Tuesday, July 5, 2011

Morning Note

July 5, 2011

Equity futures are trading above fair value after the US July 4th holiday. Stocks were little changed in Asia as relief over a potential Greek crisis was overshadowed by a Moody's report saying Chinese bank debt was worse than feared as well as more interest rate hikes as whisper numbers of a high CPI print made their way through the market.

Libor fixings 

- Overnight Libor: Dollar: 0.125% vs prior n/a ; Sterling: 0.566% vs prior 0.566%; Euro: 0.873% vs prior 0.846%
- 1-month Libor: Dollar: 0.185% vs prior n/a; Sterling: 0.628% vs prior 0.628%; Euro: 1.298% vs prior 1.294%
- 3-month Libor: Dollar: 0.246% vs prior n/a; Sterling: 0.826% vs prior 0.826%; Euro: 1.514% vs prior 1.506%

Aug WTI crude +$0.65 to $95.60

Natural gas +$0.04 to $4.35

Gold $6.30 to $1502.50

10-year yield 3.158%
30-year yield 4.377%

Asian Markets

With little direction out of the US, most Asian markets traded in a tight range today. With US participation also low due to the Independence Day holiday, volume and conviction levels were low. Moody's issued a report saying the problems at Chinese banks were worse than feared but this didn't have a huge effect on the markets. China was flat after the Moody's report and rumors of interest rate. Taiwan was flat as DRAM companies Nanya Technology (2408.TT) and Inotera Memories (3474.TT) fell 5% each after posting June sales that were lower than the previous month. Japan was little changed, despite yen weakness as banks continued to rise after a respite from Greek sovereign woes. Hong Kong was flat as negative sentiment from the Moody's report and rumors of more Chinese interest rate hikes put a lid on the market. Australia leaves cash rate unchanged at 4.75%, as expected. Australia fell slightly as an industry group released a report that the services industry had contracted for the tenth month out of the last 12. Australia May trade balance +A$2.33B vs revised A$1.62B seq. Japan May total labor cash earnings +1.1% y/y vs (1.4%) seq. The yen is trading at 81.10 to the US dollar.

European Markets

European indices are trading mixed, with banking stocks continuing to trade among the main decliners on worries over sovereign debt. Insurers are trading slightly higher after having been under pressure yesterday after the EU's stress test stated that a tenth of Europe’s insurance companies have failed the test, though the regulator declined to name them. UK June Services PMI 53.9 vs consensus 53.5 and prior 53.8. Germany June Services PMI 56.7 vs consensus 58.3 and prior 58.3. Eurozone June Services PMI 53.7 vs consensus 54.2 and prior 54.2. France June Services PMI 56.1 vs consensus 56.7 and prior 56.7. Eurozone May retail sales (1.9%) y/y vs consensus (0.5%) and prior revised to +0.8% from +1.1%. The pound and the euro are trading at $1.6105 and $1.4480 respectively.

Today's Economic Releases (Eastern Time)

07:45 US ICSC-Goldman Chain Store (02-Jul); consensus n/a
08:55 US Redbook Chain Store (02-Jul); consensus n/a
10:00 US Factory Orders (May); consensus +0.8%
16:30 US API Crude Inventories (01-Jul); consensus n/a 

Today's Key Events (Eastern Time)

08:30 NetScout Systems guides Q1 EPS: 866.701.8242 or 763.416.6912 pc 81233774
—:— Accenture (ACN) will replace Marshall & Ilsley (MI) in the S&P 500 - after the close
—:— FDA PDUFA (est): Class 2 Resubmission of NDA for Xarelto (rivaroxaban) for the prevention of DVT and PE in patients undergoing hip/knee replacement surgery
—:— World Conference on Lung Cancer 

Company Specific News

CAP.FP (Capgemini acquires 100% of AIVE Group. AIVE Group is an Italian IT services provider
PP.FP (PPR becomes majority shareholder of SoWind group)
SUG / ETE (Energy Transfer revises agreement to acquire Southern Union for $8.9B, including $5.1B in cash and ETE common units)

FPO (First Potomac Realty files mixed securities shelf of indeterminate amount)
HPP (Hudson Pacific Properties files $1B mixed securities shelf. The shelf registers of common stock, preferred stock, depositary shares, warrants, rights and units)
MN (Manning & Napier files $250M IPO through BofA. Manning & Napier is an independent investment management firm that provides a broad range of investment solutions through separately managed accounts, mutual funds and collective investment trust funds. The company hopes to trade under the symbol MN, although it did not discloses an exchange.)
MVIS (Microvision files $35.0M equity shelf)
TWO (Two Harbors Investment files $1.5B mixed securities shelf. The shelf covers common stock,.preferred stock, depositary shares and debt securities)

