Options Trading Blog
Options Trading Tips and Strategies
This thought was quickly destroyed as seen by the trend up day. The SPY made a morning low of $134.33 and traded up to $135.97 by the end of the day. Like I said yesterday, the uptrend is still very much in place and shorting this market as a whole yesterday would have been an amateur move. One day does not make a trend and tops are always harder to call than bottoms. Casino stocks continued their rampage today. Las Vegas Sands, Mel-crown Entertainment and MGM were up 2.34%, 2.29% and 1.3% respectively. MGM seems to have no problem going directly up in a straight line. I would watch this name for signs of weakness and a trend line break. The July high on MGM is $16.05, but if the overall market rolls over, I believe a move back to $12.40 would not an unrealistic scenario. RSI is a very basic tool, yes I know but on a 14 day RSI, MGM has bearish divergence. Microsoft soared higher today and was up over 5% at one point. Stock closed up 4% to $31.25. Price really does have memory. The highs on MSFT on 12/31/09 were $31.50 and $31.58 on 4/23/10. Today the stock touched $31.55 and then sold off during the last hour of trading. You want to see a break of that $31.60 level on volume for the MSFT move to continue higher.
Written by Cameron Patrick
Unprofitable: This trade is unprofitable if BIDU Closes under $128.50 or above $151.50 by February 17, 2012. The most I can lose on this trade is the amount the spread can be worth, $5.00 minus the amount I sold the spread for $1.50 for a total of $3.50.
Reason I like this Trade: I looked at the amount of movement that Bidu has had over the last 4 quarters and it has been very tight. The stock is implying a 7.1% move and it has only moved at most 5% on any earnings. I want to sell movement, but always define my risk vs reward. I am risking $350 per 1 lot to make $150, but I think it is great risk vs reward.
UPDATE 2.17.2012 With BIDU selling off, but staying above $130 this trade will be worthless after today. No trade is profitable until it is closed, so I will have to monitor it but looks like a BIG winner at #KOTM. This spread is worthless in an hour and a half, taking profits and moving to the next trade.
UPDATE 2.21.2012 This spread expired worthless, so it is on to the next trade, another winner at KOTM.
UNUSUAL OPTION ACTIVITY:
We have seen unusual option activity in stock MTG. A customer bought 338,189 Mar 4.5 Calls at $.42 while the stock was trading at $4.49. I think the size of the play was too big and therefore, we are not playing the MTG options. Today, we have seen a customer sell 1,850 ASIA Apr 10 Puts at $1.05. ASIA seems to be trading in a tight range and therefore I am staying away from those options as well. Baidu reports numbers after the bell. The average estimate of analysts is for net income of $.90 cents per share. Baidu has beat EPS estimates each quarter over the past three years. After reporting earnings, Baidu has risen the next session seven of eight quarters. General Motors posted its highest profit ever last year, though fourth-quarter revenue and earnings fell short of expectations. GM is currently trading higher by 7% or at $26.43 a share. Cloud Peak Energy, Ultra Petroleum Corp, and Barrick Gold set to report earnings after the close.
By Greg Zimny
In US equity market we finally saw an increase in ES volume. The question is will the volume be here to stay? It felt like the whole market traded around AAPL on Wed. AAPL made fresh all time highs and then suddenly sells off 5% towards the end of the trading day as rumors come out of an Iphone ban in China. With a lack of US data on Thursday, look for traders to focus on headline risk coming out of Europe. However, we will get housing start numbers, jobless claims, PPI, and the Philly Fed. Transportation average was the last 3 of last 4 trading days putting pressure on the overall indexes. Zynga reported Wed numbers that weren’t too far away from what the street expected but the stock sold off considerably in the after hour session. We will get a better idea of what Zynga is really worth when Facebooks IPO comes out. Maybe Zynga will offer a poker game one day rather then games that require no skill. JP Morgan, CLD, GM, and VF corp all report earnings on Thursday.
By: Greg Zimny