Covanta Holding Corporation is an operator of systems that convert waste to energy in addition to other waste disposal and renewable energy businesses. The company’s stock is currently trading around $17.20 in a 52 week range of $16.70-$21.89. CVA has been lagging the market this year as shares have fallen over 6% year to date. Despite the recent fall in the stock we have seen a large amount of bullish order flow in CVA.  Early in today’s trading session we saw a trader buy 25,000 of the CVA Jun 2015 15-22.5 call spreads for $2.60. This block represents volume 21.2 times average daily option volume in CVA and indicates this trader believes the stock will trade above $22.50 on June expiration. We believe that this order is an extremely bullish signal and a good opportunity for a long term trade. The Jun 25 calls are currently trading at $0.10-$0.15 so rather than selling them against the 15 calls we believe it is better to leave our profit potential uncapped. (more…)

American Axle & Manufacturing Holdings, Inc (AXL) is a designer and manufacturer of drivetrain systems for a variety of vehicles. The company’s stock is currently trading around $18.60 in a 52 week range of $9.27-$21.41. The stock has been outperforming the broader market adding over 66% to share prices year to date. The company will be reporting earnings tomorrow before the bell. We are currently seeing some bullish unusual option activity in AXL which is leading us to believe the stock will head higher on earnings. Early in today’s trading session a trader sold 1,000 AXL Nov 18 puts for $0.50 when stock was trading $18.38. This is an extremely bullish trade that indicates this trader strongly believes the stock will close above $18.00 on November expiration. Even though the stock is trading below the Ichimoku Cloud it is still inside of its bull channel that has been formed since the stock broke out late last year. We believe that these circumstances provide an opportunity for a covered call in AXL. (more…)

A trader bought 1,000 ONNN Nov 7 Calls for $0.35 (4.7 times usual volume) with stock at $7.01
A trader bought 3,000 ERIC Jan 2015 15 Calls for $0.60 (3.4 times usual volume) with stock at $11.87
A trader bought 11,000 TWM Jan 32 Calls for $0.05 (8 times usual volume) with stock at $13.74
A trader bought 2,200 REN Nov 10 Calls for $0.25 (3.5 times usual volume) with stock at $9.25
A trader bought 1,200 DATA Nov 7 Calls for $0.70 (2.9 times usual volume) with stock at $62.44

A trader bought 2,000 TYC Nov 33 Puts for $0.09 (2.3 times usual volume) with stock at $36.13
A trader bought 2,000 SGEN Dec 30 Puts for $0.70 (2.9 times usual volume) with stock at $39.19
A trader bought 2,150 CETV Apr 2.5 Puts for $0.55 (19.9 times usual volume) with stock at $2.94
A trader bought 1,000 JAH Apr 50 Puts for $1.80 (2.7 times usual volume) with stock at $54.00

A trader bought 11,000 TWM Jan 32 Calls for $0.05 (8 times usual volume) with stock at $13.74
A trader bought 2,200 REN Nov 10 Calls for $0.25 (3.5 times usual volume) with stock at $9.25
A trader bought 1,200 DATA Nov 7 Calls for $0.70 (2.9 times usual volume) with stock at $62.44
A trader bought 2,000 TYC Nov 33 Puts for $0.09 (2.3 times usual volume) with stock at $36.13
A trader bought 2,000 SGEN Dec 30 Puts for $0.70 (2.9 times usual volume) with stock at $39.19

CBOE Holdings, Inc (CBOE) operates markets for the trading of equity, index and other exchange trade options. The CBOE also holds exclusive listing rights for SPX options and VIX futures and options. The company’s stock is currently trading around $49.55 in a 52 week range of $29.01-$51.12. The stock has been massively outperforming the market this year adding over 68% to share prices year to date. CBOE is set to report their most recently quarterly earnings tomorrow before the open. The stock is historically strong on earnings day. Over the past 8 quarters the stock has rallied 6 times on earnings day with an average move of 2.2%. Shares of CBOE are also trading above the Ichimoku Cloud, indicating the stock is in bullish territory. We believe that the historical strength in CBOE on earnings and the bullish chart set up provides us with an opportunity for a long in CBOE ahead of earnings.  Currently the options market is implying a move of $2.00 in CBOE by November expiration. Using this implied move we can calculate an upside target of $51.40. Using this upside target we can now set up an options strategy that will have a well-defined risk vs. reward profile and a low initial capital outlay. (more…)

