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Associate Option Battle 10.2.2012

Associate Jim

Trade: Buying 40 FDO Oct 60- 57.5 Put Spread for $0.25

Risk: $25 per 1 lot

Reward: $225 per 1 lot

Breakeven: $59.75

Notes: The stock has sold off hard twice in the past four quarters both after beating estimates. The stock has been rallying but I think it will test lower after earnings.

Associate Alex

Trade: Buying 4FDO strangle swap by buying the Nov 62.50 Put – 67.50 Call strangle and selling the Oct 62.50 Put – 67.50 Call strangle for a net debit of $2.45

Risk: $245 per 1 lot

Reward: Unlimited

Notes: I expect the stock to stay within the strangle till October expiration, making the strangle worthless, and then to continue the direction further into November.

Alex has a master’s in economics from Suffolk U.

Jim has B.S. in finance from University of Illinois Champaign-Urbana. 

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October Seasonal Stock Performance 10.2.2012

Sectors that perform well when bought in the beginning of October include banking, computer tech, healthcare. Tech stocks that are depressed, are most profitable when bought at the end of October. In the middle of October, the best performers are materials, pharmaceuticals while oil performs well if bought at the end of October.


The second week of October tends to be strongly bullish, and the monday before October expiration, on the 15th this year, the dow has been up 25 of the last 31 years. However, on expiration day, the dow is down six straight and seven of the last eight.

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Apple is Not Perfect: Maps App Disappoints 10.2.2012

In actuality, only 0.55 percent of all iPhone 4 users complained to the company about the issue, and the number of phones returned to Apple was only 1.7 percent; 4.3 percentage points less than the number of iPhone 3GS models that were returned in the first month of that phone’s launch.

So in case you missed it, AAPL basically started to use their own data for the new map app in the iOS update, as opposed to GOOG data, and some 3D satellite images and directions were botched…and that’s it. Many strategic speculations can be pulled from this news, but basically it is an example of AAPL’s push for dominance in the app space they pioneered. Apple obviously wants to own the app tiles on your iPhone screen and the map function was ripe for the taking. The app market is a pretty organic, considering the low barriers to entry. Anyone who wants to make an app can readily develop one and have the marketplace decide if it is good. Should an entrepreneur be discontent, he or she is not held back by AAPL. If we have learned anything from Steve Jobs it is not to accept the status quo and keep pushing, for new frontiers await.

In order to remain unbiased, it is important to look at what the market said during this period. For us, it always boils down to the trade. AAPL longs hope this will blow over quickly before the media cycle really takes a hold on the story and puts a new ‘headline risk’ into the stock. Shares are off some 6% from the all time high, but with the rumored iPad mini coming out in a while, that high could soon be violated. Google longs could probably care less, for every day GOOG seems to push against a new high; and at last check GOOG was $3.00 away from said high.

In related news, AAPL analyst Shawn Wu at Sterne Agee said that iPhone yields are going to move positively with volume. The firm went on to reiterate the strong product cycle and a buy rating on AAPL shares with a $840 price objective despite map app concerns.

E-mail the author with any comments, questions, or any inquiry

mark@keeneonthemarket.com

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Morning Rage 10.2.2012

Crude oil is up slightly, an eighth of a point, and gold and silver are both down, two and a half points and sixteenth of a points respectively. Platinum is down eight points. Corn is down three and a half points.

The Mosaic Company (MOS) will report its quarterly earnings before the bell this morning. MOS is currently trading at 58.01 up more than ten points since June and trending slightly up in the past week before earnings. Mosaic has moved around 3-4% on earnings and has missed three of the last five estimates.

Motor vehicle sales reports come out today, but otherwise, no major economic announcements are expected today.

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Associate Option Battle 10.1.2012

Notes: I like this trade because I think Amazon is in a stall period and if I make money on the front month when it expires, I get a cheap ITM Call, if I want to hold on to the back month, on a stock that has shown impressive growth.

Associate Jim’s Trade

Trade: Buying 9 MON Oct12 92.50-97.50 Call spread for $1.05

Risk: $105 per 1 lot

Reward: $395 per 1 lot

Notes: Bullish trade ahead of earnings on Wednesday, stock rallied 3 out of the last 4 earnings.  I expect the stock to rally after earnings and I think this trade has a good risk vs. reward profile.

Alex Kalish has a masters degree in economics from Suffolk U

Jim Ramelli has a B.S. in Finance from UIUC