Management Announcements / Changes
BWC (Babcock & Wilcox SVP and CFO Michael Taff to resign. Taff's employment agreement with Babcock & Wilcox will terminate 30-July.)
SLF (Sun Life Financial CEO to retire 30-November 2011. The board of Sun Life Financial announced that Donald A. Stewart, CEO, will retire on November 30, 2011. Stewart will also retire from the Sun Life board in accordance with company policy.)

Newspaper Articles / Headlines

The Trader: Discusses last week’s 5.6% rally and progress on Greek debt and highlights investors concern about Juniper Networks (JNPR)
- International Trader (Europe): Argues that last week’s second bailout of Greece is only a temporary solution
- International Trader (Asia): Rediff (REDF) is a long-term play
- Current Yield: Investors forecast Treasury yields for H1 of 2011
- The Striking Price: Discusses preparing for Q2 profit reports; focuses on Google (GOOG)
- Commodities Corner: Highlights the IEA’s decision to release 60M barrels of oil from strategic stockpiles to offset the loss of oil supplies from Libya and why it might not be the best cure.
- Up and Down Wall Street: Discusses last week’s second bailout for Greece, its impact on Wall Street and why it’s more likely a short term bounce than a permanent solution
- StreetWise: Highlights instruments investors can use against “tail risks”
- Technology Trader: Discusses Sprint (S)
- Plugged In: Discusses California’s law that lets Sacramento collect taxes from out-of-state e-commerce sites that do business with in-state Web affiliates; highlights Amazon (AMZN), Barnes and Noble (BKS) and Wal-Mart (WMT)
- Electronic Investor: Highlights websites that help keep pace with the significant number of market-sentiment gauges
- D.C. Current: Discusses the Dodd-Frank Wall Street Reform and Consumer Protection Act
- ETF Focus: Concerns about Greek debt were eased and last week was first week since early May that investors put more money into the ETFs focusing on foreign stock than they had pulled out.
- Speaking of Dividends: General Mills (GIS) increased its dividend by 9%
- Follow- up: Highlights Nike (NKE) and Coventry Health Care (CVH)
- Barron's profile features Andy Knuth and Ed Nicklin of Westport Select Cap. Barron's notes that Knuth and Nicklin are small-cap investors who only buy stocks with market capitalizations under $2B. The article notes that Knuth and Nicklin prefer to buy shares of companies that are coming off some bad news and that the company's top 10 holdings include: PCP, UHS, WSH, DV, BIG, DRI, ESI, IPGP, JW.A, PXP.
Barron's feature cautious on Under Armour. Barron’s argues that Under Armour's (UA) stock could fall to the mid-60s if the company is unable to ease investors concerns about Under Armour's business. The article notes that Under Armour has rallied about 130% in the past year, to a recent $78, and is up 533% from its March 2009 low of $12.33. Barron’s points out that despite the company’s success, Under Armour has not been able to translate its success in performance apparel to traditional athletic footwear. The article notes that the company has also failed to expand internationally as quickly as expected, creating concern about near-term growth with investors.
Barron's feature positive on Tata Motors. Barron’s argues that shares of Tata Motors (TTM), currently trading in the low 20s, could trade at $33 to $35 in a year and that Tata is a good long-term play in the global auto market. The article notes that although the shares could slide a little more, the decline has already made the shares attractive for long-term investors. The article points out that in order to secure operations over the next few years, Tata is going to have to invest significant money into improving the Nano, which sells less than 10K units a month in India, introduce new models at Jaguar Land Rover and increase its commercial-vehicle business. Barron’s points out that JLR recently raised $2.4B through a bond issue and is considering another $500M bond issue as well as notes rumors that Tata is considering listing JLR independently in London or New York to raise more funds for its mass-market and luxury vehicles.
Barron's feature negative on Gold Resource. Barron’s argues that although Gold Resources (GORO) shares have gone from 4 to 24 in the past two years and the company is now promising a “zero-cost” mine, these elements are likely too good to be true. Barron’s points out that the company is run by a small group of family members who have increasingly sold shares on the way up, always promised more production than they have been able to deliver and they have not conducted formal independent drilling studies to authenticate their claims that they will mine 200K ounces of gold equivalent per year at zero cash cost. Barron’s also highlights the special monthly cash dividends, recently $0.04 per share, which ignore the fact that in Q1 this year, the company’s only profitable quarter, the company pointed out capitalizing mining equipment and supplies and a collapse in exploration spending.
The article also notes that although the company claims that they are paying the dividend out of operating cash flow, the company has never produced a positive operating cash flow.
Barron's feature highlights Tim Anderson's report which projected 2015 and 2020 profits for nine major U.S. and European drug companies. Barron’s notes that patent expirations on key drugs and the development and marketing of products now in the pharmaceutical industry's pipeline could change company revenue and profits significantly in coming years. Barron’s highlights Tim Anderson, an industry analyst at Sanford Bernstein, and his recent report which projected 2015 and 2020 profits for nine major U.S. and European drug companies. Barron's notes that, according to Anderson's report: GlaxoSmithKline (GSK), Novartis (NVS), Pfizer (PFE), Merck (MRK), Sanofi-Aventis (SNY) and Roche Holdings (RHHBY) are best positioned long-term. Eli Lilly (LLY), Bristol-Myers Squibb (BMY) and AstraZeneca (AZN) have a weaker long term prospects

