NextEra Energy, Inc. generates, transmits, distributes, and sells electric energy in the United States and Canada. The company produces electricity from gas, oil, solar, coal, petroleum coke, and nuclear sources and this sector has performed extremely well as of late.

Today we saw a trader buy 4,434 NEE June 100 Calls for $0.55.  This gives this options buyer the right, but not obligation, to buy 443,400 Shares of stock for $100 between now and June expiration.   This trader paid almost $250,000 for this right.

Since this order hit the tape the stock has been on fire and the calls have moved from $0.55 to $0.80, meaning the trader has paper gains of nearly $150,000.  I personally chose not to take this trade due to high open interest (already 12,000 prior to the order), but the NEE chart looks great and I believe it will continue to head higher.

Andrew Keene

Transocean Ltd., together with its subsidiaries, provides offshore contract drilling services for oil and gas wells across the world.  Looking at the chart and using the Ichimoku Cloud, every single matrix leads me to believe this stock is headed lower.  It is trading below the Ichimoku Cloud, it is under the 9- and 26-day moving averages, and previous performance is weak (the stock hit a new 52-week low today).

Combined with the above bearish arguments, today we saw a trader come in and buy over 12,000 RIG May 37 Puts for $0.70.  I think this is smart money and decided to follow, paying up slightly ($0.77) in the same line and currently close to getting filled at my first price target of $0.90.

Let’s break down my trade:

The Trade: I bought the RIG May 37 Puts for $0.77
Risk: $77 per 1 lot
Targets: $0.90, $1.10, $1.30 and $1.50

Greeks of this Trade:
Delta: Short
Gamma: Long
Theta: Short
Vega: Long

Air Products and Chemicals, Inc (APD) is a commodity chemicals company providing product and services to businesses in many different industries. The company’s stock is currently trading around $119.95 in a 52 week range of $84.04-$123.60. The stock has been doing well this year with shares rallying over 7% year to date. Options action in today’s trading session suggests that traders believe this trend will continue through the rest of the year. Earlier in the session a trader bought 9,000 APD Jan 2015 135 calls for $3.90. This is a very bullish trade and represents some very unusual volume in APD. Over 5.5 times the average daily option volume has already traded in APD. This is also an outlay of  nearly $3.7 million for this trader.  With shares trading well above the cloud we believe that APD should head higher through January expiration.

Trade: Buying the APD Jan 2015 135 Calls for $4.10
Risk: $410 per 1 lot
Reward: Unlimited
Breakeven: $139.10

Air Products and Chemicals, Inc. (NYSE: APD) provides atmospheric gases, process and specialty gases, performance materials, equipment, and services worldwide. The company operates through four segments: Merchant Gases, Tonnage Gases, Electronics and Performance Materials, and Equipment and Energy.  Today a trader bought 10,000 APD Jan 2015 Calls for $4.10.  Let’s breakdown this trade:  this is a $4.1 Million bet APD can trade up to $135 by the end of 2015 with a break-even of $139.10.  Anytime I see an order this large, I need to allocate some of my capital to this trade, so I just followed the trader into the same position:

The Trade: I bought the APD Jan 2015 135 Calls for $4.10
Risk: $410 per 1 lot
Reward: Unlimited
Break-even on Expiration: $139.10

Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long

Stillwater Mining Company (SWC) engages in developing, extracting, processing, smelting, refining, and marketing palladium, platinum. It also explores for all different types of metals such as: nickel, copper, gold, and silver ores. We have seen very bullish call buyers over the last 2 weeks in SWC and I think the stock is headed higher.  When I am trading using the Ichimoku Cloud there are always several different ways I can set up my entries and exits.

Aggressive Long Set-Up: Buy Stock at $14.98 with a $14.14 Stop
Target #1: $15.39
Target #2: $15.98
Target #3: $16.49

Aggressive Pull-Back Trader Buy Stock at $14.24 with a $13.24 Stop
Target #1: $14.74
Target #2: $15.24
Target #3: $15.74

Mild Pull-back Buyer: $13.24 with a $12.50 Stop
Target #1: $13.54
Target #2: $14.04
Target #3: $14.54

Allergan, Inc. (AGN) operates as a multi-specialty health care company primarily in the United States, Europe, Latin America, and the Asia Pacific. This stock has been on fire recently and is breaking through its 52 Week highs. Today we saw a very interesting trade where a trader bought 1,000 AGN July 140 calls for $5.84 and then sold 1,000 July 115 puts to reduce the cost of the trade. This is known as a “risk reversal.”  A trader will get long 100,000 shares at two different levels: $115 and $140. This trader has a breakeven at $142, but let’s break this down a little further.

