Options Trading Blog
Options Trading Tips and Strategies
– Randgold Resources Limited (GOLD) Raised to Buy: Stifel Nicolaus
– SBA Communications Corporation (SBAC) Raised to Buy: Citigroup
– Tyco International Ltd. (TYC) Raised to Buy: Argus
– Walt Disney Co. (DIS) Cut to Neutral: Citigroup
Equity futures are down roughly 1%, pushing S&P futures to the low end of its bull channel. Today’s price action will be incredibly important, technically speaking. If prices close below the bull channel, we could see further declines in the week ahead. Most of this price action is a result of a dismal jobs report from Friday, which only saw 120,000 new jobs created in March – about half of what economists were expecting. In addition, earnings reports begin this week, starting with Alcoa (AA) tomorrow afternoon.
Overseas, European markets were closed for Easter Monday, while Asian markets were down. China reported that CPI rose 3.6% in March, up from 3.2% in February. China has been outspoken that it could further tighten monetary policy in the wake of rising inflation – a negative for the overall global growth story.
As is typically the correlation, we should see the CBOE Volatility Index (VIX) spike when it opens this morning. VXX, an ETF that follows VIX short-term futures, is indicated 5.2% higher in premarket trade.
Commodities are mixed in early trade. Oil is off over 1.5%. Reports overnight suggest that Iran may reenter talks over its nuclear program, helping to ease angst over a supply disruption. Gold futures are 0.8% higher to near $1,650 per ounce.
Other News and Notes:
– AOL shares are up nearly 32% after announcing a plan to sell $1.1 billion in patents to Microsoft (MSFT). MSFT shares are lower by 0.9%
– Sony (SNE) will cut 6% of its workforce
– Needham & Company starts LinkedIn (LKND) at a hold. LKND shares look to open down 0.5% at $98.80
– The analyst who put a $1,000 price target on Qualcom (QCOM) has downgraded Apple (AAPL) to neutral from buy. AAPL shares down 1% to $626.84
– Avon (AVP) appointed a new CEO, perhaps in a bid to have someone to negotiate with Coty products over its proposed takeover. AVP is down 1.8% to $23.00
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The US$ and bonds finished the week with positive returns, while Crude, NASDAQ, and bonds finished relatively unchanged. Natural gas fell another 1.4% this week, while gold slid 2.4%.
Here are how markets closed on the week:
– US$: +1.4%
– 30-year bond futures: +0.4%
– 10-year note futures: +0.3%
– NASDAQ futures: +0.1%
– Crude oil: +0.1%
– S&P futures: -0.9%
– DJIA futures: -1.2%
– Natural Gas: -1.4%
– Gold: -2.4%
There was some interesting news released Thursday. Facebook has apparently decided to be listed in the NASDAQ under ticker FB. Shares are expected to debut in May.
In addition, Warren Buffet is said to have guarded Berkshire Hathaway (BRK) against higher rates according to Moody’s. Moody’s says that BRK’s losses as a percentage of shareholder equity would be the lowest among 27 insurers.
By Mark Meadows
In commodities, Crude rallied sharply in early U.S. trading and sits up 1.2% near $103 p/barrel. Natural gas, after rising in prior sessions, fell 2% to below $2.10 p/bcf.
Gold prices are also reversing some of yesterday’s losses, with futures up 0.8% to $1,626.
Throughout the rest of the trading day, we are looking at a whole lotta nothing. There could be some position liquidation towards the closing bell, since the March jobs report is released tomorrow morning. Analysts are calling for a 203,000 jobs. We’ll have to wait until Monday to figure out how equities will react.
Gold has gained $10, or 0.66%, after more than 3% losses yesterday. Crude futures are unchanged.
The CBOE Volatility Index (VIX) is near 17 today, with the ETF that tracks the VIX, VXX, higher by 1.9%.
We are expecting trading to be slow today ahead of the holiday tomorrow. As a reminder, the Department of Labor will still release the monthly employment report tomorrow morning at 8:30 a.m. ET. The ADP report issued this week showed 209,000 private sector jobs were created in March, compared with an expectation of 203,000 for tomorrow’s report.
If trading is slow, we recommed taking a look at “The Dimon Manifesto,” from Bloomberg. Among the gems in Dimon’s annual letter: “I have no doubt that our own actions made the recovery worse than it otherwise would have been.”
Bloomberg also reports some interesting figures: JPM makes about 1.5 cents p/share trading equities; $70 p/trade in foreign exchange; and $1,500 p/trade in credit markets. Just 10% of trades generate more than $50,000.