Earnings Trade of the Day (DIS) 2.7.2012

Reason I like this Trade:  Disney reports earnings after the bell today and I am bullish on their earnings.  Their earnings are on track for $.71 on $11.19 Billion in revenue, and I do not want to fight the trend which is higher in Disney. There is immediate support at $39 and even though there is a resistance pivot level at $40.75, I think that Disney can rip to the upside, climbing to its May highs of $44.

They should benefit from an economic recovery even though the ESPN viewer-ship from the BCS games has been down year over year, I think Disney will beat on earnings and climb higher.  There is a 5% implied move and Disney has moved over 6% on each of the last 4 quarters.
In the options front, Calls have out traded the Puts on a 3 x 1 ratio.  In this strategy I want to buy the March 41-43 Call Spread for $.70.  I usually like to trade the front month options, but with the volatility being so cheap the March Call Spread is only $.10 higher than the Feb Call Spread and it gets me an extra 4 weeks of time.  This spread can be worth $2 giving me a 2×1 risk vs reward payout.

If you have any questions please email me at [email protected].

UPDATE 2.8.2012 I did not like the way that Disney was acting last night, so I was happy that it got a POP today.  This was a one day trade for me, like most earnings are.  I sold this spread out for $.86 and paid $.72, so that is good for a 20% gain overnight. Taking profits and moving on to the next trade.  

Read more about closes by keeneonthemarket.com

Halftime Report for 2.7.2012

In unusual we saw a customer purchase 1500 TEX February 22 Puts for $.95 and with stock selling off those Puts have now popped to $1.05.  We also saw a customer buyer of 5,000 GDXJ March 35 Calls for $.20 which is yet another bull play for the GDXJ.  We also saw weekly Call buyers in ABX which were good for a double and I flagged those on twitter.  I am glad that I sold my position in my long Calls in SEE out, because for the second straight day we see Put buyers in earnings.  Today has not brought the unusual options flow that some other days bring us and today there has been less to trade than day’s past.  I always try not to overtrade, but when I get a good trade like to jump on board.  The rest of the afternoon might be slow, but I am always watching the unusual options activity for possible trades.

Why I'm Getting Hungry for Lions Gate (LGF) by Ben Hoben

Why I Like Lionsgate (LGF)
Obviously the big short term driver here is going to be the Hunger Games movie.  I’ve been waiting for the stock to make a little pull back but it just doesn’t want to go down.  I’m sure some of the success of the upcoming Hunger Games movie is being priced in and is the reason for the move up but I still think there is plenty of room to run, especially if it is a huge blockbuster like the Twilight movies.The economy may still not be recovering as fast as everyone would like but one thing is certain: the teens still have money to spend and will go out to see this movie.What else is great about LGF is that it isn’t a “one trick pony”.  They have a pretty nice library of movies and television shows and are producing some great content right now.  Just look at the Emmy award winning series Mad Men.I think what you are seeing right now with a company like Netflix is that content is king.  Part of the reason for Netflix’s downfall is the realization that content is going to become more expensive.  They are just the distribution channel.  The real opportunity lies with the content owners like Lionsgate.

Full Disclosure
I finally bought the bullet and quit waiting for a pullback and bought about a 1/3 position in LGF this morning at $11.10.  I also bought a few Jun 15 calls yesterday for 35 cents but only with a small amount of capital.  Lionsgate reports earnings on Thursday February 9th after the close.I may add more LGF over the next two days as I imagine the conference call on Friday the 10th will be nothing but positive with the release of the Hunger Games coming up.  I want a full position going into the movie release.  This could end up being a longer term holding if all goes well especially with the possibility of more Hunger Games movies.

2/24/12 Update Sold half of my LGF June 15 calls.  Bought at 35 cents and out at $1.05.  Still holding the other half as well as all the stock bought at $11.10.  Unfortunately I only bought a 1/3 position before earnings and didn’t get a chance to buy more.
 

Metaswing.com | CBOE VIX Remix 2.7.2012

We will be using our Volatility-Based Technical Analysis (VBTA) to gain additional perspective to what can be offered versus traditional technical analysis. During the last two months, I continue to get asked the same question, “Don’t you expect a rally in volatility?” The answer has been, “No.”  And it has paid off extremely well as we have been mostly long during this time period. And this was during the Greek tragedy part II and everyone and their mother trying to call a market top. Let’s take a look at what has been driving our opinion of compressing vols. Below, is the daily chart that I published on 2.4.2012 which comes from Friday’s close. I have shaded current/important support/resistance levels that we calculate through volatility math.

