Options Trading Blog
Options Trading Tips and Strategies
Break-even: I break-even on this trade if JCP closes at $33.70 by May 18, 2012.
Unprofitable: This trade is unprofitable if JCP closes under $33.70 by May 18, 2012. The most I can the amount either spread can be worth $1.00 minus the amount I sold it for $.30 for a total of $.70.
Reason I Like This Trade: I wanted to take advantage of the fact that a customer bought 10,000 JCP May 38 Calls for $.91. I thought this was the prefect time to get LONG, but I always want to define my risk vs reward and would prefer not to buy premium in this environment, so I sold a Put Spread.
UPDATE 4.4.2012: Even with the huge sell-off in equities, I am sticking with this trade. It is currently worth $0.32 for a small losing position.
UPDATE 4.9.2012: With JCP selling off hard, this Spread is currently worth $.45. I think the stock can rally higher, and I guess this was another Call Buyer to get Short the stock. I will leave this spread on until earnings
UPDATE 4.16.2012: This Put Spread is currently worth $.49 and with the market uncertain, I might look to take this trade off right before earnings, but not until it.
UPDATE 4.23.2012 This Put Spread is worth $.60 and since it LONG premium I would take it off here.
Oil, which fell sharply last week to test support above $100, is rallying 1.6% to near the $105 p/barrel mark. Even natural gas futures are seeing a bid today as the front-month contract gains 1%.
Despite some usual signs of risk, currency markets are offering a muted reaction. EUR/USD is down 20 pips on the day to 1.3320, while USD/JPY has dropped 70 pips to 82.17.
In unusual options activity, there is interest in Carmax (KMX) April $34 calls, seeing large trading volume over the open interest. KMX is trading up 0.75%, while the April $34 calls are higher by 18%.
Crude hit an intraday high shortly after noon – hitting a high of $104.15 before dropping $1 to close trading at $103.12. Natural gas fell another 1.3% in trading to a fresh 10-year low of $2.1220.
Some seasonalities to keep in mind for April:
– First day of trading in April is up 14 of the past 17 years
– April is historically the best month for the DJIA, averaging 2% gain since 1950
– 30yr TSY bonds make seasonal lows towards the end of April
– EUR has weakened in April for three of the past four years
By Mark Meadows
Crude futures are holding below resistance at $103.80, but in positive territory for the session. Natural gas futures, which hit a 10-year low yesterday, are relatively flat on the session.
Here are some breakdowns at the moment of rough estimates for quarterly performance:
S&P 500: +12.1%
Natural Gas: -28.2%
Relative to the US$, here is a breakdown of currency performance. As you can see, JPY was the only major currency to cede ground against US$ over the quarter:
With end of quarter trade this afternoon, we could see a barrage of orders coming through towards the end of the day, adding to intraday volatility and perhaps presenting some interesting trading opportunities.
Equity markets are bid in pre-market activity. S&P 500 futures are trading nearly 6 handles higher to 1,404, while DJIA futures gained 50 to 13,128. With the quarter ending today, we look at the 1,400 level in S&P futures as an indication of whether bullish sentiment will continue in April. RIMM shares, which initially fell 2% following a fourth quarter loss, are currently indicated to open 1% higher.
Oil and Natural Gas are both 0.5% higher to $103.60 and $2.1570. Expect front-month crude futures to experience some resistance at $103.80/90 – formerly a point of support.
EUR/USD rallied into the close with the rise in equity markets.
RIMM earnings will be released today, and the stock was moving higher in after-market activity before it was halted.
Tomorrow, end of quarter flows will dominate. In terms of levels, a close above 1,400 in the S&P would be bullish moving into April.