Floyd the Barber presents common sense views on the intersection of politics and the markets.  

Friday’s jobs report may be the most crucial one of the year.  Why you ask?  Simple. Because it is the most telling “political” report of the year, and politics is one main driver of the markets.

Last week ADP projected a gain of 130,000 jobs.  Most estimates for Friday’s official number are 100,000 to 120,000.  A number in this range would be good for the market.  It would show continued small gains that are not large enough to put fed tapering back on the table.  Last month’s number was in this range and the market reacted quite well.

However, what happens if the number comes in much lower, as it could.  Say 75,000 or 50,000 or even negative, due to the October government shutdown?

One of 2 things could happen.  First, the market could get very scared very quickly about a weak economy and tank.  Alternatively, the market could perceive these weak numbers as assuring continued fed accommodation, and head higher.  Existing fed policy is the current “drug of choice” for the markets.  One almost gets the feeling that, as long as the fed stays accommodative, the market will continue to be strong—regardless of whatever else happens.

Yet there could be another potential major effect of a very weak October jobs number—the very important political effect of such a number.

In essence, a weak jobs number would re-verify the horrific effect of the shutdown, and related threatened debt ceiling breach.  The current $24B estimated negative economic effect would be highlighted. The very important, resultant political effects would likely be:

**Drastically DECREASED chances of another shutdown in January.

**Drastically DECREASED chances of another debt ceiling drama in February or March.

**INCREASED chances of a small bargain between the D’s and R’s on a budget deal that would provide stability to the economy

**INCREASED chances of a GRAND BARGAIN between the D’s and R’s, which would revise harmful sequestration effects, address the deficit, improve the tax code, and let businesses know the ground rules for the next few years.  Such a grand bargain would be amazingly good news—especially in the longer term—for the markets and economy alike.

All of these outcomes are good—maybe even very, very good.  And they could all result from a weak Friday jobs report.

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Pitney Bowes Inc (PBI) is a provider of a range of office hardware and software for the management of physical and digital communication channels. Shares of PBI are currently trading around $21.85 in a 52 week range of $10.34-$22.11. The stock has been outperforming the market this year adding over 105% to share prices year to date. Bullish order flows we’ve seen in PBI in today’s trading session indicate this rally could continue. Early in trading a trader bought 5,000 PBI Nov 22 Calls for $0.35. This was one of the largest blocks to trade in PBI today as option volume in the name reaches over 3 times the average daily volume. PBI is also setting up well for a long on the chart. Shares are trading well above the Ichimoku Cloud and the future cloud is upward sloping suggesting the stock’s rally could continue. With shares of PBI just off of their 52 week highs we believe there is an opportunity here for a swing trade. (more…)

Caesars Entertainment Corporation (CZR) is a casino entertainment company operating land-based and riverboat casinos in addition to racetracks, hotels and a number of other resorts and entertainment properties. Shares of CZR are currently trading around $17.65 in a 52 week range of $4.52-$26.57. The stock has been on a tear this year adding over 155% to share prices year to date. Options activity in CZR in today’s trading session is suggesting that traders believe this rally will continue through March of next year. Early in the session a trader sold 1,354 CZR Mar 17.5 puts for $3.20. This is a very bullish trade with a high level of risk that indicates this trader’s relatively high level of conviction on CZR. While this trader collects $433,280 worth of premium they are technically risking over $1.9 million on this trade. We believe that this unusual option activity in CZR sets up well as an opportunity for a long term trade in. (more…)

A trader bought 3,048 TNGO Feb 25 Calls for $0.25 (4.7 times usual volume) with stock at $17.00
A trader sold 5,000 KERX Dec 11 Puts for $0.30 (3 times usual volume) with stock at $13.36
A trader bought 6,358 BYD Nov 11 Calls for $0.15 (2.4 times usual volume) with stock at $10.18
A trader sold 5,389 CHRW Nov 55 Puts for $0.05 (3.9 times usual volume) with stock at $59.63
A trader bought 5,000 PBI Nov 22 Calls for $0.35 (2 times usual volume) with stock at $21.93

