Trade: Selling the GIS Sep 39-40 Call Spread for $.45Aside from the headliners, CRM is expected to launch a wealth of products onto to cloud community. CRM may update their Dropbox type application, similar to GOOG’s Drive. Chatterbox users can save and access files form any linked device, basically it is a collaboration tool for the enterprise. Work.com is also expected to be launched. “Work” will be a more human resources centric application based upon contact management needs. According to reports, this CRM tool will remember information about a contact, anything from Twitter handles to e-mail.
With all these cool services it is hard to stay impartial and only focus on the material items. Since 2006, below is an aggregation of past returns of CRM during the Dreamforce conference. The figures were calculated buying the open of the first date and selling the close of the closing conference date.
The conference starts today and ends Friday the 21st, and with that in mind the September options seem to be pricing in a mediocre move. Considering the close on Monday CRM was $158.17/share and the ATM $160 straddle was selling for $5.68 or 3.6% of the stock. Since 2006 there was only one conference that had a move of that kind of magnitude. The 2010 conference may have caused CRM to surge 3.13%; or did it? The SPY in that time period rallied 0.9% and then beta adjusting CRM for that market move…CRM actually outperformed the market, assuming a 1.4 beta. It can be argued that the outperformance was due to the conference.
According to CRM’s CEO Benioff, “We are not trying to snuff competitors out.” Even thought they seem to be doing a good job of that, for the market is assigning CRM a lofty multiple of 100X TTM. Considering the former, short interest, as last reported on 9/01/12, was about 10% of the CRM float. The analyst community also sees blue skies head for the cloud provider…33 of the 40 analysts that cover the stock have buy or better on it. The average target for CRM is $170.
E-mail the author with any comments or questions
Data courtesy of Thinkorswim
Benchmark crude closed at $96.62 a barrel, down $2.38 or -2.4%. Oil had its biggest intraday swing since early June, hitting a low of $94.65 a barrel, after trading at a session high of $99.52 Monday morning, failing to break through the $100 key technical level.
The drop in U.S. crude was not as deep as the sell-off in Brent crude oil, which sank from $115.20 a barrel at 1:52 p.m. to $111.60 just 180 seconds later as trading volumes spiked despite the usually quiet Rosh Hashanah holiday. Brent crude settled down $2.87, or -2.5%, to $113.79 a barrel. Energy prices had spent the majority of the session trading marginally higher, with support from geopolitical tensions from around the world.
There is speculation among traders that a potential ‘fat-finger’ trade is responsible for the selling as prices rapidly fell more than $4 in just 20 minutes. There are also rumors of a strategic oil-reserve release. These rumors most likely derived from a report done by Reuters on the Obama administration considering a release much larger than the 30 million barrels from last year. However, the White House has denied these rumors with an official stating, “all options remain on the table, but we have nothing to announce at this time.”
Some analysts simply suggested the price of oil had gotten too high given continued weakness in the global economy, and it’s due for a correction.
Energy traders have enjoyed solid gains in the month of August with Crude-oil prices on the NYMEX up 8.7% from Aug. 1, and Brent crude gaining 7.7% over that period. Oil recently traded to a high above $100 on Friday partly on concerns that the tension in roiling parts of the Middle East and North Africa could trigger supply disruptions. Enthusiasm in the oil markets may soon fade however, due to an increasing negative outlook on global demand and high inventory levels.
Perhaps the euphoria over the Fed has worn off.
Crude spent much of the European session in the red, with the October contract off 52 cents, or -0.5%, to $96.10 a barrel.
Ciro J. Lama is currently an undergraduate studying Finance at the Zicklin School of Business – Baruch College
Twitter: @TraderCantalino
Website: CantalinoAssetManagement.com
Metals futures continue to slide lower from Friday as well. Gold futures are down 10.80 overnight and platinum futures continue their reversal, down 12.60 points. Crude futures stayed relatively still, only losing about 0.38 after getting crushed yesterday, down about three points.
Apple (AAPL| $699.78) continues to be the diamond in the rough as buyers pushed its price over the $700 mark in after hours trading to $701.60. This comes after another big gain of $8.50 even as the rest of the market slid downward. The sentiment in the market seems to be that iPhone 5 record sales have proved to investors that AAPL has not lost it’s obsessive fans and may not for some time.
My earnings plays for today is FedEx (FDX| $87.53). FeDex reported a rate increase for 2013 amidst an earnings report down once cent from last year for this first quarter. Revenue and operating income grew 3.0% and 1.0% respectively from last year but net income was down 1.0% from last year for this quarter. FedEx has dropped its forecast for annual earnings to $6.20 to $6.60 from $6.90 to $7.40. The stock fell in after hours trading almost 2%. The Sep ATM straddle suggests the stock will move around $2.50 by Friday and a little more than $4.00 by Oct expiration. I am going to wait to see what direction it moves in today and possibly play a spread in that direction for October.
Later today, a housing market index report will be released around 10:00 am EST. Last month, the index rose 2 points reflecting sales of new homes, expected sales in the next six months, and prospective buyers. Expected sales may jump higher because of QE3, so the information may be distorted higher.
Alex Kalish has a master’s degree in economics from Suffolk U.
Questions, comments and suggestions welcome: alexk@keeneonthemarket.com
Trade: Selling the $RIG oct 46-45 Put Spread for $.50
Risk: $50 per 1 lot
Reward: $50 per 1 lot
Notes: Paper sold 3500 RIG Oct 46 Puts for $1.70
UPDATE 9.21.2012 With a Nice Rally higher after Paper sold the Oct 46 Puts, these Put Spread are now worth $.28, almost good for a double.
Despite having lowered its forecast, however, the majority of analysts are still confident in the company, with 16 of 22 maintaining a buy rating on the stock. The company has a market capitalization of $28.48 billion, and is currently trading around $90.02 per share. So far this year, the stock is up 7.72 percent.
Ultimately, expect a tough reaction to disappointing earnings tomorrow. Going forward, the company needs to figure out how to reduce costs and improve efficiencies under the current uncertain global economic environment. The company remains fundamentally strong, but it has issues it needs to address, and expect that to reflected in the stock price the remainder of this week.
Brandon Kieltyka is currently an undergraduate studying Finance at Daytona State College.
Twitter: @kieltyka05
Apple is trading up today gaining 5.84 (+0.83%). Pre-sales of the Apple iPhone 5 have shattered the tech giant’s previous records with 2 million of the phone being sold in the first 24 hours they were available. The record was held by the iPhone 4s which saw 1 million pre-orders on its first day of availability. Long line are already forming outside at New York City’s 5th Avenue Apple Store in anticipation of the product release.
Things to look for this week:
Tuesday- Housing Market Index, FedEx earnings
Wednesday- Existing Home Sales, AutoZone, General Mills, Adobe Systems, Bed Bath & Beyond
Thursday- Jobless Claims, Earnings from CarMax, ConAgra, Rite Aid and Oracle.
Friday- iPhone 5 Ships.
James Ramelli B.S. in Finance from UIUC. Email: james@keeneonthemarket.com Follow: @Jim_KOTM