Daily Mail
Qatar Investment Authority will block any offer for London Stock Exchange that is less than £15/share. The QIA owns 15.1% of the LSE. There was talk yesterday that Nasdaq (NDAQ) was preparing an offer for the LSE., which would be worth £4B at £15/share. It is not clear if the article means that the Nasdaq offer values the LSE at £2.8B, or if it is just saying that the LSE's market cap is now £2.8B.
- IMAX in talks to expand UK operation from 14 to 50 cinemas. Without citing sources, the Daily Mail reports that talks are going on with more than one company, but Odeon UCI, currently IMAX's largest franchisee in the country, will probably benefit. The article says the expansion will take place "over the coming years."
Tesco plans to launch mortgage products moved to autumn from summer. The Daily Mail reports that current accounts are expected to take a year after that to launch.
- British Sky Broadcasting independent shareholders reiterate that they want £11/share from News Corp (NWSA). One such shareholder tells the Daily Mail that the company is worth at least 950p/share, and a bid premium makes £11/share appropriate. The article does not give any context to determine how widely held this belief is, and it says that independent observers think 875p/share seems to be a more likely final price.
3i Group shareholders threaten to block CEO Michael Queen's reappointment at 6-Jul annual meeting. The Daily Mail does not cite sources, nor does it give any sense of how widespread the protest movement against Queen may be.

Die Welt
Anshu Jain is favorite to become CEO of Deutsche Bank. Without citing sources, Die Welt reports that CEO Josef Ackermann could become supervisory board chairman. Jain is the head of Deutsche's corporate and investment bank.

Economic Times
Minority shareholders in Cairn India may challenge government conditions on sale. A source close to the company's board tells the Economic Times that shareholders are unhappy with conditions that reduce the company's profit, and therefore the value of the deal. But the article says that over time, Cairn Energy (CNE.LN) and Vedanta Resources (VED.LN) are likely to win board and shareholder approval of the transaction

Financial News
Nomura Holdings to launch internal hedge fund that it plans to spin off. People familiar with the plans tell Financial News that Nomura plans to provide capital for the fund, though it has not decided how much, and the timeframe to introduce the fund is also undecided.