A trader bought 4,850 ANF Nov 8^th 32 Puts for $0.08 (2 times usual volume) with stock at $36.44
A trader bought 7,250 HMA Feb 12 Puts for $0.60 (15.7 times usual volume) with stock at $12.65
A trader bought 4,000 PNK Dec 25 Puts for $1.65 (8.6 times usual volume) with stock at $24.00
A trader bought 1,355 CONN Dec 55 Puts for $2.85 (5.4 times usual volume) with stock at $61.35

A trader sold 5,389 CHRW Nov 55 Puts for $0.05 (3.9 times usual volume) with stock at $59.63
A trader bought 5,000 PBI Nov 22 Calls for $0.35 (2 times usual volume) with stock at $21.93
A trader bought 4,850 ANF Nov 8^th 32 Puts for $0.08 (2 times usual volume) with stock at $36.44
A trader bought 7,250 HMA Feb 12 Puts for $0.60 (15.7 times usual volume) with stock at $12.65
A trader bought 3,048 TNGO Feb 25 Calls for $0.25 (4.7 times usual volume) with stock at $17.00

Keryx Biopharmaceuticals, Inc (KERX) is a biopharmaceutical company focused on the development of treatments for cancer and renal disease. The stock is currently trading around $13.95 in a 52 week range of $2.23-$14.34. KERX has been massively outperforming the market this year adding over 430% to share prices year to date. A flurry of unusual option activity we’ve seen in today’s trading session suggests that traders believe upside in KERX will continue. Early in today’s session a trader sold 5,000 Dec 11 puts for $0.30. This is an extremely bullish order that also represents volume 2.9 times the average daily option volume in KERX.  The high level of risk this trade involves also shows this trader’s conviction and strong belief the stock will be above $11.00 on December expiration.  The stock is also trading relatively well on a chart, with shares trading well above the Ichimoku Cloud. The future cloud also suggests that the stock could have further upside potential. Given the bullish technical and the unusual order flow in KERX we believe there is a good opportunity for a covered call here. (more…)

CBS Corporation (CBS) is a media company operating in entertainment, cable networks, publishing and local broadcasting. The stock is currently trading around $60.65 in a 52 week range of $33.04-$60.91. The stock has had a great year adding over 59% to share prices year to date. CBS is set to report their most recent quarterly earnings report today after the close. Historically, CBS is a very strong stock on earnings. The stock has rallied 7 of the past 8 quarters on earnings day with an average move of 2.9%. The stock has also rallied the past 6 consecutive quarters. The stock is also trading well on a chart. Shares of CBS are on a new 52 week high going into the release and are trading well above the Ichimoku Cloud. The slope of the future cloud also indicates that there could be further upside in store for CBS.  With strong technical and a solid earnings performance record we believe that CBS sets up well for a long position ahead of earnings.  (more…)

A trader bought 3,600 KORS Nov 8^th Calls for $0.15 (2.9 times usual volume) with stock at $78.11
A trader bought 1,400 CSUN Nov 10 Calls for $0.34 (5.4 times usual volume) with stock at $8.55
A trader bought 1,000 MWW Dec 4 Calls for $0.65 (3 times usual volume) with stock at $4.39
A trader bought 7,659 ADSK Dec 45 Calls for $0.92 (2.5 times usual volume) with stock at $41.46
A trader bought 2,500 ITUB Jasn 15 Calls for $0.65 (4.1 times usual volume) with stock at $14.76

A trader bought 1,400 HSP Nov 40 Puts for $1.05 (19.6 times usual volume) with stock at $39.98.
A trader sold 5,000 BRY Feb 50 Calls for $3.70 to buy 2,500 Feb 45 Puts for $1.65 (21.1 times usual volume) with stock at $51.46.
A trader bought 810 ANN Dec 35-31 Put Spreads for $1.15 (2.2 times usual volume) with stock at $35.70
A trader bought 3,808 DDD May 55-50 Put Spreads for $1.60 (2.3 times usual volume) with stock at $69.88