First Business Interview 10.29.2012
Tag: $V
Max Out the Credit Card on Visa Volatility? 10.31.12
Visa has turned itself into a solid stock since its IPO in late 2008. V opened at $59.50 and is trading around $138 now… returning a cool 133%. The ride has been anything but steady however, the crash of 2008 and numerous regulation attempts have shaken some out of the trade, but the question remains…is IV too cheap for the week of a major catalyst like earnings?
Should one subscribe to history, the straddle has not been a profitable trade during earnings. As seen in the excel sheet below, buying the ‘at the money’ (ATM) straddle has been a loser five of the last six times…six observations because weekly options were not available prior to 5/5/11 before earnings. It is important to point out that the IV during these trades were all in line with the average, but now the IV is outside minus two standard deviations of the mean or 97.51% of the observations are above it. It may not be a prudent strategy to fade such low premium, as one may be selling into a hole. Fading the straddle is a popular trade among ‘gun slingers’, but the key variable in options, being implied volatility, may persuade one to think again…and maybe flip it as a long trade.
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Stocks Have Bad Breadth? 10.5.2012
The 50-day moving average is a popular way to measure short-term momentum and price trend. This line is the average closing price over 50 periods. This technical indicator can be perceived as the dividing line between a stock that is technically healthy and one that is not.
Of the stocks in the S&P 500, 371 or about 74%, opened above their 50 day moving average today. Today in the Dow Jones Industrial Average, 23 of the 30 stocks are opened today above their respective 50.
On the other hand, the 200-day moving average is an indicator of long-term trend. Here, stocks like the more economically sensitive like CAT and AA are very much so off their recent highs and under their 200 day moving average. The high today in AA just touched its 200-day and pulled back. While it may be tempting to pick bottoms in the losers, perhaps it is prudent to stay with the proven winners.
The chart below is an interesting indicator. While it may look like just scribbles or bar code on a chart, it actually represents the NYSE advancing declining bias on a daily basis. The yellow and blue lines are respectively the 50 and 200 day moving average. This chart is confirming the bullish sentiment and price action in the market. Basically it is important to watch the yellow line fluctuate relative to the blue, for it represents the average short term bias of issues (stocks).
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mark@keeneonthemarket.com“>mark@keeneonthemarket.com
Data courtesy of Thinkorswim