Tag: S&P 500 CBOE Unusual Options Activity Andrew Keene Equity Options
American International Group (AIG) saw profit in their fourth quarter rise by 77%. This was due to a big tax benefit. Shares are trading up 4.5% to $29.00. This could lift the financial sector as a whole tomorrow. Deckers Outdoor Corp. (DECK) is trading down pretty heavily. The company beat EPS and Revenue estimates but is still getting smacked. Stock is currently down 6.85% to $82.41. Good old Crocs Inc. (CROX) is getting hammered as well; this shouldn’t be a surprise to anyone. Only in America can the most hideous pair of clogs sell. Stock down 9.85% to $18.25 as CROX issued poor Quarter 1 guidance. The SPY closed at $136.70 after putting in a low at exactly $135.50. The trend of morning sell offs and afternoon buy programs stills seems to be the status quo for 2012. The SPY is up 7.5% for the year so far.
Written by Cameron Patrick
Trade: I bought the CRM March 120-140 Strangle and sold the Feb weekly 120-140 Strangle for $2.69 total.
Profitable: I make money on this trade if CRM closes between $120-$140 and the March volatility does not get crushed too bad.
Break-even: I break-even on this trade if CRM Stangle Swap is worth $2.69.
Unprofitable: This trade is unprofitable if CRM Strangle Swap is worth less than $2.69. This is a very hard trade to explain, but I basically want to the front month Strangle to be worthless and have March volatility not get crushed, so the March strangle is worth more than $2.69.
UPDATE 2.24.2012 I like to think of the earnings trades as one day bets, takes profits or losses then move on. I sold 25% of this Calendar spread for $3.15, 25% at $3.50 and I have half still on. I will take this trade off before the end of the day, but it looks like I will turn $2.69 into $3.50ish, good for 30% profit in one day.
Trade: I sold the DECK March 92.5-95 Call Spread for $1.05.
Profitable: I make money on this trade if DECK closes below $93.55 by March 16, 2012.
Break-even: I break-even on this trade if DECK closes at $93.55 by March 16, 2012.
Unprofitable: This trade is unprofitable if DECK closes above $93.55 by March 16, 2012. The most I can lose on this trade is the amount this spread can be worth $2.50 minus the amount I sold it for $1.05 for a total of $1.45
UPDATE 2.24.2012 With DECK getting slammed, this spread that I sold for $1.05 is now worth $.15. I put a $.05 bid in the “Order Book” to take the trade off and move on to the next one, another HUGE winner.
Trade: I sold the GPS March 24-25 Call Spread and 22-21 Put Spread for $.48 total.
Profitable: I make money on this trade if GPS Closes between $21.52-$24.48 by March 16, 2012.
Break-even: I break-even on this trade if GPS Closes at $21.52 or $24.48 by March 16, 2012.
Unprofitable: This trade is unprofitable if GPS Closes under $21.52 or above $24.48 by March 16, 2012. The most I can lose on this trade is the amount this spread can be worth $1 minus the amount I sold it for $.48 for a total of $.52.
UPDATE 2.24.2012 With GPS selling off and staying above $22, this spread is decreasing in value, because premium and volatility gets crushed after earnings. I put a $.30 bid in the “Order Book” and will be looking to take profits and move to the next trade.
Salesforce reports today after the bell . Quarterly earnings (Q4E) $.40 and Quarterly revenue (Q4E) $524M. Salesforce has a PEG of 3.7 and Forward PE of around $85. At this price I think CRM might be overvalued. SHLD ripped 10$ on reporting a $2.5 billion loss, hmmm.
Unusual Options Activity:
We saw a customer buying SNE JULY 22 and 23 Calls and sold the $16 Puts. In my opinion, this is very bullish activity.SNE is trading 9.5x average volume. Andrew Keene bought the July 23 Calls for $.95.
Also, we have seen a big sell order of 10,000 contracts of IAU on April 18 Calls for a $.25. This could be covering of a prior position or an outright short.
By: Greg Zimny
Moreover, Goldman Sachs announces that it is now long on WTI. Maybe it is the time to fade WTI Crude! According to Nancy Pelosi, “speculators are pushing the price of oil up and killing our economy and consumer. In fact, US oil production is at its highest level since 2003. We need to take strong action to protect consumers from this speculation.” It appears that a WTI crude oil margin hike is inevitable. WTI is at a fresh year high trading around the $107 level and appears that their appears to be real buyers and not jest people short covering. Finally, EUR/USD broke out of its trading range and is close to the $1.332 level.
AFTER THE BELL EARNINGS:
DECK: Quarterly Earnings and Estimates (Q4E)- $3.13 Quarterly Revenue(Q4E)-$562M. Deckers offer luxury shoes such as UGGs and multiple types of UGG accessories. Deckers Management reiterated their guidance after last quarter and stated, “pre- spring orders looking strong.” Expect a big move in one direction or another.
GPS: Quarterly Earnings and Estimates (Q4E)- $.42 Quarterly Revenue(Q4E)- $4.3B. Despite Gaps annual sales growth of $-1.75 for the last five years, could Gap miss analysts expectations and still run like Abercrombie is doing? Also, Gap is expanding into high-growth markets such as China, opening 30 new stores.
by: Greg Zimny