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Author: Andrew Keene
Frontpage Article
Andrew Keene has been an independent equity options trader on the Chicago Board of Options Exchange for the past 10 years. Over the past couple of years, Andrew has become one of the CBOE’s most recognized faces in the media, making regular appearances on Bloomberg TV’s Street Smart, CNBC’s Squawk on the Street, nationally syndicated First Business, and CBOETV’s In The Money with Angela Miles.
[h3]We Want to Teach You The Keys to Successful Options Trading[/h3]
First Business Interview 10.29.2012
CNBC Interview 10.30.2012
Market Refresh: Post Sandy and David Einhorn Stocks 10.31.12
Ford (F) reported third quarter EPS of $0.40 vs an estimated $0.30; 33% beat. Revenue came in at $30.9 billion vs an estimated $31.07B. This was the best third quarter ever for F…mostly fueled my North America. F battled above its 150 day moving average (DMA) on 10/26/12. The 50 DMA sits at $10 even. The USA automotive sector seems to be running on all cylinders, in related news famed and feared hedge fund manager, David Einhorn, recently talked up shares of GM at the Value Investing Congress.
Mr. Einhorn also talked down shares of CMG. Here Mr. Einhorn pointed out that competition from Taco Bell, YUM, should be taking incremental share away from the higher priced CMG. While there is no doubt in the minds of value investors, especially given the record of Greenlight Capital (Mr. Einhorn’s Fund), he is correct…the technical picture is what some traders will be looking at however. CMG is quickly approaching the earnings gap day open, more specifically 10/19/12’s open of $251.95. Perhaps a close above this figure could trigger short covering into said gap, just as a trade, for the market has been favoring the shorts for some time now…and when most are leaned to one side of the boat, maybe it is best to fade them…for a short while.
Another controversial stock has been HLF. Here Mr. Einhorn appropriately pointed out some items of interest during their conference call, and since then the stock has tumbled 28%. HLF released earnings while the market was closed. HLF guided FY13 EPS $4.40-$4.55 vs $4.52 estimated and guided Q4 EPS $0.97-$1.01 vs $0.98 estimated. For Q3 HLF reported $1.04 vs $1.01 and revenue of $1B vs $996M. Management pointed out double-digit volume growth in all their geographic locations, but it will be interesting to see what the stock actually does considering all this news and HLF’s short interest (14%).
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Max Out the Credit Card on Visa Volatility? 10.31.12
Visa has turned itself into a solid stock since its IPO in late 2008. V opened at $59.50 and is trading around $138 now… returning a cool 133%. The ride has been anything but steady however, the crash of 2008 and numerous regulation attempts have shaken some out of the trade, but the question remains…is IV too cheap for the week of a major catalyst like earnings?
Should one subscribe to history, the straddle has not been a profitable trade during earnings. As seen in the excel sheet below, buying the ‘at the money’ (ATM) straddle has been a loser five of the last six times…six observations because weekly options were not available prior to 5/5/11 before earnings. It is important to point out that the IV during these trades were all in line with the average, but now the IV is outside minus two standard deviations of the mean or 97.51% of the observations are above it. It may not be a prudent strategy to fade such low premium, as one may be selling into a hole. Fading the straddle is a popular trade among ‘gun slingers’, but the key variable in options, being implied volatility, may persuade one to think again…and maybe flip it as a long trade.
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S&P Emini & Unusual Options Activity Daily Vid Recap 10.26.2012
S&P Emini Pivot Points for 10.29.2012
Apple (AAPL) and Google (GOOG) Pivot Points for 10.29.2012
AAPL Historic Pullbacks 10.26.2012
It is important to remember, of retail AAPL investors, the average person has 17% of their portfolio in AAPL. See below for the weighted average and average pullback analysis.
The pullback of late is right in line with history. This is despite the bearish sentiment in the overall market. As displayed below, the analysts actually lowered their price targets; perhaps again it will be prudent to fade them.
The analyst community shifted their chips around, below are the results.
GS lowers price target to $760 from $810.
MS lowers PT to $714 from $720.
Topeka Maintains $1,111 PT.
Piper Jaffray lowers PT to $900 from $910.
BCS lowers PT to $800 from $810
DB lowers PT to $800 from $850
Nomura lowers PT to $660 from $710
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