Financial Times
Kraft (KFT) also interested in Hsu Fu Chi. The FT, citing people familiar with the talks, reports that: One option was the sale of a minority stake.
Kraft was among other potential parties that had been interested.
Nokia going local to compete on smartphone apps. In what reads like an interview, an executive tells the FT that Nokia is going to use independent developers in lots of countries in an effort to get apps that will allow the company's Windows-based smartphones to catch up to Apple (AAPL) and Google (GOOG) faster.
Spanish consortium complains that French consortium is breaking rules of engagement on bidding for €7B Mecca-Medina "pilgrim train" contract. People briefed on the bid tell the FT that the Spaniards feel France has continued to lobby Saudi Arabia even after bids were submitted, a condition that could lead to the French consortium's being disqualified. A source close to the French offer tells the FT that "Everybody [includingSpain] has been lobbying for the contract."
- Teva Pharmaceutical sells £14M of generic Lipitor in quick strike. Industry experts tell the FT that Teva shipped more than two months worth of atorvastatin last month before Pfizer (PFE) filed for an injunction (awarded last week) to stop the activity. The FT notes that the action was unusual, because the patent has not expired yet, and Teva didn't have a court decision saying Pfizer's patent didn't hold.
- Betfair files complaint with European Commission over Germany's plans to open its betting market. The FT reports that the complaint, filed last week, accuses the German plan of being set up to back German states' existing monopoly on the market. Betfair says the proposed requirements that licence holders pay 16.67% per stake and limit a person's bets to €750/month ensure losses for commercial players.
- BATS Global Markets takeover of Chi-X Europe no longer certain. People close to the deal tell the FT that now that the deal has been referred to UK antitrust authorities, some Chi-X shareholders are thinking of selling the platform to someone else. 35% holder Instinet is one of the owners looking at different options for Chi-X, and sources say that Chi-X could simply decide to remain independent. But the article says that option may be expensive, since some employees have already been told they will lose their jobs if the BATS purchase goes through, and they are unlikely to cheerfully return on their current salaries.
- Rising CEO Maxim Barsky says TNK-BP Holding needs new corporate structure. In an interview, Barsky tells the FT that as the company has become more international, it has outgrown its existing structure. He says the shareholders need to accept an independent management, and he will leave by the end of the year if an agreement to that end is not reached. He also says that the company wants to be BP's (BP.LN) strategic partner.
Greek banks need liquidity, yet stand powerless. The article is a summary, breaking no news. The FT notes that the banks are helpless and need to wait while others decide whether the European Central Bank will fund the Greek system. The banks also may need to recapitalize, a development that will again be dependent on what others decide.
- Brazilian government backs away from Carrefour-Grupo Pão de Açúcar (PCAR4.BZ) merger. The FT reports that the president of state development bank BNDES told a Brazilian magazine this weekend that Casino's (CO.FP) approval would be required for it to finance the deal. The €1.7B of financing has until now been presented as a given; analysts verbalize the obvious, that the development strengthens Casino's hand.
- MetLife has $3-4B to spend on acquisitions. An executive tells the FT that integrating Alico is the company's main focus for now, but international purchases remain interesting. He specifically mentions Japan, the UKBrazilRussia, and Turkey.
- Nothing happening between Foster's Group, SABMiller (SAB.LN). The FT reports that while investors are trading Foster's at a level indicating they think SABMiller will return with a higher offer than its mooted A$4.90/share, or Anheuser-Busch InBev (ABI.BB) might get involved, the SABMiller executives involved in the approach have left Australia, and SABMiller CEO Graham Mackay has been in Africa. Foster's CEO John Pollaers says there has been "no contact at all" between the companies since Foster's turned down the initial bid.
- European Commission to slash roaming data charges this week. The FT reports that mobile phone roaming price caps will be extended four years to 2016, and new caps on data downloads will come into effect next year. The cost of using the internet will fall to 50 cents per megabyte in 2014 vs more than €2 today. Price caps will be phased out if international calls become cheaper.
- Calls for Deutsche Bank supervisory board chairman Clemens Börsig to resign. People close to CEO Josef Ackermann tell the FT he is extraordinarily unhappy that dilly-dallying on the Deutsche Bank supervisory board's part allowed Axel Weber to be grabbed to be chairman of UBS (UBSN.VX) last week. Bankers say relations between Ackermann and Börsig are pretty much at an all-time low, and there is now some question whether Ackermann should become supervisory board chairman, although the idea would be like fingernails down a chalkboard to corporate governance experts.

- Ineos to pay BASF €600M. A BASF spokeswoman confirms to the FTD that Ineos will make the payment because BASF is putting more assets into the companies' styrene JV, Styrolution

Elbit Medical Imaging negotiating sale of Chennai residential project. Sources tell Globes that Elbit Imaging will sell its 80% share of the project in stages, yielding about $250M. The company will first sell 30% of the rights to an Indian developer for $41M in cash, and the parties will sign a deal calling for Elbit Imaging to collect 38% of the project's sales receipts.

- Bombardier to announce "substantial" job losses in UK today (5-July in Europe). The Guardian reports that 1,500 workers could be let go. The article says that the company privately told the government that 1,200 jobs were at risk even before last month's decision to award the £3B Thameslink contract to Siemens (SIE.GR) rather than Bombardier.

