Month: January 2014

 

(see all trades this option cycle)

Daily Market Update – January 23, 2014 (Close)

What a day, but at least it was another good day to be Carl Icahn.

Oh, to be Carl Icahn.

While the market was getting everyone’s attention by being down more than 200 points at its lowest, just 30 minutes before the closing bell, Carl Icahn was sitting pretty.

eBay, the newest in the Icahn family, as we would find out later, was widely expected to have a throw away earnings report this quarter and analysts were expecting shares to fall 5% or more.

This was a company that barely two months ago was widely derided, yet like Caterpillar, which equally caught slings from everyone, just kept moving higher, at a time when the overall market was beginning to lose its way.

But I also thought that eBay would likely see shares fall at earnings and welcomed the idea, because that would bring it back to rollover price territory and eBay has been a great stock for that kind of play.

Instead, eBay took the opportunity to time the announcement of Carl Icahn having picked up a stake in the company and wanting two board seats for his less than 1% share of ownership.

Shares, of course, responded as they usually do when Icahn gets involved and went wildly higher in the after market, although settling down by the pre-open market this morning, yet heading in a direction opposite that of the broad market, which was looking to open trading with a triple digit loss.

Of course, he also owns Apple and has added another billion or so, timed perfectly with shares moving higher. Apple happens to report earnings next week.

Then there’s Netflix. Despite having sold of portion of his shares to take immense profits a few months ago, Icahn still owns about 4% of a company that just reported earnings and saw its shares climb 17% in the pre-open.

And then there’s the rest of us. The people who are unable to move a stocks price by virtue of a Tweet, although I must say I still get a thrill when I see an option sale executed and my trade represents 100% of the day’s volume at that moment in time.

For just that moment in time, I am the market.

Still, not quite Carl Icahn territory.

What is fascinating is that there is reportedly so much cash on the sidelines.

Carl Icahn has it. Companies have record amounts of cash even after record buybacks and reportedly there is still lots of money wallowing away in bonds or money markets.

At the moment it seems as if only investor activists and those share buybacks are able to maintain the market at these levels.. Whether its Dan Loeb, David Einhorn or Carl Icahn, the reality is that that are relatively few people that can create substantive movements in shares and even they have limited resources.

At the moment, Carl Icahn is involved in as many companies as can be imagined. It’s hard to envision him doing much more without dropping some other positions. Of course, a victory as with Netflix opens up lots of other opportunities and his continuing stake there could easily fuel more activity elsewhere.

Yet these high profile stock stories are bound to have a natural limit, just as share buybacks have their limits and are actually a poor use of money when shares are already so high, as has been the practice of companies such as Cisco and IBM.

So I keep asking myself what will propel the market forward and I keep having a difficult time coming up with an answer. But somehow the market has kept right on going, even when the fundamentals haven’t warranted the rise.

What is somewhat telling, and may confirm the role of Quantitative Easing, is that the market hasn’t been the same since the initiation of the taper has been announced.

The next challenge may simply be the announcement of an increase in the taper, thereby reducing the amount that the Federal Reserve introduces into the market.

At that point we may get back to the quandary of whether good news is bad and bad news is good.

In the meantime, earnings are relatively straightforward and guidance even more so.

Today, it was obvious that bad news was bad news. It takes more than Netflix to be a reflection of an economy that’s turning around..

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 23, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 23, 2014 (9:30 AM)

Oh, to be Carl Icahn.

eBay, was widely expected to have a throw away earnings report this quarter and analysts were expecting shares to fall 5% or so.

This was a company that barely two months ago was widely derided, yet like Caterpillar, which equally caught slings from everyone, just kept moving higher, at a time when the overall market was beginning to lose its way.

But I also thought that eBay would likely see shares fall at earnings and welcomed the idea, because that would bring it back to rollover price territory and eBay has been a great stock for that kind of play.

Instead, eBay took the opportunity to time the announcement of Carl Icahn having picked up a stake in the company and wanting two board seats for his less than 1% share of ownership.

Shares, of course, responded as they usually do when Icahn gets involved and went wildly higher in the after market, although settling down by the pre-open market this morning, yet heading in a direction opposite that of the broad market, which was looking to open trading with a triple digit loss.

Of course, he also owns Apple and has added another billion or so, timed perfectly with shares moving higher. Apple happens to report earnings next week.

Then there’s Netflix. Despite having sold of portion of his shares to take immense profits a few months ago, Icahn still owns about 4% of a company that just reported earnings and saw its shares climb 17% in the pre-open.

And then there’s the rest of us. The people who are unable to move a stocks price by virtue of a Tweet, although I must say I still get a thrill when I see an option sale executed and my trade represents 100% of the day’s volume at that moment in time.

For just that moment in time, I am the market.

Still, not quite Carl Icahn territory.

What is fascinating is that there is reportedly so much cash on the sidelines.

