Procera Networks, Inc (PKT) provides network operators with enforcement solutions to help them gain control of their networks. The company’s stock is currently trading around $14.45 in a 52 week range of $10.12-$24.34. The stock has been weak this year, selling off over 18% year to date. Despite the weakness in the stock, options action suggests that there could be some upside in PKT through November expiration. The largest open interest in any November option line in PKT is in the November 15 puts. We know that most of this open interest comes from a put seller. The seller of these puts made a high conviction bullish bet on PKT and by selling those puts is expressing a strong belief the stock will be above $15.00 on November expiration.  We believe that this provides us with an opportunity for a covered call in PKT. (more…)

A trader bought 2,500 TEF Dec 19 Calls for $0.25 (3.4 times usual volume) with stock at $17.87
A trader bought 4,600 TRQ Jan 6 Calls for $0.35 (6.8 times usual volume) with stock at $4.90
A trader bought 2,600 ANN Dec 35 Calls for $1.55 (4.7 times usual volume) with stock at $33.99
A trader bought 6,900 GTAT Nov 10 Calls for $0.554 (3.8 times usual volume) with stock at $8.98
A trader bought 5,127 TIVO Jan 14 Calls for $0.45 (4.5 times usual volume) with stock at $12.83

A trader bought 2,500 IRWD Nov 10 Puts for $0.58 (3.7 times usual volume) with stock at $10.59
A trader bought 1,060 LINTA Nov 26 Puts for $0.34 (3.2 times usual volume) with stock at $27.28
A trader bought 2,300 HMA Nov 12 Puts for $0.25 (5.8 times usual volume) with stock at $12.94
A trader bought 5,000 HPQ Jan 24 Puts for $1.85 with stock at $23.59

A trader bought 2,500 IRWD Nov 10 Puts for $0.58 (3.7 times usual volume) with stock at $10.59
A trader bought 1,060 LINTA Nov 26 Puts for $0.34 (3.2 times usual volume) with stock at $27.28
A trader bought 2,600 ANN Dec 35 Calls for $1.55 (4.7 times usual volume) with stock at $33.99
A trader bought 6,900 GTAT Nov 10 Calls for $0.554 (3.8 times usual volume) with stock at $8.98
A trader bought 5,127 TIVO Jan 14 Calls for $0.45 (4.5 times usual volume) with stock at $12.83

TiVo Inc (TIVO) is a developer and producer of technology that enables users to navigate content such as television, broadband video and on demand video. The company’s stock is currently trading around $12.85 in a 52 week range of $9.63-$14.10. The stock has performed well this year, but has lagged the broader market, rallying only 5.7% year to date. TIVO has outperformed the market in the past 12 months however, rallying nearly 31%. TIVO stock is in a steady uptrend on the daily chart, trading well above the Ichimoku Cloud. The cloud is upward sloping into the future indicating there could be more upside in TIVO.  A flurry of bullish unusual option activity in TIVO today shows that institutional money is willing to be on a TIVO rally into the end of the year. Early in today’s trading session a trader bought 5,127 TIVO Jan 14 calls for $0.45. This block amounts to a $230,000 bullish bet on TIVO. This trade also represents volume 4.5 times the average daily option volume in TIVO. With a strong chart and a high conviction bullish bet like this being placed on the stock we believe TIVO sets up well for a long stock swing trade here. (more…)

Coach, Inc (COH) is a marketer of handbags and accessories for men and women. The company offers bags, footwear, jewelry, watches and fragrances. The company’s stock is currently trading around $53.50 in a 52 week range of $45.87-$61.94. The stock has been weak this year, under performing the broader market, selling off 3.5% year to date. The stock is also lower by over 4% in the past 12 months. COH is set to report their quarterly earnings tomorrow before the market opens. The stock has been relatively weak on earnings selling off on earnings day 5 of the past 8 quarters.  The stock has an average earnings day move of around 9.0%. Shares of COH are also breaking the Ichimoku Cloud to the downside, a sign that there could be significant downside in the near future. This major technical indicator coupled with historical weakness in COH means we will be looking to get short into earnings. With the options market implying a move of $4.45 by Friday’s expiration we can calculate a downside target of $49.05. Using this target we can now set up a trade. (more…)

