Energen Corporation (EGN) is yet another company that we have seen bullish activity in today. It is an energy holding company, engages in the development, acquisition, exploration, and production of natural gas and oil. Today we saw a trader buy 1,000 EGN April 85 Calls for $2.55. This was 6.0 times usual volume and control the right but not obligation to buy 100,000 shares of EGN between now and April for $85. The chart looks great to the upside and I think it can approach its old 52 week high of $90.
Disclosure: I am long the 50 EGN April 85 Calls for $2.55 and will look to exit 80% of them by the end of the day.

Encana Corporation (ECA) engages in the exploration, development, production, and marketing of natural gas, oil, and natural gas liquids in North America. We have seen high levels of call activity for several days and today we saw a trader buy 2790 ECA March 20 Calls for $.35. This gives the buyer the right but not obligation to buy 279,000 shares above $20 by March expiration. The chart looks great as the stock is strongly breaking through $19.60 and I think the stock can push to its 52 week high of $20.55.
Now, lets look at a credit spread to take advantage of the increased volatility that is generated from a trader buying calls.

The Trade: Selling the ECA March 20-19 Bull Put Spread for $.45 Credit
Risk: $55 per 1 lot
Reward: $45 per 1 lot
Breakeven: $19.45

I like this trade, because I can make money if the stock is higher, lower, or even flat.

THE BARBER’S CHAIR: Floyd the Barber presents common sense views on the intersection of politics and the markets

This past week witnessed a Russian incursion into Crimea and threats of moving into Ukraine. This was all prompted by Ukraine removing its pro-Russian premiere.

But the moves by Russia were not the real news. The real news—the important, very positive news was the reaction of the US and the world to what the Russians did.

The US and its allies did not immediately threaten a military response. They did not load up their weapons and threaten a confrontation. No. That was off the table from the beginning. Instead, they readied their financial weapons. There was talk of boycotts, and sanctions and loss of trade. And then Putin responded. Not by moving more guns and soldiers, but by calmly noting that sanctions and financial repercussions would hurt many countries. The fallout—pardon the pun—would not be confined to Russia.

This is the world in which we live. A world where countries rely on each other economically, and where economic strife in one country affects many, many others.

This is also a world of the ultra-super rich. There are Russian oligarchs and – lest you think otherwise – American oligarchs. In the past week, the Russian oligarchs, many of whom provide political support to Putin, felt threatened. Their concern over economic sanctions, and their resultant pressure on Putin, likely played a huge role in toning down the current Ukraine crisis.

And speaking of oligarchs, the American ultra-super rich may today have similar power over foreign policy. When President Bush invaded Iraq a decade ago, certain business interests talked about the invasion leading to $10 a barrel oil.

Things did not work out that way. Oil is sky high and the Iraq war cost the US billions of dollars, adding to our deficit. Thus, anything similar to an Iraq invasion in the future will likely have to pass a much harder “financial effects” test, as well as a strategic military test and “doing the right thing” test. Moreover, after Iraq, it may be close to impossible for any President to have the political will to invade another country—unless the situation is dire beyond belief. That’s right, financial considerations may make another Iraq highly unlikely–and this is favorable for our country.

In short, we live in a world of interconnectedness and financial integration. Having the oceans protect us from foreign enemies has been a fallacy for a long time. Likewise, the ability of the military to protect the US is clearly waning. Our country is much more likely to fall victim to a massive computer virus, or a financial crisis, than a military annihilation. For example, for years true thinkers have feared that China (or to a far lesser extent Russian) could dump their US Treasury bonds on the market, intentionally devastating the US economy. This could occur as the result of ONE strategic financial decision made in China. Every realist knows this.

But to me this is a good thing. I would rather be threatened by a Treasury bond sale than by a nuclear attack.

So this is the world in which we live. Where boycotts, sanctions, and bond sales are the new international weapons of power. Some will curse this; others will welcome it. But it is clearly the brave new world in which we all live.

Floyd at KOTM

Follow me on Twitter @USKOTM

World Wrestling Entertainment, Inc. (WWE) is a media and entertainment company that provides content via television and internet in addition to its live events. The company’s stock is currently trading around $24.55 in a 52 week range of $8.37-$24.96. The stock has been massively outperforming the broader market and is higher by over 48% year to date. Options traders seem to think this trend will continue through the middle of the year as so unusually large options bets hit the tape today. Earlier in the trading session a trader bought 3,000 WWE Jul 30 calls for $1.50. This is a $450,000 bet that WWE stock rallies through July expiration. This block also represents volume 2.3 times the average daily option volume in WWE. WWE also has one of the best looking charts out there. The stock is trading well above the Ichimoku Cloud and has been not traded under the cloud since late January of 2013. With such bullish order flow and an amazing chart we believe that WWE signals well for a long here.