London Telegraph
- Dragon Oil to be bought out by Emirates National Oil Company or CNOOC (883.HK) for 700p/share. The Telegraph only mentions "talk" to this effect, giving no reason to believe the talk is well-informed or true. The article notes that Emirates National Oil Company is Dragon Oil's largest shareholder.
- UGL (UGL.AU) interested in DTZ Holdings. A source close to the negotiations tells the Telegraph that 55% shareholder Saint George Participations, which wants to take DTZ private and merge it with BNP Paribas Real Estate (BNP.FP), is not permitting access to the company's books. The Telegraph repeats what it reported 12-May, that SGP is looking at offering about 60p/share.

London Times
Other potential bidders sounding out Capital Pub Company. Without citing sources, the Times reports that Greene King (GNK.LN) and others have informally been in contact with Capital since it turned down the advance from Fuller, Smith & Turner (FSTA.LN).
- BAE Systems (BA.LN) thinking about bidding 180p/share for Qinetiq. The Times reports the rumor, whose lack of certainty is evidenced by a notation that the company thinking about makling the offer might actually be an American rival of BAE, rather than BAE itself.
Caterpillar to invest $150M/year in UK. In what reads like an interview, CEO Doug Oberhelman tells the Times that Caterpillar plans to aggressively challenge JCB.
Asda names Judith McKenna COO. The Times reports that McKenna, who has worked for Asda for 15 years, will assume the position in September.

Los Angeles Times
Goldman Sachs cranking up its lobbying efforts. The LA Times reports that the company is spending four times as much on lobbying as it did in 2005, but the amount is still miniscule, at $4.6M for 2010.

Mail on Sunday
Nasdaq OMX Group executives meet to plot a £3.4B merger with the London Stock Exchange. According to the Mail on Sunday, senior executives at Nasdaq OMX (NDAQ) were meeting this weekend in New York to discuss a £3.4B merger with the London Stock Exchange (LSE.LN). The article notes that it is thought that Nasdaq CEO Bob Greifeld values the LSE at 1275p a share.

New York Post
Investors likely to put $8-10M into American Apparel within two weeks

New York Times
NYT discusses auto industry's response to new rules on gas mileage. The article is a summary, breaking no news. It notes that: Car companies are healthier and therefore less malleable now than they were in 2009 when they first agreed to new standards. The carmakers want to be sure that California will not be allowed to hold them to a higher standard than the rest of the US does.
NYT looks at TV networks' new demand of affiliates: reverse compensation. The NYT reports that Fox (NWSA) is being most aggressive in demanding the fees. The article says most stations have agreed to pay, but some haven't; Nexstar Broadcasting (NXST) is given as a specific example of one that declined to participate in the new system. Different networks have different plans. Fox imposes a flat fee, while NBC (CMCSA) is talking about a deal that would split retransmission fees 50-50, if enough affiliates agree to the idea. ABC (DIS) uses a blend of the Fox and NBC concepts.

Nippon Life to buy €500M of convertible bonds to take 1-2% stake in Allianz, probably by end of July.
Massive rare earths discovery thought to have been found in Pacific OceanThe Nikkei reports that details of the discovery, estimated at 100B tons, will be published today in Nature Geoscience. Researchers plan to apply to have mining approved in the relevant areas, which are located over a vast expanse; different countries would divide up the rights.

Sky News
Birds Eye Iglo CEO turns down chance to run Premier Foods. Without citing sources, in his blog, Mark Kleinman says Martin Glenn told headhunters he didn't want the job.The blog says that Premier Foods may elevate COO Tim Kelly to the CEO post on an interim basis.

The Australian
- Bunge sells its 6.9% interest in Tully Sugar to Cofco

This is Money
RWE prepares for £5B sale of Npower. According to This is Money, RWE has appointed Goldman Sachs to advise on a £5B sale of Npower. The article notes that rising debts has forced RWE to rethink the future of its UK subsidiary, Npower, which is one of the country’s biggest power companies.
This is Money notes that it is understood that no firm decision has been made yet but highlights that Npower, with a turnover of £7B and 11K employees, would be a very attractive target for the other "big six" energy companies. The article notes that it is understood that RWE is still very dedicated to its nuclear building programme in Britain and would continue to invest in it, even after selling Npower.