Carl Icahn has it. Companies have record amounts of cash even after record buybacks and reportedly there is still lots of money wallowing away in bonds or money markets.

At the moment it seems as if only investor activists and those share buybacks are able to maintain the market at these levels.. Whether its Dan Loeb, David Einhorn or Carl Icahn, the reality is that that are relatively few people that can create substantive movements in shares and even they have limited resources.

At the moment, Carl Icahn is involved in as many companies as can be imagined. It’s hard to envision him doing much more without dropping some other positions. Of course, a victory as with Netflix opens up lots of other opportunities and his continuing stake there could easily fuel more activity elsewhere.

Yet these high profile stock stories are bound to have a natural limit, just as share buybacks have their limits and are actually a poor use of money when shares are already so high, as has been the practice of companies such as Cisco and IBM.

So I keep asking myself what will propel the market forward and I keep having a difficult time coming up with an answer. But somehow the market has kept right on going, even when the fundamentals haven’t warranted the rise.

What is somewhat telling, and may confirm the role of Quantitative Easing, is that the market hasn’t been the same since the initiation of the taper has been announced.

The next challenge may simply be the announcement of an i
ncrease in the taper, thereby reducing the amount that the Federal Reserve introduces into the market.

At that point we may get back to the quandary of whether good news is bad and bad news is good.

In the meantime, earnings are relatively straightforward and guidance even moreso.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 22, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 22, 2014 (Close)

Earnings continue this morning and most of the early talk was about once invincible IBM, which will open weighing heavily on the DJIA.

While there’s still a lot of earnings to go, following the script set by the financials over the past few earnings seasons, the remaining sectors have been lagging, even when expectations are lowered.

One factor mentioned this morning was the cautious mood expressed by those reporting good earnings.

Certainly, when you hear that forward earnings may be impacted by a variety of factors even good last quarter numbers become meaningless. But if there seems to be agreement that the near term future will be challenging, what becomes the basis for sending the market higher? Where is the economic growth?

So far January 2014 seems to be taking that issue much more seriously than at any point in 2013.

This morning started in a very interesting way and saw some wild gyrations in a couple of stocks that I was following for earnings. In both cases I decided yesterday that the reward for making the trades prior to earnings didn’t offset the perceived risk.

But this morning after both Coach and Cree released earnings I was ready to make some short term trades, albeit with the sale of puts, rather than covered calls.

In one case, I was able to sell $48 puts on Coach, but before I could even get the Trading Alert sent, shares reversed direction and the premium was almost cut in half.

Then I did get a Trading Alert sent on shares of Cree. In that case, it reversed direction almost instantaneously with having sent the alert.

I always like looking at the 1 minute charts to see the really wild moves and wonder what causes such pronounced and sudden shifts. In some cases it’s panic and in other cases it’s just fear of missing out (FOMO). I can’t really understand what other factors might be involved, especially when there is significant volume.

For example, take a look at the 1 minute charts of both Anadarko and British Petroleum today at 10:07 AM.

What they had in common was buying from those with uncontrollable FOMO, as news came out that David Einhorn had established large positions in both. For the casual investor that should suggest that a very smart person believes that litigation liabilities for both of those companies have been defined and as such, are no longer real liabilities.

At the time of the Cree Trading Alert, at 9:40 AM, options were trading at 0.89. By 9:42 AM it was down to $0.57, then a minute later $0.40 and then another minute later was down to $0.34.

The Coach movement was actually more dramatic, because for 2 minutes it was trading hands at about $1.70 and then went straight to $0.60 and then in another 2 minutes was at $0.37.

In the case of Coach, it has almost a 2 year history of disappointing on earnings and then simply recovering. Although it’s easy to be wrong, I didn’t expect shares to go much lower than where the pre-open trading had it. I was surprised, however, to see how quickly it had recaptured much of the early loss.

Cree, on the other hand started with a nice gain after yesterday evenings earnings release, but saw it pared a little in the pre-market.

It opened nicely higher, but then gave up much of the gain. At that point I thought it was a good time to sell puts expiring in just 3 days. Apparently at about the same time someone, possibly a single buyer, thought it was a good idea picking up shares, that maybe they thought were bargain priced. The option volume also jumped very quickly, normally suggesting that money was following other people’s money.

However, in this case, much of that option volume was in this Friday’s expiration.

That suggests that the very same people who bought shares also bought the options, because there’s otherwise too much of a risk of buying blindly options that expire in less than 3 days.

Not my problem, I suppose.

Unfortunately.

What I do know, however, is that while we hear and see significant spikes in option volume on short term contracts, most often they end up expiring worthless or are rolled over by the buyer, who adjusts his thesis by increasing the time frame.

Those are the kind of people that I like selling my options to.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 22, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

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See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 22, 2014 (10:45 AM)

Earnings continue this morning and most of the early talk was about once invincible IBM, which will open weighing heavily on the DJIA.