AOL Inc (AOL) is a global Web services company providing online content and other products to online consumers, businesses and advertisers. The company’s stock is currently trading around $34.70 in a 52 week range of $29.16-$43.93. The stock has been performed well this year, but is lagging the market some, rallying over 17% year to date.  Although the stock has been lagging the market this year options action on Friday suggests that there could be more upside in AOL this year. Half way through Friday’s trading session a trader sold 10,000 AOL Apr 28 puts for $1.40 when the stock was trading at $33.70. This is a very bullish trade that carries a high level of risk.  The high level of conviction this trader is showing indicates there is a high probability the stock will be above $28 on April expiration.  We will look to get long AOL through April as a long term trade set up. (more…)

NO MORE SHUTDOWNS

The last three weeks were very interesting for the markets.  Strong, strong upward movement with a couple of dips in the middle.  Clearly, the markets were pricing in the eventual resolution of the debt ceiling crisis: government reopening with no debt ceiling default.  FYI, Andrew Keene was predicting this all along.

Now the markets seem to be pricing in smooth sailing: either a grand bargain between D’s and R’s, or at least a mini-bargain.  This seems appropriate when very powerful people like Sen. Minority Leader Mitch McConnell (R, KY) state outright that there will NOT be another shutdown soon.  McConnell is up for re-election in 2014. Apparently, he believes it better to be seen as a compromiser in the general election, than as an ideological purist in his R primary.

However, the question remains whether the market’s rosy picture is justified.  Clearly, the market has strong upside momentum.  But, if the shutdown cost the country $24B and 0.5% to 0.6% in GDP, weaker economic numbers will have to be discounted as one time events, for the market to continue strong.

Follow me on Twitter @USKOTM.

Recent weeks have seen massively bullish options activity in oil and gas refiners. Tesaro Corporation (TSO), Valero Energy Corporation (VLO), and Phillips 66 (PSX) have seen the most option activity with traders placing large bets on further upside in all 3 companies.  On Wednesday a trader bought 11,750 TSO Feb 55 Calls for $1.31 and bought 7,340 Nov 49 calls for $1.12. These are both very bullish orders that indicate there could be more upside in TSO. Shares of TSO are higher this week by 6.51%. VLO has also seen aggressive call buys in recent weeks. On October 10^th a trader bought 14,251 VLO Dec 39 calls for $0.38. The position was then added to when on October 16^th a trader bought 14,298 more VLO Dec 39 calls for $1.00. Shares of VLO have rallied over 5% this week on the back of this bullish options activity. We saw even more activity in refiners yesterday when a trader bought nearly 20,000 PSX Jan 72.5 calls for $0.55. PSX stock was trading at $61.78 at the time of the trade so it is clear that this trader has an aggressive target. Shares of PSX are higher on the week by 4.72%. Options activity continues to suggest further upside in all of these names and reveal that institutional money is very bullish refiners through the end of the year.

iShares MSCI South Korea Capped ETF (EWY) is an exchanged traded fund seeking to track the performance and yield of the MSCI Korea 25/50 Index. EWY is currently trading around $65.50 in a 52 week range of $49.57-$65.57. EWY is higher on the year but has underperformed the broader market only adding 3.4% to its share price year to date.  Earlier this week we saw some very bullish order flows in EWY. On Wednesday a trader bought 20,000 EWY Nov 66 calls for $0.79 with stock at $64.76. EWY has rallied on the back of this very bullish trade. EWY is also trading in bullish territory according to the Ichimoku Cloud. The cloud is upward sloping and shares are trading well above all major support levels.  We believe that the technical strength in EWY confirms the signal given by the unusual option activity we saw in EWY. We will look at a long stock swing trade in EWY. (more…)