Trade: Buying the WWE Jul 30 Calls for $1.70
Risk: $170 per 1 lot
Reward: Unlimited
Breakeven: $31.70

Endeavour International Corporation (END) is an oil and gas exploration and development company in the U.S. and the U.K. The company’s stock is currently trading around $5.15 in a 52 week range of $2.36-$7.50. The stock has been doing very well over the past year with shares rallying over 112% over the past 12 months. Huge call buyers during today’s trading session seem to think this trend will continue through September expiration. Today a trader bought 40,000 END Sep 5 Calls for $1.30. This is an extremely bullish trade that required this trader to lay out $5.2 million in premium. This block also represents volume over 26 times the average daily option volume in END. Although the chart is rather weak we believe that order flow this significant justifies a long in END.

PetSmart, Inc operates as a specialty retailer of products, services, and solutions for pets in the United States, Puerto Rico, and Canada, which means that it has no European or Chinese exposure.  The stock trades about 1.5 Million shares in a day and has been trading in a 52 week range of $61.30-$77.32.  Technically the stock looks weak even though it is possible that it has made a rounding bottom at $62.  Today, a trader bought almost 2,000 PETM March 70 Calls for $.90 hoping the stock can recover and move higher after they report earnings on March 5^th.  The stock has shown strength on earnings rallying 5 of the last 8 quarters.  I am currently long the PETM March 70 Calls for $.90, I sold 25% of my position at $1.10 with targets at $1.30, $1.50 and $1.75.  I will leave only 25% of my position on into the earnings announcement.

PowerShares DB Agriculture Fund (DBA) is an investment trust that invests in commodities. Shares of DBA are trading around $27.70 in a 52 week range of $24.04-$27.86. DBA has been underperforming the market over the past year with shares rallying only 5.6% in the past 12 months. Despite its relatively lackluster performance options action in DBA during today’s trading session has been decidedly bullish. Earlier in today’s trading session a trade bought 1,261 DBA Apr 27 calls for $1.05. This is a very bullish trade that also represents volume nearly 3.5 times the average daily option volume in DBA. With shares of DBA trading well above the Ichimoku Cloud and the future cloud sloping upward the chart is suggesting there can be further upside in DBA. We believe this order flow and chart set up is a great signal for a long in DBA.

I am a trader, not an expert on geopolitical events. For me it’s important to stay focused on markets, namely price action and order flow. We knew that there was a chance of news over the weekend and we saw some interesting price action into Friday’s close. As far as Russia we actually saw a fair amount of options activity early last week in the Market Vectors Russia ETF (RSX), as traders positioned themselves for the weekend. Puts massively out traded calls on Tuesday and Wednesday as concerns over the situation in the Ukraine continued.

Today we are actually seeing the exact opposite; calls are out trading puts in the opening hour of the session as two huge blocks of short puts hit the tape this morning. A trader sold 9,650 then another 9,500 Mar 21 puts this morning for $0.40 indicating they believe RSX will stay above 21 through March expiration

Although it is an obviously tense situation I think if market participants were truly in a panic we would see a much larger move in the VIX. Although the VIX is up nearly 15% today it’s still only trading at 16. Traders can still buy relatively cheap protection and I still do not see a reason to get short the market. We overlooked some positive data this morning because of the Ukraine situation. Not time to panic yet.

InterMune, Inc (ITMN) is a biotechnology and medical research company focused on developing therapies for the treatment of lung conditions. The company’s stock is currently trading around $31.05 in a 52 week range of $8.21-$37.22. The stock is now higher by over 261% over the past 12 months with stock prices nearly doubling during today’s trading session. This large move higher was telegraphed by some unusual options activity earlier this month.On February 10th a trader sold 9,900 ITMN May 8 puts to buy 9,900 of the May 15 calls for a net debit of $2.78. With stock at $31.05 this spread is worth $16.05. At that level this trader profits over $15.8 million in this trade. This was the biggest trade in the past 10 days and did a good job of leading the move higher. The options action in ITMN and subsequent move higher in the stock is another great example of the value of reading the tape.