Trade: Selling the DG Sep 52.5-55 Call Spread for $1.20
Risk: $130 per 1 lot
Reward: $120 per 1 lot
Breakeven: $53.70
This trade reaches maximum profit if the stock closes below 52.5 on expiration, but it still profits anywhere below $53.70. This means that the stock can sell off, sit still, or even rally some and we will still profit in this trade.
Trade: Sell 1 Sep 35 Call for $2.70 for every 100 shares of stock bought at $37.15
Should the stock stay above 35 through September expiration this trade will profit $0.55. The trade is still profitable anywhere above $34.45. Should the stock close above 35 on expiration a trader would net a return of 1.48% in just 17 days. This is equivalent to an annualized return of 37.7%.
This morning Stern Agee lowered its forward guidance on DRI citing weak sales in the industry. On the downgrade we saw a flurry of unusual option activity in DRI. Early in today’s session a trader bought 4,000 DRI Oct 45 puts for $1.35. This block pushed daily option volume in DRI to a level 4.5 times its average daily volume. Puts can be bought as a hedge against a long stock position, but with the weak chart in DRI this is unlikely. It is more likely that these puts were being bought for bearish speculation. The October expiration also gives this trader exposure to DRI’s next quarterly earnings report on Sep 20th. DRI is historically very weak on earnings. The stock has sold of 6 of the past 8 quarters on earnings day with an average move of 2.5%. With the weakness in the DRI chart and the stock’s historical weakness on earnings this block trade confirms that there is likely more downside in store for DRI.
Trade: Shorting DRI Stock at $46.87 with a $48.35 stop
Target #1: $46.01
Final Target: $44.21
Risk per 100 Shares: $148.00
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.
MGM holds a 50% stake in a Macau property, which many analysts speculate is their most valuable holding. The company is also actively working on projects in Dubai, United Arab Emirates, some of which will be entirely non-gaming. Finally, as US Regulators begin to possibly ease restrictions in online gambling, MGM is seen as an immediate beneficiary to this type of deregulation.
MGM shares have performed exceptionally well in 2013, up 44 percent YTD. Beginning today’s session up modestly and trading $17.85, the stock is trading above the 50 ($16.15), 100 ($15.27), and 200 ($13.66) day moving averages.
Based on the unusual option activity we saw yesterday with Paper selling 5,000 MGM Mar 16 Puts for $1.06, we feel this sets up well for a covered call strategy.
Our Trade:
Sell 1 MGM Mar 16 Call at $2.95 for every 100 shares of MGM bought at $17.85.
Traders employing this strategy will achieve maximum profitability so long as the stock stays above $16, however, the trade will remain profitable anywhere above $14.90.
Salesforce last reported earnings on May 24th and sold off 5 percent. The stock continued to sell of until reach a bottom of $36.75 on June 20th. Despite reporting in line earnings, investors sought a downward revision in guidance to reflect slow revenue growth. However, this was not the case; the company revised guidance upwards with CEO Marc Benioff citing 29 percent revenue growth from one year prior. In the case of Salesforce, this last point is especially interesting.
While profitable companies’ shares are usually valued based on earnings multiples, Salesforce does does not currently fit into this category. This is partly due to their subscription model (SaaS, or ‘software as a service’), which does not allow all revenue that has been collected to be immediately recognized. For this reason, Wall Street investors have a tendency of looking at Salesforce share values as a multiple of revenue (currently trading at around 7x expected sales for the current fiscal year).
Another challenge Salesforce may be slowing growth in stock shares. Shares rose by roughly 116 percent (2009), 76 percent (2010), and 63 percent (2012), posting a loss of 25 percent in 2011. Such growth make compensation tied to stock attractive to employees, but this may not be the case much longer.
As we discussed in yesterdays earnings trade for GES, catalyst events (like today’s earnings call) are often separate from the overall trend. CRM has recently changed the manner i which it bills its customers, allowing to collect more cash from customers upfront and increase their billings.
The stock has risen on earnings 3 of the past 4 quarters, and 5 of the past 8, moving 6.7 percent on average. The near-term at-the-money straddle is implying a move of just below 8 percent. Shares have shown strong support recently, and the trade below offers a good return on one’s money.
Our Trade: Buy the CRM Weekly 45.5 – 46.5 Call Spread for around $0.30.
Risk: $30 Per 1 Lot
Reward: $70 per 1 Lot
Break-even: $45.80
Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
We define unusual option activity as large block trades that represent a large percentage of daily option volume. The block trade is considered “unusual” if the option volume is above the average daily volume over the past 22 days. At KeeneOnTheMarket.com we scan and analyze order flow from all of the major options exchanges in order to identify any unusual option activity.
Analyzing unusual order flow gives traders a window into what the positions that large institutional players have. The majority of unusual option activity can be traced back to hedge funds, mutual funds, and other large institutions. Knowing where these institutions are placing their bets can be hugely advantageous for any trader. These institutions have informational and technological advantages that the average trader doesn’t have, and the amount of time and analysis that goes into every one of their trades is substantial. We offer this service through our 7 hour daily LIVE trading room http://bit.ly/135QWt8 or through Premium Twitter feed with all entries, exits, and unusual options activity tweeted all day long: http://bit.ly/11f0L9u .
Order flow can however at times be deceiving. One might logically thing that a large block buyer of calls is bullish on the underlying. This is not always the case. Remember that a large number of participants in the equity options market are hedgers. Long calls are a hedge against short stock, and long puts are a hedge against long stock. With this in mind we have developed a 7 step trading plan that helps filter out unusual option activity that will not provide actionable trade setups. It is by using this plan that we are able to identify the most significant unusual options activity trades every day.