While there’s still a lot of earnings to go, following the script set by the financials over the past few earnings seasons, the remaining sectors have been lagging, even when expectations are lowered.

One factor mentioned this morning was the cautious mood expressed by those reporting good earnings.

Certainly, when you hear that forward earnings may be impacted by a variety of factors even good last quarter numbers become meaningless. But if there seems to be agreement that the near term future will be challenging, what becomes the basis for sending the market higher? Where is the economic growth?

So far January 2014 seems to be taking that issue much more seriously than at any point in 2013.

This morning started in a very interesting way and saw some wild gyrations in a couple of stocks that I was following for earnings. In both cases I decided yesterday that the reward for making the trades prior to earnings didn’t offset the perceived risk.

But this morning after both Coach and Cree released earnings I was ready to make some short term trades, albeit with the sale of puts, rather than covered calls.

In one case, I was able to sell $48 puts on Coach, but before I could even get the Trading Alert sent, shares reversed direction and the premium was almost cut in half.

Then I did get a Trading Alert sent on shares of Cree. In that case, it reversed direction almost instantaneously with having sent the alert.

I always like looking at the 1 minute charts to see the really wild moves and wonder what causes such pronounced and sudden shifts. In some cases it’s panic and in other cases it’s just fear of missing out. I can’t really understand what other factors might be involved, especially when there is significant volume.

AT the time of the Cree Trading Alert, at 9:40 AM, options were trading at 0.89. By 9:42 AM it was down to $0.57, then a minute later $0.40 and then another minute later was down to $0.34.

The Coach movement was actually more dramatic, because for 2 minutes it was trading hands at about $1.70 and then went straight to $0.60 and then in another 2 minutes was at $0.37.

In the case of Coach, it has almost a 2 year history of disappointing on earnings and then simply recovering. Although it’s easy to be wrong, I didn’t expect shares to go much lower than where the pre-open trading had it. I was surprised, however, to see how quickly it had recaptured much of the early loss.

Cree, on the other hand started with a nice gain after yesterday evenings earnings release, but saw it pared a little in the pre-market.

It opened nicely higher, but then gave up much of the gain. At that point I thought it was a good time to sell puts expiring in just 3 days. Apparently at about the same time someone, possibly a single buyer, thought it was a good idea picking up shares, that maybe they thought were bargain priced. The option volume also jumped very quickly, normally suggesting that money was following other people’s money.

However, in this case, much of that option volume was in this Friday’s expiration.

That suggests that the very same people who bought shares also bought the options, because there’s otherwise too much of a risk of buying blindly options that expire in less than 3 days.

Not my problem, I suppose.

Unfortunately.

What I do know, however, is that while we hear and see significant spikes in option volume on short term contracts, most often they end up expiring worthless or are rolled over by the buyer, who adjusts his thesis by increasing the time frame.

Those are the kind of people that I like selling my options to.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 21, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 21, 2014 (Close)

With everyone of any importance being in Davos for the 2014 Global Economy meeting, it’s a good week to have almost no economic news scheduled to be released.

Instead, it’s a week of photo opportunities in the snow and dealing with the avalanche of earnings, not to be confused with actual avalanches in the Swiss mountain resort of Davos.

Starting the week is unexpected news that activist Dan Loeb is taking a stake in Dow Chemical. He was very successful recently in Yahoo!, probably getting out way too early and then not quite as successful with his interest in Sony.

Dow Chemical was a stock bought 9 times in 2013 and another 7 times in 2012. I was anxious to buy it again, but it suddenly is set to escape its longstanding mediocrity in its trading which is more than a decade long.

While I hate seeing a reliable stock get removed from rotation, this is an important bit of news, based on Dow’s market capitalization. Although Yahoo! is now a $40 billion company, it was far from that when Loeb became involved. Dow Chemical is already a $52 billion company and Loeb’s ownership is “only” about 2% of the market capitalization

That kind of commitment to a company that is closely tied with economic growth and expansion is a vote in that direction. The vote is in the way that counts most; with Loeb’s own money.

While no one has a crystal ball, Loeb’s interest in Dow Chemical is interesting in what many think is the very late stage of a stock market bull run. Clearly, Loeb doesn’t believe that the top is near.

What we don’t know is what Loeb’s time frame is, as he has shown the inclination to move on. The longer his time frame, the less relevance his actions have on how to look at tomorrow or the day after.

Given some of the details surrounding Dow Chemical’s Board of Directors, it appears as if there is almost a year before any board seats could be gained, so in the interim the changes at Dow, if any should be slow and strategic in nature.

That means that even if Dow has escaped its trading orbit and gone to a new level, it may still be attractive even at that higher level, as its option premium is likely to increase and it has a nice dividend.

