The options were expecting about a $9.00 move in the stock and according to current prices, the move is going to be outside of that. The ‘at the money’ straddle was just about $9.50 too. Today’s move was basically unlikely, according to what the options were implying yesterday. LNKD is probably going to open up at a new all time high. Bullish fundamentals are paired with bullish management.
Analysts are moving around their PTs. BMO Capital Markets maintained LNKD at market perform, but raised its $130 PT. JEF held on to its buy rating and increased its PT to $170.
Last quarter GOOG’s earnings were leaked. This lead to unsure and volatile action, price’s reaction to this news was net bearish. Investors are hoping this doesn’t happen again. Of the last nine observations, excluding last quarter timing error, post EPS activity is mixed. In most of the sample set, six of the nine observations, GOOG gapped and pinned on expiration at a large round number. In the other observations, GOOG gapped, but then filled or reversed into said gap.
GOOG was around the $750 level before last quarter’s report. This report proved to be the catalyst for further downside action. After the report, GOOG shares came down to test the 200-day moving average. On this day specifically, shares formed a bottoming tail hammer and the following day printed a nice confirmation bar…shares have been in rally mode since.
The ATM (at the money) weekly $705 straddle (lifting the offer) is at about $42.00 (5.9% of stock). It is easy to calculate break evens on the straddle. At last check the stock was around $705; $747.00 & $663.00 are the respective upper and lower breakeven. Straddle traders need to be aware of fast weekly time decay and the IV crush post earnings. Implied volatility (IV) is a measure of risk, supply and demand, relative price, and an input into theoretical models for options.
The channel break may indicate that lower prices are ahead. A reasonable target could to the September 26th, 2012 gap. This gap is represented in the chart below by the white oval. If one was inclined to take a trade like this, it may be advantageous to sell the UNG ETF. The futures would be an organic way to play price moving down, but the UNG fund has structural problems. The ETF underperforms the future and has a 10-day correlation of only 0.88. This could be explained by the nature of the product.
As displayed below, natural gas has a positively sloped futures curve and as the fund rolls contracts they lose money; put simply.
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