I watch 3200 Stocks Trade everyday and I look for Stocks with Huge

Unusual Volume and I trade using the OCRRBTT Trading Plan.  Today

I saw paper buy 19,300 CBI April 55 Calls for $1.00 which was 12.2

times the Usual Volume, so I go through my Trading Plan

O: Options Volume vs Open Interest, 19,3000 vs 262

C:  Chart looks Very Bullish for a Breakout even higher

My Trade:  Buying the CBI April 55 Calls for $1.00

R: Risk: $100 per 1 lot

R: Reward: Unlimited

B: Breakeven: $56

T: Time: April

T: Target: Will take off 1/2 at Double then leave the other 1/2 until Expiration

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Andrew Keene
President/Founder KeeneOnTheMarket.com

AKAM seems to be a way to play on the cloud-computing trend. Cloud companies tend to trade at a higher multiple than traditional tech. The recently released SKYY ETF, which tracks the cloud computing industry, has an average PE multiple of over 33x EPS for a company inside the ETF. AKAM trades at a significant discount to this average. Akamai’s “Cloud Performance Solutions” are designed to, “provide on-demand access to applications and resources anywhere…cloud computing offers businesses significant cost savings, and operational scalability,” says the company.

With regard to bottom line EPS performance. AKAM has had the tendency to beat Wall Street expectations. Over the last six observations (quarters), AKAM has posted positive EPS results over the streets’ expectations. The average beat is 6.6% over the same sample.

Other risks include general pricing trends. While there are very strong secular trends for AKAM (like the mobile tsunami), pricing is a key component for the stock. Renewal waves may keep the peeks and valleys of AKAM’s prices volatile to moving downward…a massive risk

But shares have been rather volatile. AKAM recently made a low of $20, so investors should be cautious. Another catalyst includes earnings. It is important to note that AKAM has earnings February 6^th of 2013 after the close. The February options, that include earnings, are implying a $4.00 range in the stock by the third Friday of February (expiration day). This is roughly a 10% move up or down.

salerno.mark.a@gmail.com

Lets start with Apple… its obvious that they have enough cash to buy Twitter up whenever they want to, but would they pay up? If you were looking at their track record, you would say no. But, Steve Jobs is not in charge anymore. The times of no major acquisitions could be over if Twitter entices Tim Cook enough. Personally, I think Cook would be willing to make the move…he’s already introduced dividends, and Jobs was obviously not willing to do that during his time. So why would shelling out 5-10 billion be any different?!

Apple already has the iPad, iPhone and Macs to immediately implement Twitter if they decide to make the move. The way all of their devices are currently connected to each other is mind blowing, and if they could figure out a way to weave social media into their products, it could be the next jump Apple needs to take to separate them from competitors.

How does Google fit with Twitter? Well, they have already tried their own social media aspect, Google+, and that has not worked out for one second! I do not know anyone who ever signed up for it and who currently uses it. But, that is not the point, the point is, is that they have tried to get into that business, but failed. Who says that they still don’t want to get back into it? They certainty have the cash to buyout Twitter, but would they make that move? Sure, they acquired Motorola for billions and look at what they’ve done with them?! Nothing! That doesn’t say they don’t have plans for the long term with Motorola, but in the short run it doesn’t look that way. Twitter is no different in my eyes; they could acquire them for ‘X’ amount and sit on them for a little bit before they introduce how they will be used.

Currently, Apple makes the most sense to acquire Twitter, but Google is right behind in second place. Look for the acquisition later on in 2013….

Author: Peter Nitso

pnitso@yahoo.com

Twitter: @PeterNitso 

From a more psychological standpoint, humans are naturally lazy and gravitate towards entropy. A retail investor may use a large round number as a cognitive reference point; more or less a ‘psychological stop’ or ‘buy point’ that is easy to remember. This level may or may not have any fundamental or technical significance, but perhaps it is used because we find comfort in easy mathematics. There are probably multiple HFT algos (high frequency trading algorithms) hunting stops and orders at large round numbers like $500, but I digress.

 What is the trade on large round numbers and what may cause these large round numbers to eerily occur on Fridays? The answer is pin risk from the derivatives market.    

On the third Friday of September 2012, or 09/21/12, AAPL made its all-time high of $705.07. This was interestingly enough options expiration too. Shares were up early in the day, but came back down to close at $700.10! During September of 2011, a similar analysis was done, because AAPL was a mere 1% away from a new ATH too. Lone behold on that expiration Friday AAPL pinned right on $400. (Not to mentions last week’s close of $500 too!)

In September of 2010 AAPL pinned directly equidistant from the $270 and $280 strike. Then in September 2009 AAPL pinned right on $185. It seems as though AAPL likes to pin at large numbers. This could only potentially get stronger, because traders and investors have flocked in herds to AAPL options to speculate and hedge.

A trade off of this could be butterflies or calendars; with short strikes at the large round number of interest. The maximum profit zone for these trades is always at the short strike.

salerno.mark.a@gmail.com

In short…probably not.  The VIX hit a 52 week low on Friday and inversely the SPY hit a 52 week high. This should be expected because of the nature of the VIX and option pricing. It is interesting to note however that we may be getting close to historic lows, which are immensely interesting.

The VIX made a low of just about $10 in 1994. The index tested this low again back in 1996 too and respected it. This was just a few years before the Asian crisis and the explosion of LTCM. The VIX then trended between about $17 to $30 during 1999 until early 2001. Enron and the iraq war brought the VIX back up to LTCM highs, but then eventually retreated back to the aforementioned $10 level in mid-2005. The $10 level held a few times during the 2006/2007 housing bubble complacency era..then exploded to all-time highs.

There are a few take always from this historical exercise. The VIX obviously hits its low during times of extreme bullishness and complacency, but that does not make it a raging ‘buy.’ One would go broke buying out of the money (OTM) calls on the VIX every time it hit the $10 level. The VIX takes time to level out. During this time, the next bubble or crisis is brewing.

For us now, this is potentially the Japan debt crisis (as Kyle Bass so eloquently explains), or maybe the consequences of QE…who knows.  The only thing traders do know is that the VIX has respected the $10 level historically, and after some time muddling around this level… something hits. Perhaps the best thing traders could do is sit still and remove themselves from the market in order to take a fresh look at things and avoid the confirmation bias.

salerno.mark.a@gmail.com