Wall Street Journal
At least nine life insurers get subpoenas to determine if they are paying promised death benefits. People familiar with the matter tell the WSJ that New York AG Eric Schneiderman is running the investigation, which is questioning whether the insurers should take some responsibility that is typically assigned to beneficiaries in terms of potential claims. New York state laws mean that it may be easier to find fraud there than it would be under federal statutes. The sources say the subpoenas were issued to AXA (CS.FP), Genworth Financial (GNW), Guardian Life Insurance Co ofAmerica, Manulife Financial (MFC.CN), Massachusetts Mutual Life Insurance, MetLife (MET), New York Life Insurance, Prudential Financial (PRU), and TIAA-CREF.
Samsung Electronics says H2 will be harder than H1. The WSJ reports that in remarks to Korean reporters, an executive said the semiconductor business was unlikely to have its traditional H2 uptick this year, and the flat-panel business is in a cyclical downturn.
Cisco Systems helping China to build large surveillance system. The WSJ, citing people familiar with the deal, reports that The system is to be built in the city of Chongqing over the next two-three years. Cisco was brought onto the project by Chinese company Hikvision Digital. The total project size appears to be around $2.4B
WSJ thinks Jiayuan.com bears looking at. A "Heard on the Street" column says that Jiayuan seems to have worked out how to cash in from online dating in China, and its trading multiple is high, but not nearly as offensively so as other internet companies'.
WSJ is positive on Volkswagen. Without saying it thinks Volkswagen's stock is going to rise, a "Heard on the Street" column likes the fact that Volkswagen avoided paying a premium to take control of MAN (MAN.GR). The column notes that antitrust clearance will be necessary to take full advantage of a potential merger of MAN and Scania (SCVB.SS), but seems to think that Volkswagen is likely to get the clearance over time.
- IntercontinentalExchange (ICE) wins oil business from the Chicago Mercantile Exchange (CME). The WSJ reports that the Brent futures contract traded on the ICE had more volume for four consecutive days in late June, a record total oil futures volume on ICE was higher in June, the first month for four years investors and users seen to be favouring the Brent contract now as more reflective of real prices due to WTI trading at a low price due to a glut at Cushing.
- WSJ discusses Italian banks. The article breaks no news but talks about some of the reasons for their current predicament, despite a low exposure to Greece, including an inability to cut costs due to strong unions, a sluggish economy and increased competition. The article also notes that the banks didn't get a bail-out from the government and had to issue expensive bonds instead.
- Alibaba Group to launch mobile operating system in Q3. The WSJ, citing a person close to the situation, reports that the Alibaba Cloud Computing unit is developing the system the apps will be accesses on a server rather than downloaded to the phone the initial version will target China but can be used elsewhere eventually.
- AntiSec claims it hacked Apple. The WSJ reports that the hackers say they got usernames and passwords, but they are now "busy elsewhere."

Washington Post
New guidance system for airlines is ambitious and costly. In a lengthy article, the Washington Post reports that NextGen will cost $29-42B by 2025, with the cost to be shared by the government and airlines. Proponents argue that delaying the system will cost billions of dollars a year. JetBlue (JBLU) and Southwest (LUV) have started installing some of the necessary technology, but other airlines are reluctant, largely out of fear that technology installed too soon will be outdated by the time the system is operational.


Credit Suisse: upgraded CLWR
Deutsche Bank: upgraded SNDK; downgraded GG, SSRI, TC
Duncan Williams: upgraded SLXP
Evercore Partners: upgraded GOOG
Goldman Sachs: upgraded EE; downgraded POR
Janney Capital: downgraded THS, CNK, RGC
Jefferies: upgraded SKT
JP Morgan: downgraded BBBB
Keefe Bruyette: upgraded VRTS, DHI; downgraded KBH
Morgan Stanley: downgraded CX, JBLU
Oppenheimer: downgraded RVBD
Susquehanna: downgraded SAI
UBS: upgraded NYT
Wells Fargo: downgraded MDT


VIT/ASIA – Skew, a measure of implied downside risk relative to implied upside risk, in both VIT and ASIA is at an all-time high. This suggests that there is excess demand for downside exposure (put buying). Not surprisingly, the borrow in each of these names have become quite difficult. This sets up an attractive opportunity for investors to buy put spreads to protect their holdings.

VIT – Buy August 22.50/15 Put Spread for $1.95 (2.9x1 max payout, downside to $15 level)

ASIA – Buy August 16/13 Put Spread for $1.10 (1.7x1 max payout, downside to $13 level)


 *Special thanks to Option Radar, BMO Capital, MEB Options, LiveVolPro, CBOE, Option Monster, T.O.P. group, and all of the options desks and traders we work with to provide the option flow!

 No position at this time. Position declarations are believed to be accurate at time of writing but may change at any time and without notice.

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