The Trade: Trader bought 1,000 AGN July 140 Calls and Sold July 115 Puts for $2.00 debit
Their Risk: $117,000
Their Reward: Unlimited
Breakeven: $142

Between $115-$140: Trader will lose Cash outlay of $200,000

Under $115 and Above $140, Trader will become Long 100,000 Shares of Stock

PACCAR Inc (PCAR) is a company that manufactures medium and heavy duty trucks under several different nameplates. The company’s stock is currently trading around $65.95 in a 52 week range of $47.12-$66.46. The stock has been outperforming the market this year with shares gaining over 11% year to date. Options activity during today’s session would suggest that traders believe this trend will continue through May expiration. Earlier in the session a trader bought 5,000 PCAR May 66.60 calls for $2.05 to $2.10. This is a very bullish trade that requires this trader to invest around $1 million in premium. PCAR is also trading above the Ichimoku Cloud, suggesting the stock has more room to the upside. With order flow this strong and a bullish chart set up we believe PCAR is setting up well for a long.

Trade Setup: Buying the PCAR May 66.6 Calls for $2.10
Risk: $210 per 1 lot
Reward: Unlimited
Breakeven: $68.70

Yesterday, Andrew Keene Tweeted that he may be starting to like KNDI as a speculative play. Andrew, welcome to the KNDI bandwagon.  I am very bullish KNDI.  Last December, I chose KNDI as my favorite stock play for 2014.  It is up almost 65% since then.

I still like it and think it will go much higher.  I own both shares of stock and call options.

KNDI is an electric vehicle company in China, and has been soaring.  Here are some important KNDI points to consider:

1.  In his State of the Union last month, China’s Premiere Li stressed fighting smog.

2.  When the Chinese government wants to do something, it does it.  There is no political stalling like the US.

3.  The Chinese government provides subsidies to KNDI customers. These were just enhanced and extended, and they could increase further.

4. There are many enormous cities KNDI is not yet in.

5. KNDI is a microcap; thus it has enormous growth potential.

6.  Wait ‘til all the TSLAites discover KNDI.

7.  KNDI has electric battery patents.  These alone could be worth more than the current market cap.

8.  The biggest risk in a Chinese stock is normally fake numbers.  Here that doesn’t matter, because you’re buying growth potential, not earnings or revenue.

I have also made the following subjective observations with regard to the stock and option prices.

KNDI’s options have wide spreads, but offers in the middle frequently fill.  Option volume seems to be increasing lately.  Still, day trading the stock may be more lucrative than options.

KNDI is very volatile.  Can be up or down a point or more quickly intraday.  This creates trading opportunities.

KNDI seems to go up or down intraday not on news but on volume.  On many volume spikes (which are frequent) KNDI will move up or down hard.

KNDI is often very volatile (up or down big) before the bell and in 1st half hour, creating stock trading opportunities. It often seems to move back to the norm during the day.

The above are just a few thoughts to consider.  But KNDI remains my stock pick of the year.

Follow me on Twitter @USKOTM

(DISCLAIMER: The above is my subjective opinion only and NOT investing advice or suggestions in any form. I am not a registered advisor of any kind. I own KNDI stock and call options.)

Encana Corporation (ECA), together with its subsidiaries, is engaged in exploration for, development, production, and marketing of natural gas, oil, and natural gas liquids in Canada and the United States.  This is not the first time we’ve seen bullish activity in ECA and it seems that this trader has been right in the past.  Today a trader bought 15,000 ECA Oct 23 Calls for $.85.  This gives the trader the right but not obligation to buy 1.5 Million Shares of ECA at $23 between now and October.  Let’s break-down their trade a little easier.

Their Risk: $85 per 1 lot
Their Reward: Unlimited
Their Breakeven: $23.85
Cash Outlay: $1.275 Million

Restoration Hardware Holdings, Inc., together with its subsidiaries, engages in the retail of home furnishings. It provides bedroom, dining, upholstery, home office, and media furniture products and has over 2,100 full-time employees in the services sector.  Today we saw a trader sell their long March 55 calls and roll them to the Apr 65 line. This is a bullish trade and I think the stock will move higher on this unusual options activity.  This block also represented volume over 4 times the average daily option volume in RH.  If I did not want to put on an options trade I could buy the stock with a $6 stop, under the Ichimoku Cloud.

Possible Trading Ideas:
Buy Stock: $65.38
Stop: $59.38
Target #1: $68.38
Target #2: $71.38

Stop at Breakeven when Target #2 is hit:
Target #3: $74.38
Target #4: $77.38