Tiffany & Co (TIF) is a company operating specialty retailers offering mainly jewelry.  The stock is currently trading around $81.05 in a 52 week range of $55.83-$83.48. The stock has had a great year having added nearly 42% to share prices this year. TIF is set to report their most recent quarterly earnings before the market open tomorrow. The stock has mixed historical performance on earnings day. Over the past 8 quarters the stock has rallied 4 times and sold off 4 times with an average move of 5.3%. However, the stock has rallied 3 times over the past 4 quarters. Technically speaking, the stock is trading in bullish territory according to the Ichimoku Cloud.  The future cloud is also upward sloping indicating a potential for more upside in TIF.  We believe the technical and historical data lines up well for a long in TIF ahead of earnings. To set up a trade we must first develop an upside target. The options market is currently implying a move of $4.60 by Friday’s expiration. We will use this implied move to calculate an upside target of $85.65 and set up a trade. (more…)

iShares iBoxx $ High Yield Corporate Bond ETF (HYG) is an exchange traded fund seeking to track the performance of an index of high yield U.S. corporate bonds. Shares of HYG are currently trading around $93.00 in a 52 week range of $88.27-$96.30. HYG has had a relatively flat year with shares losing only 0.35% year to date. Options action in HYG today would suggest that traders believe this sideways action will continue. Early in today’s session a trader sold 10,000 of the Dec 92-93 Strangles for $0.88. This means they are expecting the stock to trade in a range between $92.00 and $93.00 on December expiration. This block also represents volume 3.2 times the average daily option volume in HYG. We believe that this order is big enough to signal as a set up for an iron condor in HYG. By using an iron condor we are not exposing ourselves to the extremely high levels of risk short strangles come with. Here we are still able to set up a great risk to reward ratio with a slight downward directional bias and no risk of unlimited losses. (more…)

A trader bought 12,328 KNK Jan 37.74 Puts for $0.15 (6.1 times usual volume) with stock at $40.50
A trader bought 1,000 DXCM Dec 30 Puts for $0.42 (3.1 times usual volume) with stock at $32.40
A trader bought 1,000 RWT Jul 15 Puts for $0.50 (3.7 times usual volume) with stock at $19.30
A trader bought 2,000 MFA Jul 6 Puts for $0.40 (19.8 times usual volume) with stock at $7.18
A trader bought 6,000 EWY Jan 61 Puts for $1.36 (3.7 times usual volume) with stock at $63.31

A trader bought 1,500 HA Apr 6 Calls for $2.30 (3.2 times usual volume) with stock at $8.22
A trader bought 2,000 MILL Feb 7.5-10 Call Spreads for $0.55 (5.1 times usual volume) with stock at $6.91
A trader bought 1,000 ATHX Jul 2.5 Calls for $0.87 (42.4 times usual volume) with stock at $2.15
A trader sold 5,000 ARIA Dec 3 Puts for $0.12 (3.1 times usual volume) with stock at $3.62

A trader bought 12,328 KNK Jan 37.74 Puts for $0.15 (6.1 times usual volume) with stock at $40.50
A trader bought 2,000 MILL Feb 7.5-10 Call Spreads for $0.55 (5.1 times usual volume) with stock at $6.91
A trader sold 5,000 ARIA Dec 3 Puts for $0.12 (3.1 times usual volume) with stock at $3.62
A trader bought 2,000 MFA Jul 6 Puts for $0.40 (19.8 times usual volume) with stock at $7.18
A trader bought 6,000 EWY Jan 61 Puts for $1.36 (3.7 times usual volume) with stock at $63.31

ARIAD Pharmaceuticals Inc. (ARIA) is a global company focused on developing medicine for cancer patients. The company’s stock is currently trading around $3.90 in a 52 week range of $2.15-$24.59. The stock has had a rough year with shares losing over 80% of their value year to date.  Despite the weakness the stock has shown this year a trader has decided to make some very bullish bets on ARIA today. Earlier in today’s trading session a trader sold 5,000 ARIA Dec 3 puts for $0.12. This block represents volume over 3 times the average daily option volume in ARIA. Short puts also carry a large amount of risk meaning this trader has a relatively high level of conviction. Essentially this trader is betting the stock will be above $3.00 on December expiration which is 28 days from now. Although the stock is trading in bearish territory technically we believe this order is large enough to serve as a signal for a covered call set up in ARIA. (more…)