Here are the objective take aways:
•Support has continued to cascade lower
•Bounces in volatility have been countertrend off of said support and they have been contained well by resistance (can especially see this intraday – not shown)
•Trend & Trend Strength continues to be negative (hashed red lines circled below)
•VXN is not extremely oversold, volatility-wise (we trend compensate the indicator – circled in the bottom pane)•Immediate support and resistance (N Bands) are falling, giving VXN more room on the downside and less on the upside
•The biggest thing is the range created by volatility based support/resistance 14.81-19.10 

VXN_02042012_d

In summary, the evidence points to vols continuing to compress. There will most likely be periodic hiccups, that are tradable though, if you know how to find valid support. In fact, if you pull up the chart, you’ll see that this upper level is holding nicely. I have also included some levels above this range. I would look to take action at these levels if some unexpected news were to come into the market place and drive the vols higher. Finally, I will be extremely cautious at the lower end of this range as it is support from multiple time frames. You can find out more about (VBTA) and The A Game Trading Letter which applies it here: http://metaswing.com/site/a-game-trade-letter/ 

Morning Rage 2.7.2012

RageZombieMonday, U.S equities finished flat for the day. Brent traded and settled at a $2 premium to WTI. The Euro traded in a narrow trading range for most of the day at the 1.3 level. Is all the bad news priced in the Euro or will the market witness more “headline risk” in the near future? The USD traded higher all day and finished near its Fri highs. While the world is awaiting Greek PSI negotiations to conclude.. The S&P had its lowest “non-holiday” volume trading day in over 10 years. Overseas market moving events for Tues trading include Germany IP #/Taiwan exports and Merkel will give a speech on Europe’s future.  In U.S markets, Lazard, Yum brands, and Anadarko are reporting Tues. Bernanke will testify before congress regarding the budget.

Cam at the Close 2.6.12

Range Resources closed above its 200-DMA for the first time in three weeks.  It closed up 2.75% to $60.82. The 50-dma is $61.48 and a break of that would serve as the next buy point. I am not sure how many people are aware but EOG Resources stands for, “Enron Oil and Gas”, which is my mind is pretty hilarious. EOG has showed incredible strength since it began rallying off of the October 4 lows. The stock cleared major resistance in the $108 area and looks like it will be a straight shot to $112. EOG closed up .90% to $110.04. So far the SPX move that we have seen since the start of the year has been the best start in 25 years. Crude oil was down today due to investor concern that Greece will not be able to avoid a default. I am surprised that markets are even responding to news about Greece at this point. The SPY is still showing resilience and maintaining a strong uptrend.

Trade of the Day (CEDC) 2.6.2012

Reason I like this Trade: I like this trade when I saw a customer buy 1500 CEDC Feb 5 Calls for $.65 when the stock was trading $5.52.  CEDC disturbutes alcohol products in European countries.  I guess I should have bought these Calls as well, but I decided to sell the Puts for $.20 instead.  The stock has rallied $.40 to $5.92 and the Calls have outperformed the price of the Puts.  I will leave these Puts on until expiration, as I do not get “LONG” stock until CEDC sells off 20% in the next 9 trading days.  If you have any questions please email me at  [email protected].

UPDATE 2.7.2012 With the stock selling off $.20, these Puts are worth $.175.  The longer until expiration the less these Puts will be worth.  With the stock looking strong above $5, I will leave these Puts on until expiration, so I do not chop my P&L with commissions.

UPDATE 2.8.2012 With the stock rallying to $6 and I realize that I should have bought the Calls instead of selling the Puts.  These Puts are now worth $.10, but will leave them on until expiration, so I do not chop my P&L up with commissions.  Moving to the next trade

UPDATE 2.14.2012 With the stock raging abovew $6.25, these Puts are basically worthless, but no trade is a complete winner until it is closed, so waiting until Friday and will not be taking any of this position off until then.

UPDATE 2.16.2012 With these options expiring tomorrow, these will be worth zero and I turned a nice profit and moving on to the next trade.

Halftime Report for 2.6.2012

In unusual activity we see a customer once again buy the DLPH March 30-35 Call Spread for $1.60 as this stock continues to see bullish order flow.  We also see a customer seller of about 5500 CIGX May 2.5 Calls from $.70 which is the bearish acitivity I have seen today.  In other bullish order flow, we saw a customer seller of SNTA August 5 Puts for $1.00 and a customer buyer of LPS Feb 19 Calls for $.90.  I always try not to overtrade, but when I get a good trade like CIGX I jump on board on a short position.  The rest of the afternoon might be slow, but I am always watching the unusual options activity for possible trades.