Earnings Trade of the Day (V) 2.8.2012

Reason I like this Trade: I looked at the amount of movement that Visa has had over the last 4 quarters and it has been very tight.  Here is a performance of how much the stock has moved the next day after earnings.  
10/27/11   $92.02   $94.40  $+2.38 (2.6%)
07/28/11   $87.75   $86.92  $-0.83 (-0.9%)
05/06/11   $78.70   $79.41  $+0.71 (0.9%)
02/03/11   $72.09   $71.63  $-0.46 (-0.6%)
Average Magnitude of Post Earnings Return 1.3%

UPDATED 2.9.2012 With the stock rallying more than I thought it would, this spread has expanded and is currently worth $2.70.  I will leave this trade on until expiration.

UPDATE 2.10.2012 With the stock market down and Visa up, this trade is not working out as planned.  I have two choices, I could either sell next week’s Feb 110 Puts to try to recover my losses or I could to take the trade off and move on.  I will decide by the end of day, hopefully I can get a sell-off in the stock.

UPDATE: 2.14.2012 This spread ended up worth $4, but I left a short stock position on, when the Feb weekly 110 Calls were in the money and the Feb 1155 Calls closed worthless last week.  This left me with a short stock position, and I bought stock yesterday for $113.03 making the Call Spread Iron Condor I sold for $1.65 worth $3.03.  Moving on to the next trade.

This helps me conclude that I would rather be a seller of premium than a buyer.  When I looked at this I thought this spread was a great way to define my risk vs reward and make a bet that V does not move over 4% by Friday despite a strong earnings from Mastercard, MA.   

 

Please feel free to email me with any questions at  [email protected].

Trade of the Day (ITW) 2.8.2012

Reason I like this Trade: To be honest, I like this trade, because a saw a customer come into the market and buy Calls in ITW on the March 55, 57.5, and 60 line.  I usually do not like to overpay for options, because the customer bought these ITW March 67.5 Calls for $.75, but I looked at the volatility and I realized how cheap it was, around 20.5%, so I thought it was good enough to jump in and buy Calls in ITW.  I will be looking to piece out of this position if the stock rallies higher.  Please feel free to email me with any questions at  [email protected].

UPDATE 2.9.2012 I sold 15% of my position at $1.05 leaving me with an 85% position in ITW. These Calls are currently worth .85 cents and im hoping for some more upside in ITW.

UPDATE 2.10.2012 These Calls are currently worth $.75 and I will leave it on for more upside.

UPDATE 2.14.2012 These Calls are currently worth $.85, so this trade is a small winner, might look to Punt it on a POP higher.  

UPDATE 2.15.2012 This will be the same update as yesterday as these Calls are still worth $.85 and I am still LONG them.

UPDATE 2.16.2012 Getting bored very easily is a flaw and advantage at the same time.  I want to take the best and highest probable trades, and I did not like the way ITW was trading so I punted these Calls at $.85 and took a small profit.  

Read more about money by keeneonthemarket.com

Halftime Report for 2.8.2012

In unusual options acitivity we see a trader buy LOGM Feb 40 Puts when the stock was trading $41.60 for $1.20, then they bought more of these Puts for $1.90, $2.20, and now they are $2.50 bid.  WOW, I traded to buy Puts in March, but with the markets so wide I did not get on this trade.  The stock has traded 212 times usual volume, now that is a trade.  Also, we a trader bought 2145 RGC Feb 12.5 Calls for $.65, so in this stock I bought the March 12.5 Puts for $.35 and also bought stock at $13.02.  This accounted for 9.2 times usual volume.  Other than that just taking profits in SOL and YGE, but have not traded too much today.  Look for my tweets later in day to get my earnings trades in AKAM, CSCO, and GRPN.  

Read more about profits by keeneonthemarket.com

Morning Rage 2.8.2012

RagegirlU.S Equities finished flat in Tues trading although S&P cash touched July ’11 levels. Financials were among the weak. ES volume was a little better then yesterday’s embarrassing volume. The Vix got slammed towards the close. Might not be a bad time to buy some cheap protection. . The market is trading funny IMO.  It is the year of the momentum stocks. The heaviest shorted/most hated stocks are gaining strength and the shorts are running even w crappy fundamentals that don’t support the moves.The Euro bounced off its morning 1.30 level to make fresh 2 month highs. Has Greece found someone to bail them out (rumors are LTRO) or is the whole world short the Euro and starting to cover(according to CFTC data)? USD is propelling the “risk on” trade for the time being.In trading Wed. all eyes will be on the 10 yr note auction and DOE inventory report. Look for big moves in WTI regardless and for the brent/crude spread to widen.

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.