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Morning Rage 9.26.2012

Dow futures are down twenty-two, S&P futures down three and a quarter, and Nasdaq futures are down nine and a quarter. Crude, metal and grain futures are all down as well. Crude futures are down a buck-seventeen, gold is down five and a half and silver is down twenty-two cents.

Yesterday was a bearish day in most sectors with most major tech and financial stocks down for the day. Google (GOOG) started the day off well, moved up to a new high, but lost all of its gains for the day and ended slightly lower. Apple (AAPL) continues to lose ground from its strong couple of weeks in early September as negative news continues to come out against the iPhone. I guess five million units sold is negative news for the iPhone 5. Delays for new units may be a problem as the riots at Foxxcon, where the iPhone and iPad are made, are investigated further.

I saw a couple of inside buys in oil companies last night in my own research which is leading me to considering a bullish trade in oil or at least keeping an eye on the price to see if it jumps upward at all in the near future.

New home sales report comes out today at 10:00am EST. Analysts expect a positive growth of 10,000 newly constructed homes with a committed sale, a gain of about 2.5%.

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

Look for the associate option pick of the day competition on the blog.

Email me if you would like a free trial into the KOTM Trading Room: alexk@keeneonthemarket.com

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Associate Option Battle 9.25.2012

Trade: Buying 8 Lots of BBY Oct 62.50 – 67.50 – 70.00 Iron Butterfly

Risk: $1.22 or $122 per one lot

Reward: $3.78 or $388 per one lot

Break Even: $63.72 (current price 62.36)

Why I like this trade: BBBY gapped down after a poor earnings trade. In the past, it has made up this gap eventually and I expect it to do the same here especially with strong consumer confidence. I like the iron butterfly because the call spread helps to pay for the put spread making my break even lower without any upside risk. Reward and Risk ratio is about 3:1.

Associate Jim’s Trade

Trade: Buying 25 Nov12 SPY 148-151-154 Call Fly for $.40

Risk: $40.00 per 1 lot

Reward: $260 per 1 lot

Breakevens: $148.40 and $153.60

I like this trade because I only have to pay $.40 for a chance at a $2.60 reward.  I think the market is going to grind higher throughout the rest of the year and this trade has a good risk v. reward setup.

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

Alex Kalish has a masters degree in economics from Suffolk U.

James Ramelli has a B.S. in finance from UIUC

 

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Earnings Play of the Day Jabil Circuit (JBL) 9.25.2012

The 52-week range is 15.65 to 27.40 and the stock is currently sitting around the center of its trading range. The stock hit its high in March this year and fell more than $5.00 by the end of May and early June. Since then, the stock has rebounded slightly but has not made it back over $25. Dividends have released once a quarter, and have been steady at $0.08 for the past year. The last dividend increase, $0.01, was in November of 2011.

Trade:  Selling the October 20-19 Put Spread for $.30

Risk: $70 per 1 lot

Reward: $30 per 1 lot

Breakeven: $19.70

 JBL Earnings Trade

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Jetblue (JBLU) Covered Call 9.25.2012

Revenue growth reported by the company has shown in their earnings. Two out of the last three earnings beat expectations with the last earnings report up twice as much from the 2011 levels. Yearly earnings from 2011 were down from 2010, but expected earnings for 2012 are expected to grow $0.21. Annual revenues have grown as well, with expectations of $5.0 billion in sales for 2012.

JBLUE opened today at $4.98 and is trading between $4.93 and $5.03. The 52 week range is $3.40 to $6.32. The stock hit its 52-week high around February and has been on a slight decline since, but generally has stayed around $5 for the past three months. The stock hit its low in November 2011. JBLUE’s market cap is $1.41 Billion.

My covered-call trade is to buy the stock at $4.96 and sell the Jan13 5 Calls for a credit of $0.40.

Breakeven: $4.56

Max Profit: $0.44 (+8.87%)


JBLU Chart