Paper sold 28,214 SD June 7-9 Bear Call Spread for $.20 (4.4 times usual volume) when stock was trading $5.69
Paper bought 3000 JCP March 22 Puts for $1.76 when stock was trading $22.58
Paper bought 22,446 TXN Jan 2014 35 Calls for $2.50 (2.8 times usual volume) when stock was trading $34.31
Paper bought 9498 LM Jan 2014 Jan 35 Calls for $1.00 (12.6 times usual volume) when stock was trading $28.34
Paper bought 1000 BKS April 15 Calls, Sold April 13 Puts for $.80 debit (7.3 times usual volume) when stock was trading $14.65

Greeks of a Call:

Delta: Long
Gamma: Long
Vega: Long

90% of the time if a stock goes higher Calls will lose money because the implied volatility will move lower.  This is not always the case but it occurs the majority of the time.  I use a strategy from the trading floor where I buy both Puts and ‘extra stock.’  

For example, I bought 100 LVS May 48 Puts for $2.60 and purchased stock for $49.89.  The delta of the Puts was 35 so I would need to purchase 3500 shares of stock to be delta neutral.  Let’s also examine what would happen if I purchased even more stock, for this example let’s say I were to purchase 5000 shares of stock:

Long 100 May 48 Puts, Long 5000 Shares of Stock:

Long 5000 Shares of Stock can translate to Long 50 May 48 Calls and
Short 50 May 48 Puts since this is a Combo.

Lets net out this position:

Long 100 May 48 Puts minus Short 50 May 48 Puts= Long 50 May 48 Puts/Long 50 May 48 Calls

So, I am long the May 48 Straddle.  Why did I choose this position instead of just buying the Puts outright.  Well, I have downside and upside as well.  If the stock sells off $10 on Monday, I will make money on this trade because I am long 50 of the May 48 Puts.  Since the stock is $50.75 and the Long May 48 Calls have a larger delta than the Puts, I will get longer as the stock goes higher as well, similar to the Calls.  The primary reason I chose this trade was because I will make money if the stock continues to go higher.  Let’s look at how the trade breaks down:

Long 50 May 48 Calls, Long 50 May 48 Puts  

OR

Long 100 May 48 Puts and Long 5000 Shares of Stock:

Delta: Positive: around 1500
Gamma: Positive: around 500
Vega: Positive: around 900

As stated earlier, stock moves higher the implied volatility will move lower.  An out of the money Put has higher implied volatility than a Call.  The further a put is out of the money the higher the implied volatility will be, this is known as the Volatility Skew.  Therefore, as stock moves higher I should actually make money on the Vega as the Puts will become further out of the money and their implied volatility will rise.  The position will get crushed if the stock goes to 48, but I consider the likelihood of this happening to be low.

For those interested in learning more about this, I offer private 1 on 1 mentoring and boot camps.   In a boot camp I will fly to your location and personally educate you on Options 9 hours/day for 1 week.  1 on 1 mentoring is peformed remotely.

—
Andrew Keene
President/Founder
Andrew@KeeneOnTheMarket.com

WIN strives to be the premier consumer and enterprise communications and services provider in the United States. The firm offers high-speed Internet, digital television, and other high tech goods and services to customers. They plan to execute this by making significant investments in data centers to broaden their technology-based services, but the penetration into the consumer front has been costly.  Total capital expenditure from 2011 to 2012 was up 56%. Continued expense increases could negatively affect the stock. For example the stock has a corporate credit rating of Ba2 (Moody’s), BB-(S&P), and BB+(Fitch), with one negative outlook and the remaining with stable and is down roughly 16% over a three year period.

From a technical prospective, the stock has been a loser. WIN’s major moving averages are all above it and currently pointing toward lower prices. WIN made a recent low of $7.86 in mid November of 2012 and may be heading that way to re-test prior lows.  Additionally, short interest has doubled since mid 2011 and currently stands at roughly 11% of the float. One must remember that short sellers have to pay the massive dividend out, so there is a cost to be short.

—
E-mail me,

salerno.mark.a@gmail.com

One thing to note on LVS is while that they may have a large exposure to the Las Vegas market, they have large exposure to other markets.  One such market is Macau, the Chinese administrative region and what is essentially their Las Vegas.  

The recent sell-off was overdone and had little to do with the the fundamentals of the stock.  It has already been above $60 and if it is able to pass the strong resistance level at $52.50, there is a strong probability it will cross the $60 level again.

Technically speaking, it looks very positive as we recently made a so called GoldenCross. This happens when the short-term moving average (50SMA) crosses the longer-term moving average (200SMA) to the upside. Also the RSI shows a strong bounce of the lower oversold territory straight back up to a positive buying opportunity. Last but not least the MACD shows a bending curve for the MACD, which simply means that the stock is reversing to the upside, on its way to the signal, in order to create a bullish pattern as well.

Taking advantage of this trade, as I believe there is still more room to the upside, way more room to the upside to be more precise.  I put on the May LVS 48 Straddle for $6.60.

Paper bought 2159 SKS Aug 12 Calls for $.80 (2.4 times usual volume) when stock was trading $11.21
Paper bought 1591 VNO March 85 Calls for $1.25 (5.1 times usual volume) when stock was trading $84.91
Paper bought 2027 DGX May 65 Calls for $.25 (2.9 times usual volume) when stock was trading $56.15
Paper bought 700 FXB March 158 Calls for $.05 (4.6 times usual volume) when stock was trading $150.91
Paper bought 1300 ISIL April 10 Calls for $.15 (11.1 times usual volume) when stock was trading $8.70

Paper bought 1500 EWA March 27 Puts for $.60 (2.9 times usual volume) when stock was trading $26.71
Paper bought 994 IRM July 30 Puts for $.75 (3.7 times usual volume) when stock was trading $34.78
Paper bought 700 BPZ Sep 1 Puts for $.05 (7.1 times usual volume) when stock was trading $2.74
Paper bought 540 GTI March 10 Puts for $1.35 (2.9 times usual volume) when stock was trading $8.86
Paper bought 405 EXC June 95 Puts for $.95 (7.7 times usual volume) when stock was trading $97.14

Paper sold 29,597 VWO April 43 Puts for $.90 (44.7 times usual volume) when stock was trading $43.54
Paper bought 19397 LVS May 52.5 Calls for $2.05 when stock was trading $49.72
Paper bought 10000 GGB Sep 9-10 Call Spread for $.26 (8.6 times usual volume) when stock was trading $8.05
Paper bought 2500 AWAY April 30 Calls for $1 (7.0 times usual volume) when stock was trading $1
Paper bought 700 BPZ Sep 1 Puts for $.05 (7.1 times usual volume) when stock was trading $2.74

Recently in January we hit the 52 week high, which stands at 136.03. The 52 week low is at 119.73 which we pinpoint in July of 2012 and therefore technically its more likely we will go lower from here. The political and economical pressure is not promising any good either as Europe finds itself in a sluggish recovery. The BOE, Fed and BOJ implementing measurements that will stimulate the economy through asset purchases that deliberately devalues their currency in order to prop up the GDP. So in order for other currencies to go down another has to appreciate in value, which in this case is the euro. An appreciating euro in combination with a sluggish to flat recovery will keep the ECB awake at night and  at least doubtful whether additional measurements needs to be taken. Also with the FOMC minutes released yesterday signaling an earlier stop or at least a possible reducing standpoint in the additional easing gives reasons enough to see the U.S. dollar appreciating in the near-term, which would cause FXE to visit lower levels.

Sven Van Tongeren
Sven@KeeneOnTheMarket.com