A trader bought 3,000 BRKR Mar 22.5 Calls for $1.20 (18.1 times usual volume) with stock at $20.71
A trader bought 10,000 CBS Mar 60 Calls for $3.60 (5.6 times usual volume) with stock at $59.08
A trader bought 2,000 HNT Dec 32.5 Calls for $0.85 (5 times usual volume) with stock at $30.04
A trader bought 1,000 NVAX Nov 3 Calls for $0.25 (2 times usual volume) with stock at $3.20
A trader bought 1,000 MM Jan 2015 12.5 Calls for $1.35 (3.2 times usual volume) with stock at $7.13

A trader bought 1,300 SFI Dec 12 Puts for $0.25 (4.9 times usual volume) with stock at $12.51
A trader bought 2,655 BMRN Nov 60 Puts for $1.00 (3.5 times usual volume) with stock at $64.59
A trader bought 5,000 FBC Apr 15 Puts for $1.45 (10 times usual volume) with stock at $16.24
A trader bought 29,000 PLCM Nov 12.5 Puts for $2.05 (4.8 times usual volume) with stock at $10.61

A trader bought 10,000 CBS Mar 60 Calls for $3.60 (5.6 times usual volume) with stock at $59.08
A trader bought 2,000 HNT Dec 32.5 Calls for $0.85 (5 times usual volume) with stock at $30.04
A trader bought 1,300 SFI Dec 12 Puts for $0.25 (4.9 times usual volume) with stock at $12.51
A trader bought 2,655 BMRN Nov 60 Puts for $1.00 (3.5 times usual volume) with stock at $64.59
A trader bought 5,000 FBC Apr 15 Puts for $1.45 (10 times usual volume) with stock at $16.24

The market is on a tear—it seems to never go down.  I wake up every morning and check the market, not to see if it is up, but to see how much it is up.  This year the market has been amazing—tearing higher in spite of some strong headwinds, including:

1. Near total dysfunction in Washington.
2. When not dysfunctional, congressional action and inaction hurting the economy.  Just this year, DC anti-economy antics have included sequester, raising of the payroll tax, raising income taxes, the government shutdown, the debt ceiling debacle, and on and on.
3.  Fear of the end of tapering.  And tapering WILL occur.  The question is not “if” but “when”.
4.  Fed uncertainty.  First it was fear of the unknown, in the person of Larry Summers.  Now, it is fear of the known, as Sen. Rand Paul just today threatened to thwart Janet Yellen’s     nomination.
5.  Mediocre earnings reports and numbers out of China (some good, some bad)

Yet the market continues to go up and up—relentlessly.

There is an old saying on Wall Street that applies to strong bull rallies: “The market never goes down!!!——-Until it does.”  Yes, all rallies must end.  The question is when and at what price level. Now or later?  At 1770 or at 2100?

As we approach the end of the year, the market must contend with various year-end hurdles.  Even today, the FOMC concludes its October meeting.  While no changes in policy are expected, the fed could say something that is interpreted as putting tapering back in play.  Clearly, the market would not like that.

As we enter November and December, retail sales become very important.  Many retail stocks are way down this year.  And some experts are predicting weak holiday sales, largely because of the economy-harming dysfunctions noted above.

Many indicators are available to market prognosticators—some bullish and some bearish.  To me one of the most important is that margin debt is at a record-high, over $400 billion. This is not good.  Margin calls often pour fuel on a small correction, turning it into a sharp, quick and painful spike down.

In sum, the market has been amazing.  But all strong upward moves will end at some point. Remember, “The market will never go down!!!——-Until it does.”

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