upside, but a nice winner so far.  

UPDATE 2.27.2012 I sold 10% of my position at $1.10, so I still have a 90% position on.  Even with the stock market selling off, I think SNE has more room to run to the $22.50 level.  These Calls are currently worth $1.15, good for over 20% gain.

UPDATE 2.28.2012 Sony traded up to $22.50 today and hit my target. I am still LONG a 75% position and it looks very strong, so I will try to piece out of Calls piece by piece.  My next offer on the Calls is $1.60

UPDATE 2.29.2012 Even with Sony getting slammed today by more than $.75 to $21.50, these Calls are worth more than I paid for them.  They are still worth $1.10 and I paid $.95 so it is still profitable  

UPDATE 3.1.2012 A little POP never killed anyone, I am leaving a 75% position on and I am LONG SNE.  These Calls are worth $1.15.

UPDATE 3.2.2012 With SNE selling off a bit, I have started to release that if I have a 30% gain in 3 days, I should take the position and move to the next trade.

UPDATE 3.5.2012 Proving once again that I need to take more quick profits, these SNE Calls are now only worth $.80, but I will not look to add to this position, I am glad that I took some partial profits.

UPDATE 3.9.2012 Sony has been all over the place and it sold off and now it is rally back.  I think the stock can trade back to $22.50, so I will leave this trade on for more upside.

UPDATE 3.22.2012 With Sony selling off again today, these Calls are now only worth $.60, indicating to me that I have to take profits quicker and faster.  Another lesson learned.

UPDATE 4.9.2012 With positive news from SNE today, this stock still can’t rally higher, but once again since the trade it on until July, I will leave it on, because anything can happen

Read more about break by www.keeneonthemarket.com

Halftime Report for 2.23.2012

Salesforce reports today after the bell . Quarterly earnings (Q4E) $.40 and Quarterly revenue (Q4E) $524M. Salesforce has a PEG of 3.7 and Forward PE of around $85. At this price I think CRM might be overvalued. SHLD ripped 10$ on reporting a $2.5 billion loss, hmmm.

Unusual Options Activity:

We saw a customer buying SNE JULY 22 and 23 Calls and sold the $16 Puts. In my opinion, this is very bullish activity.SNE is trading 9.5x average volume. Andrew Keene bought the July 23 Calls for $.95.

Also, we have seen a big sell order of 10,000 contracts of IAU on April 18 Calls for a $.25. This could be covering of a prior position or an outright short.
By: Greg Zimny


Trade of the Week (FCEL) 2.23.2012

Reason I like this Trade: There are unusual options activity orders then there was this order in FCEL.  Someone bought about 5,000 FCEL July 2 Calls for $.25.  This stock has been raging higher and been trading higher on 10 of the last 11 days.  FCEL just inked a deal with IPKT for stationary power plants in Germany, and it looks the alternative energy story has more room to run.  With higher oil prices, Solar and alternative energy looks like a great way to play this space.  Just like I have been trading the Solar stocks, I will be looking to take off partial profits in a run-up in stock, but I have almost 5 more months for this trade to pan out to a winner.  With the price Please feel free to email me with any questions at [email protected]

UPDATE 2.24.2012 I like to put orders in the book, so if a trade trades I get on the “print.”  Why would I not put an offer in or bid in just in case, it is FREE advertising.  Today, I was offering, trying to sell, FCEL July 2 Calls for $.35 and I got filled on 20% on my position.  I still have 80% left, but locking in 40% profit on 25% of my position.  That is a “Trade of the Week.”

UPDATE 2.27.2012 I still have a 80% position on and these Calls are currently worth $.30, I took partial profits, but I still see more upside in the alternative energy space.

UPDATE 2.28.2012 Someone sold these Calls for $.20 yesterday, the exact number that was purchased for $.25.  So, I will be looking to punt this trade on any upside POP.

UPDATE 2.29.2012 These Calls are worth $.25 and they are in my BACK pocket, for a great risk vs reward play.

UPDATE 3.1.2012 I still own these Calls and they are worth $.25. 

UPDATE 3.5.2012 These Calls are still worth $.15, but if I get a POP in the stock, I will be looking to take them off and move to the next trade.  

UPDATE 3.9.2012 These Calls are currently worth $.20 for a small loser, but these kind of stocks can POP at any time, so it another lottery ticket for the back-pocket.  

UPDATE 4.9.2012  I am still LONG these Calls and I was offering them today at $.15.  They are currently worth $.10, but my position is so small I am not too concerned.

Morning Rage 2.23.2012

Moreover, Goldman Sachs announces that it is now long on WTI. Maybe it is the time to fade WTI Crude! According to Nancy Pelosi, “speculators are pushing the price of oil up and killing our economy and consumer. In fact, US oil production is at its highest level since 2003. We need to take strong action to protect consumers from this speculation.” It appears that a WTI crude oil margin hike is inevitable. WTI is at a fresh year high trading around the $107 level and appears that their appears to be real buyers and not jest people short covering. Finally, EUR/USD broke out of its trading range and is close to the $1.332 level.

AFTER THE BELL EARNINGS:

DECK: Quarterly Earnings and Estimates (Q4E)- $3.13 Quarterly Revenue(Q4E)-$562M. Deckers offer luxury shoes such as UGGs and multiple types of UGG accessories. Deckers Management reiterated their guidance after last quarter and stated, “pre- spring orders looking strong.” Expect a big move in one direction or another.

GPS: Quarterly Earnings and Estimates (Q4E)- $.42 Quarterly Revenue(Q4E)- $4.3B. Despite Gaps annual sales growth of $-1.75 for the last five years, could Gap miss analysts expectations and still run like Abercrombie is doing? Also, Gap is expanding into high-growth markets such as China, opening 30 new stores.

by: Greg Zimny