A trader bought 2,323 DISCA Jan 75 Puts for $0.55 (5.3 times usual volume) with stock at $85.13
A trader bought 10,000 DNDN 1×2 Put Spreads for $0.25 (2.2 times usual volume) with stock at $2.88
A trader bought 2,000 KMR Jan 75 Calls for $1.85 (13.4 times usual volume) with stock at $75.69
A trader bought 2,000 IBB Jan 220 Calls for $4.70 (3.1 times usual volume) with stock at $213.55
A trader bought 3,100 WTI Dec 20 Calls for $0.45 (12.8 times usual volume) with stock at $19.10

A trader bought 5,500 CWH Jan 30 Calls for $0.10 (3.2 times usual volume) with stock at $23.65
A trader bought 2,000 KMR Jan 75 Calls for $1.85 (13.4 times usual volume) with stock at $75.69
A trader bought 2,000 IBB Jan 220 Calls for $4.70 (3.1 times usual volume) with stock at $213.55
A trader bought 3,100 WTI Dec 20 Calls for $0.45 (12.8 times usual volume) with stock at $19.10

A trader bought 1,800 TIP Jun 112 Puts for $3.90 (17.7 times usual volume) with stock at $110.99
A trader bought 1,167 UBNT Dec 41 Puts for $1.40 (3.1 times usual volume) with stock at $43.40
A trader bought 2,800 LEAP Jan 2015 12 Puts for $0.25 (3.4 times usual volume) with stock at $16.48
A trader bought 2,323 DISCA Jan 75 Puts for $0.55 (5.3 times usual volume) with stock at $85.13
A trader bought 10,000 DNDN 1×2 Put Spreads for $0.25 (2.2 times usual volume) with stock at $2.88

TODAY THE WORLD CHANGED—DID YOU NOTICE?

Sometimes earth shattering happenings are (in newspaper talk) buried below the fold. That is, they are not recognized for their world-changing importance. This will undoubtedly be the case today. One story will receive far less coverage than a murder in Kansas or a carjacking in Oregon. But, in terms of importance, today could rank up there with the day TARP was rejected, the day that TARP passed, or the day that a Republican Supreme Court Justice voted to uphold Obamacare.

Today, the news broke that the US Senate changed its rules. Sounds boring, right? No it definitely is not.   Rather, today’s Senate action is clearly one of the most important occurrences of this decade.

From now on, all federal executive and judicial appointments (except for Supreme Court nominees) can move forward with only 51 Senate votes.  Yesterday that number was 60—a big difference from 51.  But, after today, President Obama–and all of his successors, both R’s and D’s—will find it vastly easier to have their appointments approved.

This Senate rule change is a sign of the times.  As Sentor Reid pointed out, Presidential appointments have been blocked 168 times in US history. Half of these have occurred with Obama as President.  It is part of the R’s “block and cause trouble” strategy, designed to frustrate Obama’s programs.  But that strategy has now led to the rule change, and our country (for better of for worse) will never be the same again.

While the direct effect of the rule change is to make the appointment process easier, there are other—equally important—consequences down the road.

1.  If Janet Yellen’s confirmation had ever been in doubt, it is no longer.

2.  While legislation and Supreme Court appointments still need 60 votes to proceed, THE PRECEDENT HAS BEEN SET.  In the future, if Supreme Court candidates or important legislation is frustrated by a Senate minority, further rule changes can be made to allow for majority control—whether that majority be D as it is now, or R in the future.

Think of what this would have meant in 2008-2009.  The Democratically controlled House passed substantial environmental and social justice legislation.  Because of the 60 vote requirement, most of these did not pass the Senate.  If there was only a 51 vote requirement, many of these social justice programs would likely have become law.

Similarly, in 2004, Republicans controlled both the White House and Senate.  Many conservative measures were not pushed hard nor enacted because the 60 vote barrier was impossible to overcome.

In the future, either party will feel freer to change the rules, and eliminate the 60 vote barrier to legislation.

3.  Importantly, the Senate rule change also does not bode well for the upcoming Budget talks and debt ceiling showdowns.  If there was animosity before, the Senate vote will ratch it up another notch—or maybe 2 or 3.  Hopes for a small bargain, or perhaps even a grand bargain, have just taken a big hit.

In sum, the Senate rule change is really important.  So read about it and try to understand how it could effect your portfolio.  For it is clearly one of the most momentous occurrences so far this decade.

Follow me on Twitter @USKOTM.