But that’s a consideration for tomorrow or the day after.

Today the consideration is just how real the pre-market climb is and how much staying power it has. No doubt the Dow Chemical news adds fuel to whatever nascent buying there has been lately.

As it would turn out there was no staying power, but the market recovered most of its early losses. Ib fact, the broad market did much better than the narrow DJIA and was up for the day.

With the start of the February cycle and already having this week’s option expirations populated, as well as some for the following week, the goal will be to continue that diversification, where possible.

At about 40% in cash, I’m again willing to get down to the 25% level, but not too likely to jump in on a strong open for the week and more likely to want to stick to lower volatility names, although some of the earnings trades do look a little tempting.

For now, though, the focus is still on reasonable safety, premiums and dividends while waiting for some sign of direction that has been slow in coming since the start of the New Year.

Unfortunately, today wasn’t the kind of day to easily identify many prospects. With a trade shortened week the premiums were already 20% lower and volatility went down even further today, taking premiums with them.

As much as I wanted to grab some more dividends, I just couldn’t justify those trades today. The same applies to those positions reporting earnings after tod
ay’s closing bell or before trading tomorrow. In those cases, however, the premiums were good, but I don’t like making the trades when those stocks are moving higher.

On the other hand, as some prices did fall today, other potential opportunities may be creating themselves, such as Starbucks, which was downgraded in advance of earnings Thursday afternoon and has already fallen about 7% in the past week.

Tomorrow is another day.

 Access prior Daily Market Updates by clicking here

 OTP Sector Distribution* as of January 21, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 21, 2014 (9:45 AM)

With everyone of any importance being in Davos for the 2014 Global Economy meeting, it’s a good week to have almost no economic news scheduled to be released.

Instead, it’s a week of photo opportunities in the snow and dealing with the avalanche of earnings, not to be confused with actual avalanches in the Swiss mountain resort of Davos.

Starting the week is unexpected news that activist Dan Loeb is taking a stake in Dow Chemical. He was very successful recently in Yahoo!, probably getting out way too early and then not quite as successful with his interest in Sony.

Dow Chemical was a stock bought 9 times in 2013 and another 7 times in 2012. I was anxious to buy it again, but it suddenly is set to escape its longstanding mediocrity in its trading which is more than a decade long.

While I hate seeing a reliable stock get removed from rotation, this is an important bit of news, based on Dow’s market capitalization. Although Yahoo! is now a $40 billion company, it was far from that when Loeb became involved. Dow Chemical is already a $52 billion company.

That kind of commitment to a company that is closely tied with economic growth and expansion is a vote in that direction. The vote is in the way that counts most; with Loeb’s own money.

While no one has a crystal ball, Loeb’s interest in Dow Chemical is interesting in what many think is the very late stage of a stock market bull run. Clearly, Loeb doesn’t believe that the top is near.

What we don’t know is what Loeb’s time frame is, as he has shown the inclination to move on. The longer his time frame, the less relevance his actions have on how to look at tomorrow or the day after.

Given some of the details surrounding Dow Chemical’s Board of Directors, it appears as if there is almost a year before any board seats could be gained, so in the interim the changes at Dow, if any should be slow and strategic in nature.

That means that even if Dow has escaped its trading orbit and gone to a new level, it may still be attractive even at that higher level, as its option premium is likely to increase and it has a nice dividend.

But that’s a consideration for tomorrow or the day after.

Today the consideration is just how real the pre-market climb is and how much staying power it has. No doubt the Dow Chemical news adds fuel to whatever nascent buying there has been lately.

With the start of the February cycle and already having this week’s option expirations populated, as well as some for the following week, the goal will be to continue that diversification, where possible.

At about 40% in cash, I’m again willing to get down to the 25% level, but not too likely to jump in on a strong open for the week and more likely to want to stick to lower volatility names, although some of the earnings trades do look a little tempting.

For now, though, the focus is still on reasonable safety, premiums and dividends while waiting for some sign of direction that has been slow in coming since the start of the New Year.

.

 Access prior Daily Market Updates by c
licking here

 OTP Sector Distribution* as of January 17, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

See all Trade Alerts for this monthly option cycle

 

(see all trades this option cycle)

Daily Market Update – January 19, 2014 (Close)

The Week in Review and the Weekend Update are now posted.

Markets will be closed on Monday in honor of Dr. Martin Luther King, Jr. Day.

.

Access prior Daily Market Updates by clicking here

OTP Sector Distribution* as of January 17, 2014

 * Assumes equal number of shares in positions

Posting of trades is not a recommendation to execute trades

Friday? See Week in Review for summary statistics and performance

Sunday? See Weekend Update for potential stock choices for coming week

Any day? See Performance for open and closed positions

Subscribers may see  ROI statistics  on all new, existing and closed positions on a daily updated basis

 

See all Trade Alerts for this monthly option cycle